Analysts happy with fall in imports by India, growing exports

India’s exports kept up the pace for the fourth straight month by expanding at 13.5% -a 24 month high. Imports too declined in Oct’13, though the pace slowed down a little. Non-oil imports declined by 22.8%, with oil imports posting a marginal pick-up in growth. Cumulative trade balance was at $90.7 billion during Apr-Oct’13.

“The good thing is that gold imports did not show a significant turnaround in Oct’13, though on a sequential basis such imported jumped by 71.3%. Also, India has gained in market share in apparel exports to USA in current fiscal, an encouraging development,” said State Bank of India in a note.

India’s exports registered a growth of 13.5% in Oct’13 to $27. 3 billion from $24. 0 billion in corresponding month of last year. This is the fourth straight month of double-digit growth in exports and pace of growth in Oct’13 is the highest in last 24 months. Cumulative value of exports for the first seven months of FY 14 (Apr-Oct) were valued at $179. 4 billion as against $138. 7 billion, registering a year on year growth of 6.3%.

If Oct’12 export figures were not revised, export growth would have been lower at 9.5%.

Imports during Oct’13 were valued at $37.8 billion, a negative growth of 14.5% over the level of imports valued at $44. 2 billion in Oct’12. Oil imports in Oct’13 were valued at $15. 2 billion, 1.7% higher than $15. 0 billion in the corresponding period last year. Provisional data showed that gold import increased to $1.4 billion in Oct’13 from unrevised $800 million a month earlier, a growth of 71%. However, the good thing is that Oct’13 gold import is still 80% lower in value terms against the gold import of the same period last year.

“We continue to maintain a trade deficit at $170 billion for FY14, with a CAD at $55 billion / 3. 1% of GDP, with downside,” it added.

“A significant decline in gold imports and weak capital and consumption goods’ imports, due to subdued domestic demand, will help lower growth in non-oil imports during rest of this year,” predicted CRISIL Research. “Improvement in exports due to a weak rupee, low base and improved global demand, will also aid in lowering trade deficit in 2013-14. Lower merchandise trade deficit, along with a healthy growth in IT/ITes exports, create downside to our forecast of current account deficit at 3.9 per cent of GDP for 2013-14,” it said.

“We expect the current account deficit to moderate to USD 54bn in FY14 (year ending March 2014) from USD 88.2bn in FY13 due to better exports, weak domestic demand and a policy-driven reduction in gold imports,” said brokerage Nomura. “Large inflows under the FCNR(B) deposit scheme and the delayed QE taper have led to a surge in capital inflows since September. However, with the FCNR (B) deposit window to close soon (by end-November), oil marketing companies’ demand gradually being shifted back to the market and changing expectations around the US QE taper (our US economists now assign a higher probability to a taper in January 2014 relative to March 2014), financing may remain a challenge,” it added.

“The EXIM Trade Data released today reaffirmed the reversal of negativity,” said Sanjay Budhia, Chairman of CII’s National Committee on Exports & Imports. “Exports since last 3 months, from August , September and October 2013, have come to positive growth trajectory due to stability in the global market, particularly with our large trading partners like US and Europe.

“Also the timely Intervention by the Commerce Ministry in terms of expanding Focus Product and Focus Market Scheme have helped Indian Exporters to withstand the vagaries of tough competition. CII strongly recommends restoration of Duty Drawback Rates which have been reduced drastically last month. This will further help in gaining and maintaining India’s Share in Global Market,” he added.

SBI noted that the incremental share of price sensitive items in Indian exports has been higher in current fiscal, though the pace has slowed down a bit in recent months.

The bank’s research team has an export target of $320 billion for this year, nearly matching the Government target.

“In principle, coming festive season would further boost export demand in the developed economies aiding trade deficit to narrow down to a comfortable zone,” it said.

However, cumulative oil imports in Apr-Oct FY14 were $98. 1 billion, 3.3% higher than the oil imports of the corresponding period last year. Meanwhile, non-oil imports contracted for the fifth consecutive month in row to $22.6 billion at 22.8% lower compare to Oct’12. H owever, tracking the trade deficit on a month on month basis, trade deficit increased in Oct’13 after having declined to a two-and-a-half-year low the previous month.

The deficit widened to $10.6 billion from $6.8 billion in Sep’13. A year earlier, the gap was $20.2 billion. Widening trade deficit in Oct’13 was aided by higher oil and gold demand. India’s share in the US textile import has remained promising. In the first eight months of 2013 (Jan- Aug) , India’s share has increased to 6.2% f rom 5.8% in 2012 and 5.9% in 2011. Further recovery in the US would add to the domestic export revenue.

“Imports contracted 14.5% y-o-y in October compared with a decline of 18.1% in September, which reflects continued weakness in domestic demand.Overall, global demand is improving, but higher imports (of oil, gold and others) have led to the deterioration in the trade deficit. The rise in imports is due to seasonality, as imports tend to rise ahead of the festival season. On a seasonally adjusted basis, we estimate that the trade deficit narrowed to USD7.3bn in October from USD7.5bn in September,” Nomura said.