Continued decline in imports leads trade deficit to narrow further to USD8.1bn in February 2014 - Angel Broking

According to provisional data released by the commerce ministry, the trade deficit for February 2014 has come in at USD8.1bn as against USD9.9bn in the previous month and USD14.1bn in February 2013. The trade balance has continued to improve and this can be attributed to a steep contraction in imports even amidst decline in export growth. Imports have been contracting for the ninth straight month as a result of deterioration in domestic demand as well as curbs on gold imports.

Exports reported de-growth of 3.7% as compared to growth of 4.2% in the previous month and 2.3% in February 2013. Nevertheless, the steep contraction in imports by 17.1% during February 2014 as compared to growth of 2.9% in February 2013 has more than offset the decline in exports and narrowed the trade deficit to a 5-month low. The import compression is mainly aided by 23.5% lower non-oil imports in February 2014 as compared to a year ago as the domestic demand environment remains sluggish on account of slowdown in the economy.

At the same time, gold and silver imports came in 71.4% lower as against a year ago impacted by the linking of gold imports to exports. Oil imports reported decline of 3.1% at USD13.6bn in February 2014 as compared to USD14.1bn during February 2013.

Cumulatively, in the April to February period of FY2014 the trade deficit stands at USD128bn ie almost 29% lower than USD179.9bn in the corresponding period of the previous year. We continue to maintain our CAD estimate for FY2014 at about 2.0% of GDP as compared to 4.8% of GDP in the previous fiscal year.

Source : Equity Bulls

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