IN: Merchandise Trade Balance

Fri Apr 17 07:00:00 CDT 2015

Actual Previous
Balance $-11.79B $-6.85B
Exports Y/Y -21.1% -15.0%
Imports Y/Y -13.4% -15.7%

The unadjusted merchandise trade deficit widened from $6.85 billion in February to $11.79 billion in March.

The end of quarter reading was the worst since last November and the first double digit shortfall in 2015. Exports were particularly weak, falling some 21.1 percent on the year after a 15.0 percent drop in mid-quarter. This was their fourth month of negative growth.

Imports were not much better but at least a 13.4 percent annual contraction compared favourably with February's 15.7 percent drop albeit largely reflecting stronger gold purchases.

For the full fiscal year, the red ink stood at $137 billion, little changed from $135.8 billion in FY2012/13. Significantly lower oil costs should have a much more positive impact this year but underlying trends need watching carefully. Indeed, the RBI will not want to see the rupee strengthen and further intervention as needed to prevent this is to be expected over coming months.

The foreign trade data relate to total sea, air and land trade and on private and government accounts. Exports are on f.o.b. basis and imports are on c.i.f. basis. Exports include re-exports of foreign merchandise previously imported to India and imports relate to foreign merchandise whether intended for home consumption, bonding or re-exportation. Direct transit trade, transshipment trade, passengers baggage, ship's stores, defense goods and transactions in treasure i.e. gold and current coins and notes, diplomatic goods and "proscribed substances" under Atomic Energy Act, 1962, are excluded from the trade data, while indirect transit trade, transactions in silver (other than current coins) and in notes and coins not yet in circulation or withdrawn from circulation are included.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in India. Exports show the demand for Indian goods in countries overseas. The rupee can be particularly sensitive to changes in the trade deficit run by India, since the trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. Data are reported in US dollars and Indian rupees.