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Market Commentary
Trade deficit narrows to USD10.9bn - Angel Broking
Posted On : 2013-09-11 11:06:35( TIMEZONE : IST )
Provisional data released by the commerce ministry shows that India's trade deficit for August 2013 narrowed to USD10.9bn on the back of decline in gold imports and double-digit growth in exports. Though the trade deficit improved as compared to USD12.3bn in July 2013 and USD15.3bn in August 2012, it came in slightly above consensus estimates of USD9bn. The cumulative trade deficit for April - August of 2013-14 is estimated at USD73.4bn, lower than the deficit of USD74.7bn during April - July of 2012-13.
During August 2013, exports continued to report double-digit growth for the second straight month at 13% on the back of 6.5% contraction during August 2012. On a cumulative basis during April - August 2013, exports witnessed growth of 3.9%.
The outlook for export growth has improved supported by the economic recovery in advanced economies like U.S, Japan and Eurozone to some extent along with steep INR depreciation and low base (contraction of almost 2% in FY2013).
During August 2013, imports reported 0.7% contraction as compared to decline of 6.2% in July 2013 and 6.7% in August 2012. The contraction can be attributed to the 10.4% decline in non-oil imports. Gold imports are pegged to have come in at just USD0.65bn as compared USD2.2bn in July 2013 mainly because of the uncertainty related to the new gold import policy imposed by the RBI on July 22, 2013 linking gold imports to exports. It is believed that with the subsequent clarification issued by the RBI, gold imports for the month of September 2013 would be boosted. Nonetheless gold imports are expected to moderate to USD40-45bn during FY2014, lower than import of USD53bn for FY2013.
Oil imports have witnessed almost 18% growth during August 2013 as against contraction of 8.0% in the previous month. While ex-oil, ex-gold imports are expected to decline, we believe that oil imports are at the receiving end of a double whammy owing to rise in international crude oil prices as well as INR depreciation on a yoy basis. In this regard, we would be watchful for the steps expected to be announced by the oil ministry in the coming week (possibly September 16, 2013 as per media reports) to cut the oil import bill.
