Impact: Positive
(Exchange rate, GDP growth) Negative (Trade Deficit, CAD)
Brief: The trade number for January, 2019
released by the Ministry commerce indicates a sign of improvement in India’s
Current Account Balance. In the reference period, exports have expanded by
3.7%. This is better performance compared to what the December augured with
0.3%. Overall imports, on the other hand, remained stable with 0.02% growth
during the reference period. Due to this weak growth in imports, the trade
deficit stands at of $14.7 billion in January, 2019. Notwithstanding, since the
monthly trade deficit exceeded $17 billion for some months in the current
financial year on account of higher crude prices, overall CAD has increased to
2.5% of GDP in Q3, FY19. This figure was just around 1% a year earlier.
Considering the current improvements, we expect the CAD to GDP ratio to stand
at around 2% in Q4, FY19.
The trade number for January,
2019 released by the Ministry commerce indicates a sign of improvement in
India’s Current Account Balance. In the reference period, exports have expanded
by 3.7%. This is better performance compared to what the December augured with
0.3%. From a sub-category level perspective, export of petroleum products, on
account of lower oil price, has contracted by (-) 19.36% in January, 2019,
which is lowest over the past three years. Manufacturing goods category, on the
other hand, has expanded at a healthy rate of 8.03%.
We note that a cheaper Indian
Rupee has benefited the Indian manufacturing to an extent. The USD-INR currency
pair has dropped to 71.1 in January, 2019 as against 63.6 a year earlier.
Overall imports, on the other
hand, remained stable with 0.02% growth during the reference period. A breakup
in overall imports shows that as with exports, crude oil imports have dropped
by (-) 3.6% and manufacturing goods by (-) 1.4%. However, import of precious metal
expanded by 44% during the month, helping the overall import growth trajectory
to remain positive.
Due to this weak growth in imports,
the trade deficit stands at of $14.7 billion in January, 2019. Notwithstanding,
since the monthly trade deficit exceeded $17 billion for some months in the current
financial year on account of higher crude prices, overall CAD has increased to
2.5% of GDP in Q3, FY19. This figure was just around 1% a year earlier.
Considering the current improvements, we expect the CAD to GDP ratio to stand at
around 2% in Q4, FY19.
Trade Performance:
|
Export
|
Import
|
Trade
Balance ($ bn)
|
||||
|
Overall
|
Petroleum
|
Manufacturing
|
Overall
|
Crude oil
|
Non-crude oil
|
|
FY15
|
-1.51
|
-10.66
|
0.80
|
-0.27
|
-16.43
|
9.11
|
-137.5
|
FY16
|
-15.45
|
-46.11
|
-8.61
|
-15.01
|
-40.10
|
-3.84
|
-118.2
|
FY17
|
5.13
|
3.37
|
5.37
|
0.99
|
5.28
|
-0.19
|
-108.5
|
FY18
|
10.03
|
18.55
|
8.93
|
20.97
|
24.98
|
19.79
|
-161.5
|
2017-18 (YTD)
|
11.93
|
22.05
|
10.62
|
23.96
|
25.63
|
23.47
|
-136.2
|
2018-19 YTD)
|
9.02
|
30.54
|
5.97
|
12.83
|
37.66
|
5.54
|
-163.2
|
Jan-18
|
11.62
|
35.89
|
8.22
|
26.03
|
42.63
|
20.4
|
-15.7
|
Dec-18
|
0.27
|
12.81
|
-1.66
|
-2.37
|
3.16
|
-4.17
|
-13.1
|
Jan-19
|
3.75
|
-19.36
|
8.03
|
0.02
|
-3.6
|
-1.46
|
-14.7
|
Source: CMIE, Acuité Research