Exports growth decelerated to the lowest in five months
Exports growth slowed to 5.8% YoY in November, from 13.5% YoY in October. In absolute value terms, exports came at USD 24.6 bn in November, the lowest reading since April 2013. Though the exports growth has been lower than our expectation, we believe that there is a strong case for better exports sector growth going forward, led by global recovery and improved exports competitiveness supported by weaker INR.
Though the internals of the exports sector performance is not available for November, the data over the last few months suggest that agriculture and related products, textiles, leather, handicrafts, engineering goods and chemical products have performed well in FY2014.
Imports remain muted on weak domestic demand
Imports contracted by 16.4% YoY in November as against a negative growth of 14.5% in October. In absolute terms, total imports came at USD 33.8 bn in November as against USD 37.83 bn in October. Within imports, gold and silver imports remain muted at USD1.05bn in November as against USD 1.4 bn in October. Crude imports contracted by 8.1% YoY and came at USD 12.9 bn in November as against USD 15.2 bn in the previous month.
Non crude non gold imports contracted by 8.5% YoY to USD 19.2 bn in November (USD 21.2 bn in October). Though lower gold imports reflect government curbs, contraction in non gold imports reflects slower domestic demand.
Trade deficit narrowed in November
As a result of sharp contraction in imports growth, trade deficit narrowed to USD 9.2 bn in November as against a deficit of USD 10.6 bn in October and FYTD average deficit of USD 12.5 bn. We believe that gradual improvement in exports along with weakness in imports would continue to support the outlook for India's current account deficit this year. Given the continuation of weaker gold imports, there is risk to our current account deficit (CAD) expectation of USD 52 bn (~2.9% of the GDP) for FY2014.
Please refer to the attached document for the detailed report.
Regards,
ICICI Bank : Treasury Research
Contact:
Samir Tripathi
022-4008-7233
