India: Merchandise exports grow strongly in May
June 15, 2018
In May, merchandise exports expanded 20.2% compared to the same month last year, up from the 5.2% expansion recorded in April and totaling USD 28.9 billion. The fastest growing categories of exports in May were petroleum products, chemicals, and drugs and pharmaceuticals, in descending order. Although a low base effect boosted the export growth figure in May, it still beat market analysts’ expectations of 12.0%.
Annual growth in the 12-month trailing sum of exports accelerated to 9.9% in May from 8.9% in April. The sum of exports in the 12 months up to May was USD 309 billion, up from USD 304 billion in April.
Meanwhile, year-on-year growth in merchandise imports accelerated to 14.8% from 4.6% in April, with imports totaling USD 43.5 billion. May’s strong reading came on the back of increased oil imports, which helped compensate for falling gold imports.
The 12-month trailing sum of imports increased 15.0% in May, less than 16.3% in April. Consequently, the 12-month total of imports reached USD 467 billion in May, just above April’s USD 461 billion.
Despite the pickup in exports, the merchandise trade deficit grew to USD 14.6 billion in May from USD 13.7 billion in April. Looking ahead, the deficit is likely to remain large in the coming months. Indian exporters—who are exempt from the Goods and Services Tax (GST)—continue to be weighed on by delayed GST refunds. Moreover, the Reserve Bank of India is tightening trade credit standards. The recent China-U.S. trade policy spat also bodes poorly for the external side of the economy, as the U.S. is India’s largest export market and China is India’s largest import market. In addition to the already bleak outlook, our panelists expect higher global oil prices will weigh on the balance of trade this fiscal year and lead to a widening in the current account deficit.
Author: Edward Gardner, Economist