IN: Merchandise Trade Balance

Mon Jan 15 06:00:00 CST 2018

Actual Previous
Balance $-14.88B $-13.83B
Exports Y/Y 12.4% 30.55%
Imports Y/Y 21.1% 19.61%

The trade deficit widened out from $13.83 billion in November to $14.88 billion in December, the most red ink in three years and a $4.33 billion increase from December 2016.

The headline deterioration mainly reflected a marked slowdown in annual export growth from a misleadingly high 30.6 percent in November to 12.4 percent. Even so, engineering goods (25.3 percent) and petroleum products (25.2 percent) had a very good month as did organic and inorganic chemicals (31.4 percent). Imports (21.1 percent after 19.6 percent) accelerated slightly.

The December report puts the 2017 calendar year shortfall at $144.8 billion, a marked worsening from the $97.1 billion recorded in 2016. Over the first nine months of the fiscal year, the red ink stands at $114.9 billion, a near 47 percent jump from the same period in FY2016/17 and only partly due to higher energy prices.

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.

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.