IN: Merchandise Trade Balance

Highlights
India's October trade deficit widened to $10.16 billion from $8.34 billion in September and $9.69 billion a year ago. A doubling in gold imports on the year did much of the damage. Although compared with levels seen earlier in the year the monthly trade deficit has been bigger in recent months, the shortfall for the year to date remains well below 2015 levels. Indeed, for the first seven months of the fiscal year, the cumulative red ink stands at $53.2 billion, down sharply from a deficit of $101.6 billion for the comparable period in FY2015/16.

In year-on-year terms, exports declined throughout 2015 and continued to do so for much of 2016. However, building on September's improvement, growth accelerated to 9.6 percent in October and is now showing signs of stabilising in positive territory. Overseas sales of engineering products were up 13.9 percent, jewellery 21.8 percent and petroleum and chemicals 7.2 percent and 6.7 percent respectively.

Imports also recorded a solid bounce, rising 8.1 percent from October 2015 as oil increased almost 4 percent and non-oil 9.3 percent.

Definition
The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Alongside the merchandise data, exports and imports of services are also provided. The statistics, which are not seasonally adjusted, are reported in both local currency and U.S. dollars, the latter being the main market focus.

Description
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.