India Import Export Data August 2015: Insights & Impacts

India’s merchandise trade data for the month of August 2015 hardly came as a surprise. The trade deficit for the month of August was down marginally to $12.5 billion compared to a trade deficit of $12.8 billion in the month of July. Both the exports and imports continued to contract palpably in the month of August. As far as exports are concerned, this marks the 9th consecutive month of falling exports. While this has been largely driven by a fall in prices of oil and other commodities, a general compression in global trade is also responsible for this trend.

How exports fared in the month of August…

Exports for the month of August 2015 came in at $21.27 billion. In dollar terms, this is 20.66% lower than the export figure $26.81 billion recorded in August 2014. In pure rupee terms the fall in exports has been just 15.22%, implying that the additional 5.44% fall in exports was accounted for by the depreciation of the rupee versus the US dollar. India’s exports for the first 5 months April-August 2015 came in at $111.09 billion, which is still 16.94% lower than the exports recorded in the first 5 months of the previous fiscal year. Most of the key items in India’s export basket including petroleum products, iron ore, oilseeds, cereals and engineering goods saw steep decline compared to the prior period. Only jute, handicrafts and pharma managed to buck the trend and grow over last year. Going ahead, a weak Yuan is likely to exert additional pressure on India’s ability to push exports in the coming months.

Why import situation is dangerous even though it is falling…

For the month of August 2015, imports came in at $33.74 billion almost 10% lower than the import figure recorded in the month of August 2014. The fall in rupee terms was just 3.77% but that was largely because of the weakening of the rupee versus the dollar. Even if one considers the first five months from April to August 2015, imports at $168.61 billion was a good 11.61% lower than the corresponding 5 months in the previous year. Effectively, the combination of a sharp fall in imports and exports hints at a genuine contraction of global trade. We have seen China becoming a victim of this global contraction and India has also not been spared. However, the import data is a matter of concern due to its components.

Gold imports may be the problem area…

For the month of August 2015, oil imports were at $7.36 billion. What is interesting is that during the last one year the oil import bill is down by a whopping 42.59%. Hence it is surprising that despite this steep fall in the oil import bill the overall imports are down by a mere 10% over the last one year. There are a few areas of concerns here. Non-oil imports at $26.39 billion were actually 7% higher than the month of August last year. This trend has been maintained in the first 5 months of the fiscal year as non-oil imports were up 3.4% compared to the first five months of the last fiscal. The problem is gold imports! Interestingly, gold imports for the month of August 2015 were at $4.9 billion, which is almost double the average monthly gold import in the past few months.

If you remove oil and gold from the import basket, then the non-oil/gold basket has shown de-growth of 5.5%. The sole responsibility for the high import figure, despite a fall in oil imports, squarely lies on the shoulders of gold imports. The reason this is dangerous is that it leads to India’s precious forex reserves being used to buy an asset that is prima facie unproductive.

The sum and substance of the numbers…

The broad theme seems to be that there is a visible contraction in volumes as far as both imports and exports is concerned. On the one hand, a weak commodity price situation will ensure that this trend continues. Also, with China devaluing its currency and the dollar getting stronger, there is an opportunity for India to expand its export basket due to a cheaper currency. But the biggest concern is that we must not let gold get away by spoiling the traction achieved on the external front. A contraction in global trade by 20% in one year can have serious repercussions for solvency of EOUs and employment. The government needs to be cautious about that.

In a nutshell, it is a wake-up call that the Indian government cannot afford trade compression to get the better of them. There has to be a conscious effort on the exports front. Gold imports must be curbed once again, if required. At least, that can be a starting point.

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2 responses

  1. “Hi,
    I agree with the data and sincerely hope for the negative trend to buckle down. The concept of ‘Make In India’ is most likely to provide that impetus, by reducing the imports. However, for better numbers as far as exports are concerned, a pragmatic solution would be to stem the decline of the Rupee against the dollar. “

    Like

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