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India's Trade deficit - exports still disappointing
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India’s trade deficit for Apr’19 stood at $15.33bn as against $10.89bn in Mar’19 above consensus expectation of US$13.5bn, widened to a five-month high in April due to rise in crude oil imports coupled with muted growth in export amid rising concerns over US-China trade war. 

Imports grew by 4.4% YoY in dollar terms to US$41.4bn YoY, down from $43.44 billion in Mar’19 but higher than the $39.63 billion a year ago. The items which showed higher imports include Crude (+9.26%), Gold (+54%), Non-oil imports (+2.78%), petroleum products (+9.3%), plastic materials (+3.5%), iron and steel (+11%), non-ferrous metals (+1%), machinery (+6.5%) and electronic goods (+4%) expanded while transport equipment (-31.7%), chemicals (-0.1%) and precious stones (-8.9%) fell.

Oil imports for FY20 in April were $11.38 billion, which was 9.26% higher in dollar terms, compared to $10.41 billion in April 2018, primarily on account of Crude prices. However going into FY20, we sense that Oil import bill shall be surge on account of higher oil prices. Non-oil imports marginally grew by 2.78% YoY at $30.02 billion, compared to $29.21 billion in April 2018 showing that imports are well contained primarily on increase in imports of precious stones as well as electronics in FY19. Gold imports spiked by 54% to $3.97 billion in April. The rise in imports driven by strong demand during wedding season and festival along with fall in prices which prompted purchases.

Exports in Apr’19 stood at $26 billion as against US$32.6bn in Mar’19. They slid to a four-month low of 0.64% YoY in April as shipments of engineering goods, gems and jewellery, leather and other products declined. During April, India’s exports picked up in drugs and pharmaceuticals (+4%), electronic goods (+27.78%), organic and inorganic chemical (+15.06%), readymade garments (+4.4%) and petroleum products (+30.8%), while exports contracted in gems and jewellery (-13.4%) and engineering goods (-7.1%). Non-petroleum and non-gems and jewellery exports stood at $19.54 billion, as compared to $19.80 billion in April 2018, exhibiting a negative growth of 1.31%.

While Petroleum product growth showed signs of optimism in April, uncertainty over US-China trade war as well as slowed demand can continue to pose a threat on exports of discretionary commodities in FY20. 

We expect trade deficit to widen going forward on account of increase in exports, higher crude prices and rupee at $69-$72 levels. 

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