IN: Merchandise Trade Balance

Tue Nov 17 06:00:00 CST 2015

Actual Previous
Balance $-9.8B $-10.5B
Exports Y/Y -17.5% -24.3%
Imports Y/Y -21.2% -25.4%

The merchandise trade balance was in a $9.8 billion deficit in October, down from $10.5 billion in September and the least negative outturn since February. Compared with a year ago the red ink was reduced by some $3.8 billion.

The improvement came courtesy of a much better performance by exports which fell 17.5 percent on the year or nearly 7 percentage points less than in September. Annual import growth was minus 21.2 percent following a 25.4 percent drop last time.

On current trends the overall current account deficit this financial year looks likely to come in close to 1 percent of GDP which, despite recent concerns about emerging markets in general, should not pose any real problems for funding.

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transit trade, transactions in silver (other than current coins) and in notes and coins not yet in circulation or withdrawn from circulation are included.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.