India: Trade deficit narrows on plunging imports
December 11, 2013
In November, the trade balance reported a USD 9.2 billion deficit. The reading represents an improvement over the USD 17.2 billion shortfall registered in the same month last year.
A 16.4% contraction in imports over the same month last year (October: -14.5% year-on-year) largely contributed to the lower deficit. The sharp decrease in imports mostly reflects the government's and the Central Bank's efforts to bring India's current account deficit under control. In fact, in the July-September period, the current account registered a USD 5.2 billion deficit (or equivalent to 1.2% of GDP), which represents a four-year low. November trade data suggest that the trend persists. Meanwhile, exports increased 5.9% annually in November, which was well below the hefty 13.5% expansion observed in October.
The government has set an export target of USD 325 billion for this fiscal year. In order to achieve this goal, it announced a stimulus package worth an estimated INR 30 billion (USD 550 million), which is intended to fuel the country's exports.
FocusEconomics Consensus Forecast panelists expect exports to increase 11.2% in FY 2013/2014, reaching USD 329 billion. In FY 2014/2015, the panel sees exports expanding 6.8% and reaching USD 348 billion.
Author: Ricardo Aceves, Senior Economist