India: Merchandise exports rebound in April but the trade deficit remains
May 15, 2018
In April, merchandise exports expanded 5.2% compared to the same month last year, contrasting the 0.7% contraction recorded in March and totaling USD 25.9 billion. This result came on the back of strong shipments of engineering goods, chemicals, and drugs and pharmaceuticals, which more than outweighed fewer shipments of gems and jewelry, and ready-made garments.
Annual growth in the 12-month trailing sum of exports slowed to 8.9% from 10.0% in March. The sum of exports in the 12 months up to April was USD 304 billion, up from USD 303 billion in March.
Meanwhile, year-on-year growth in merchandise imports decelerated to 4.6% in April from 7.2% in March, with imports totaling USD 39.6 billion. The softer growth figure in April reflected plunging gold imports.
The 12-month trailing sum of imports increased 16.3% in April, a moderation from 19.7% in March and the slowest rise since August 2017. Consequently, the 12-month total of imports reached USD 461 billion in April, just above March’s USD 460 billion.
Despite the pickup in exports, the merchandise trade deficit remained steady at March’s USD 13.7 billion in April. Looking ahead, the deficit is likely to grow 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 year and lead to a widening in the current account deficit.
India Exports Forecast
FocusEconomics Consensus Forecast panelists expect exports to grow 11.6% in FY 2018 and 9.5% in FY 2019.
Author: Edward Gardner, Economist