India: Exports contract in October
November 17, 2014
India’s trade deficit totaled USD 13.4 billion in October, which was below the USD 10.6 billion registered in the same month last year and undershot the USD 15.6 billion shortfall the markets had expected. In the 12 months up to October, the trade deficit reached a seven-month high of USD 131.5 billion (September: USD 128.7 billion deficit).
A notable deterioration in exports drove the increase in the trade deficit. India’s overseas sales contracted 5.0% annually in October, which contrasted the 2.7% expansion observed in September and was slightly worse than the 4.1% contraction the markets had expected. Imports decelerated notably, from a 26.0% surge in September to a meager 3.6% expansion in October. The sharp slowdown in imports reflected a moderation in gold demand and a decrease in oil imports.
India and the United States recently reached a breakthrough agreement on the dispute over food stock holdings, thus removing a major obstacle to what experts believe is likely to be the largest trade deal in nearly two decades. Both countries agreed that India would continue its food’s subsidy program. The agreement focuses on easing customs procedures, reducing red tape and upgrading border infrastructure. In settling the dispute, India and the U.S. have paved the way for the creation of a broader trade package. The World Trade Organization welcomed the decision and pointed out that the agreement is expected to stimulate the global economy. In fact, it is expected to add USD 1.0 trillion to global trade and create 21 million jobs going forward.
Author: Ricardo Aceves, Senior Economist