Trade First Cut_February 2014

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CRISILEconomy First Cut

Overview

Merchandise trade deficit fell slightly in January 2014 to US$ 9.9 billion from US$ 10.1 billion in December (figure 1). Compared to a

year ago, however, trade deficit nearly halved in January as import compression steepened (-18.1% y-o-y) while export growth

edged up (+3.8% y-o-y).

In January, imports contracted sharply as weak domestic demand and restrictions on gold imports lowered non-oil imports by 22%y-o-y. In addition, a strong base effect contributed to the fall in imports in the month. Oil imports fell by 10.1% reversing the rise seen

last month. Detailed data for December shows that gold imports contracted by 38% y-o-y from April-December 2013.

Export growth remained in the single digits for the third consecutive month in January, edging up to 3.8% from 3.5% in the previous

month. Export growth might have been capped by a continued fall in the value of petroleum exports in January, as crude oil prices

averaged at US$107.4 per barrel in January as compared to US$112.9 per barrel at the same time last year. In 2014-15, despite

growth in export volumes, we expect petroleum exports in value terms to decline by 23% y-o-y due to lower global petroleum

prices.

Why export growth is slowing despite global recovery

In 2013-14 so far, the top three contributors to export growth have been petroleum products (contributing 20%), textiles (contributing20%) and transport equipment (contributing 13%). In the third quarter, petroleum products contracted by 11.9% y-o-y versus an

expansion of 26% in the previous quarter (Figure 2). Fall in petroleum exports are in part explained by the fall in crude oil prices that

averaged at US$109.4 per barrel in Q3 as compared to US$110.4 per barrel same time last year. In addition, shutdown of refineries

for unplanned maintenance led to a slowdown in exports volume. Petroleum product export volume stood at 17 million metric tonnes

in Q3 2013-14 versus 19 million metric tonnes in the same quarter a year earlier.

Figure 1: Export-Import (3 month moving average, US$ bn) Figure 2: Slowdown in petroleum exports (y-o-y, 3mma)

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Exports Imports

USD billion, 3mMA

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Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13

Petrouleum products Textiles Transport equipment

Merchandise Export Growth (y-o-y), 3mma

Trade: Deficit narrows as imports fall steeply

February 2014

Source: Ministry of Trade & Industry, CRISIL Research Source: Ministry of Trade & Industry, CRISIL Research


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CRISIL Economy First Cut - Trade

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Table 3: Indias Trade Performance(USD billion):

April-January

Jan-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 FY13 FY14

Exports 25.8 23.8 25.8 26.1 27.7 27.3 24.6 26.3 26.8 243.2 257.1

Imports 44.8 36.0 38.1 37.1 34.4 37.8 33.8 36.5 36.7 409.0 377.0

Oil Imports 14.7 12.8 12.7 15.1 13.2 15.2 13.0 13.9 13.2 136.5 138.1

Non-Oil Imports 30.1 23.3 25.4 22.0 21.2 22.6 20.9 22.6 23.5 272.5 238.9

Trade Balance -19.0 -12.2 -12.3 -10.9 -6.8 -10.6 -9.2 -10.1 -9.9 -165.8 -120.0

Source: Ministry of Commerce and Industry, CRISIL Research

Analytical Contacts:

Vidya Mahambare Sakshi Gupta

Principal Economist, CRISIL Research Junior Economist, CRISIL Research

Email:[email protected] Email:[email protected]

Phone: +91 22 334 28038 Phone: +91 22 425 42929

Media Contacts:

Manasi Apte Jyoti Parmar

Manager, Communications and Brand Management Communications and Brand Management

Email:[email protected] Email: [email protected]

Phone: +91 22 334 21812 Phone: +91 22 334 21835
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About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are

India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks

and leading corporations.

About CRISIL Research

CRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and

analysis on the Indian economy, industries, capital markets and companies. We are India's most credible provider of

economy and industry research. Our industry research covers 70 sectors and is known for its rich insights and

perspectives. Our analysis is supported by inputs from our network of more than 4,500 primary sources, includingindustry experts, industry associations, and trade channels. We play a key role in India's fixed income markets. We

are India's largest provider of valuations of fixed income securities, serving the mutual fund, insurance, and banking

industries. We are the sole provider of debt and hybrid indices to India's mutual fund and life insurance industries. We

pioneered independent equity research in India, and are today India's largest independent equity research house. Our

defining trait is the ability to convert information and data into expert judgments and forecasts with complete

objectivity. We leverage our deep understanding of the macroeconomy and our extensive sector coverage to provide

unique insights on micro-macro and cross-sectoral linkages. We deliver our research through an innovative web-

based research platform. Our talent pool comprises economists, sector experts, company analysts, and information

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Disclaimer

CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources, which it considers

reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or

omissions or for the results obtained from the use of such information. CRISIL Limited has no financial liability whatsoever to the subscribers / users

/ transmitters / distributors of this Report. The Centre for Economic Research, CRISIL (C-CER) operates independently of and does not have

access to information obtained by CRISIL's Ratings Division, which may in its regular operations obtain information of a confidential nature that is

not available to C-CER. No part of this Report may be published / reproduced in any form without CRISIL's prior written approval.

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Trade First Cut_February 2014