India: Trade deficit narrows in January, exports show timid growth
February 11, 2014
The trade balance incurred a USD 9.9 billion deficit in January. The reading represented an improvement over both the USD 19.0 billion shortfall registered in the same month last year and the USD 10.1 billion deficit registered in December.
Overseas sales increased 3.8% annually in January, which was up from the 3.5% expansion observed in December and overshot market expectations of a 2.7% rise. January's expansion represents, nonetheless, the third consecutive month of tepid growth in exports. Meanwhile, imports plummeted 18.1% year-on-year in January, which came in below the 15.3% contraction recorded in December.
The steep fall in imports reflected a sharp decline in imports of gold, which took a 77.0% nosedive in January. Gold imports continue falling due to the government tax hike on such imports. Additionally, the Reserve Bank of India has imposed lending restrictions on importers seeking to purchase gold. Nonetheless, earlier in February, Commerce Secretary Rajeev Kher pointed out that the exports target of USD 325 billion in FY 2013/2014 is achievable and also recommended easing restrictions on gold imports, as the external sector is looking up.
FocusEconomics Consensus Forecast panelists expect exports to increase 9.0% in FY 2014/2015, reaching USD 351 billion. In FY 2015/2016, the panel sees exports expanding 12.4% and reach USD 395 billion.
Author: Ricardo Aceves, Senior Economist