India: Exports increase slowly in February, while imports decrease

Merchandise export growth in annual terms decelerated to 2.4% in February from 3.7% in January. The expansion was underpinned by increased exports of pharmaceutical products. Merchandise imports, meanwhile, tumbled 5.4% in February, contrasting the flat growth in January and primarily due to fewer purchases of oil, precious stones and electronic goods from abroad.

The merchandise trade deficit was USD 9.6 billion in February, notably reduced from USD 14.7 billion in January and USD 12.3 billion in the same month last year. The 12-month trailing sum of the trade deficit shrank for the third consecutive month to USD 179.2 billion in February from 182.0 billion in January.

Commenting on the short-term future of the external sector, analysts at Nomura commented:

“We remain cautious on export growth owing to slowing global demand [and believe] import growth will also be modest in the wake of lagged effect of INR depreciation and domestic slowdown. However, increased oil prices and a pickup in gold demand in response to elections remain key upside risks to our view on import growth.”

India Trade Balance Forecast

Our panelists forecast that exports will expand 7.2% in FY 2018 and imports will rise 5.8%, bringing the merchandise trade deficit to USD 193.0 billion. In FY 2019, we expect exports and imports will expand 9.3% and 7.2% respectively, which would result in a merchandise trade deficit of USD 201.0 billion.