According to provisional data released by the commerce ministry, the trade deficit for November 2013 has narrowed to USD9.2bn as against USD10.6bn in the previous month and USD17.2bn in November 2012 mainly on account of a sharp decline in imports. Imports reported a contraction of 16.4% during November 2013 as against 14.5% in the previous month and growth of 3.5% in November 2012. However, the momentum of strong export performance witnessed over the past four months slowed in November 2013, with export growth at 5.9% as compared to 13.5% in October 2013. The decline in imports for the sixth consecutive month can be attributed to the steep contraction in non-oil imports due to restrictions on gold imports as well as the impact of weak domestic demand in the economy. Non oil imports reported de-growth of 23.7% as compared to 22.8% in the previous month and oil imports came in lower by 1.1% as compared to growth of 1.7% in the previous month. Gold and silver imports have declined by more than 80% over a year ago since the previous three months despite higher festival season demand during the period owing to RBI’s policy of linking import of gold to exports aimed at curtailing demand for the precious metal since it has resulted in a bloated CAD and divergence of household savings to non-productive physical assets. The cumulative trade deficit in the April – November 2013 period at USD99.9bn has reported de-growth of 23% as compared to deficit of USD129.2bn during April – November 2012. This contraction is on account of the 6.3% growth in exports as well as decline of 5.4% in imports. We believe that these positive trends in the trade balance are likely to bode well for the current account deficit in 3QFY2014 as well. We expect CAD in the third quarter to remain within RBI’s comfort level of 2.5% of GDP. We also note that the import cover of reserves, another indicator of external sector vulnerability, has also improved to 8.6 months, the highest level since May 2011. The financing of the CAD would be aided by the banking sector’s mobilization of funds to the tune of USD34bn on account of the concessional FCNR (B) swap window offered by the RBI until end-November. We believe that these factors together have materially reduced the risks emanating from the external sector. Source: Angel BrokingAccording to provisional data released by the commerce ministry, the trade deficit for November 2013 has narrowed to USD9.2bn as against USD10.6bn in the previous month and USD17.2bn in November 2012 mainly on account of a sharp decline in imports. Imports reported a contraction of 16.4% during November 2013 as against 14.5% in the previous month and growth of 3.5% in November 2012. However, the momentum of strong export performance witnessed over the past four months slowed in November 2013, with export growth at 5.9% as compared to 13.5% in October 2013. The decline in imports for the sixth consecutive month can be attributed to the steep contraction in non-oil imports due to restrictions on gold imports as well as the impact of weak domestic demand in the economy. Non oil imports reported de-growth of 23.7% as compared to 22.8% in the previous month and oil imports came in lower by 1.1% as compared to growth of 1.7% in the previous month. Gold and silver imports have declined by more than 80% over a year ago since the previous three months despite higher festival season demand during the period owing to RBI’s policy of linking import of gold to exports aimed at curtailing demand for the precious metal since it has resulted in a bloated CAD and divergence of household savings to non-productive physical assets. The cumulative trade deficit in the April – November 2013 period at USD99.9bn has reported de-growth of 23% as compared to deficit of USD129.2bn during April – November 2012. This contraction is on account of the 6.3% growth in exports as well as decline of 5.4% in imports. We believe that these positive trends in the trade balance are likely to bode well for the current account deficit in 3QFY2014 as well. We expect CAD in the third quarter to remain within RBI’s comfort level of 2.5% of GDP. We also note that the import cover of reserves, another indicator of external sector vulnerability, has also improved to 8.6 months, the highest level since May 2011. The financing of the CAD would be aided by the banking sector’s mobilization of funds to the tune of USD34bn on account of the concessional FCNR (B) swap window offered by the RBI until end-November. We believe that these factors together have materially reduced the risks emanating from the external sector. Source: Angel Broking
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