India: Trade deficit narrows to five month low due to increasing exports
September 10, 2013
The trade balance reported a USD 10.9 billion deficit in August, which was less than the USD 14.2 billion shortfall reported in the same month last year. The reading represents the lowest deficit in five months.
Exports, which climbed 13.0% in August over the same month last year in USD terms, were underpinned by the weakening of the rupee and the government's measures to incentivize exporters. The reading came in above the 11.6% expansion observed in July and marks the fastest pace in nearly two years. Meanwhile, imports decreased 0.7% in August (July: -6.2% year-on-year), which marks the third consecutive month of decline. Declining imports continue to reflect lower imports of gold as a result of the steps the government and the Central Bank took to curb demand for the metal.
The government has set an export target of USD 325 billion for this fiscal year. In order to achieve this goal, the government announced a package worth an estimated INR 30 billion (USD 550 million), which is intended to stimulate the country's exports.
FocusEconomics Consensus Forecast panelists expect exports to increase 11.1% in FY 2013/2014, reaching USD 327 billion. In FY2014/2015, the panel sees exports expanding 12.4%.
Author: Ricardo Aceves, Senior Economist