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Market Commentary
Trade deficit at USD10.1bn aided by decline in imports - Angel Broking
Posted On : 2014-01-13 21:18:20( TIMEZONE : IST )
According to provisional data released by the commerce ministry, the trade deficit for December 2013 has come in at USD10.1bn as against USD9.2bn in the previous month and USD17.6bn in December 2012. The overall quantum of imports contracted steeply by 15.3% during December 2013 as compared to growth of 7.5% in December 2012.
The decline in imports for the seventh straight month has been led by sharp nonoil import compression in spite of a 1.0% increase in oil imports during the month. Non-oil imports witnessed a steep 22.9% contraction as compared to growth of 3.3% in December 2012, largely on account of restrictions on gold import and also due to weak demand in the economy. During the April-November 2013 period, trade deficit excluding gold has declined by about 20% over a year ago period, reflecting slowdown in the demand environment in the economy. In addition, for the April-December 2013 period, gold and silver imports have declined by 30.3% to USD27.3bn.
Growth in exports slowed for the second consecutive month as exports reported a modest 3.5% growth despite an almost flat performance in December 2012. The lower export growth has been attributed to slowdown in petroleum product exports for the third straight month.
CAD expectations: As per Commerce Ministry data, the trade deficit for 3QFY2014 at about USD30bn is similar to the 2QFY2014 level. We thus expect the current account deficit (CAD) to moderate substantially in the range of 0.9-1.4% of GDP during 3QFY2014 as against 6.5% of GDP reported in the corresponding quarter of the previous year and similar to 1.2% of GDP in the previous month. For FY2014 as a whole, the CAD is seen moderating to a sustainable level of within 2.5% of GDP as compared to 4.8% of GDP in the previous fiscal year, reducing the risks emanating from the external sector. The concern surrounding financing of the deficit has also materially subsided on account of timely policy measures.
