FY15 trade data disappoints-Crisil

India falls short of its export target; deficit under check

India recorded $310.5 billion worth of exports in FY15, down 1.2% from $314.4 billion last year and 7.5% below the government's target of $340 billion. Exports had grown by 4.7% in FY14. Despite depreciation in rupee from 60.5 in FY14 to 61.1 in FY15, exports declined amidst weak global growth. Even after accounting for 11.2% decline in oil exports (from $63.1 to $56.1 billion) due to lower oil prices in FY15, growth in non-oil exports was a paltry 1.2% (from $251.3 to $254.3 billion). A positive development - engineering goods export increased 14.2% (from $63.9 to $73.0 billion) in FY15.

Imports too declined in FY15, albeit marginally. They were down 0.59% to $447.5 billion from $450.2 billion in FY14. A 16.2% decline in oil import in FY15 (from $165.0 to $138.3 billion) helped assuage the impact higher gold imports which grew 19.2% (from $28.8 to $34.3 billion). Non-oil, non-gold imports grew by a decent 7.2% in FY15 (from $256.4 to $274.9 billion) suggesting improvement in domestic demand conditions. Key items which registered a high import growth were: electronic goods, growing by 14.8% (from $32.4 to $37.2 billion) and machinery growing by 4.9% (from $27.1 to $28.5 billion).

Decline in imports allowed merchandise trade deficit to rise only marginally to $137.0 billion in FY15 as against $135.8 billion in FY14. Services trade surplus during Apr-Feb FY15 improved to $68.3 billion from $66.6 billion in the year ago period suggesting that current account deficit would be kept under check. We estimate the CAD for FY15 at 1.1%.

Monthly export trends worrisome

Exports declined by 21.1% y-o-y in March to $23.9 billion - its fourth consecutive monthly decline. Such a stark decline in exports was last seen at the peak of financial crisis period during 2008-09. While lower oil exports are a major contributor to this decline, the fall in non-oil exports at 11.9% was also substantial. India's new Foreign Trade Policy which aims to take total exports to $900 billion by 2019-20 may find the task difficult amidst weak global trade growth prospects. According to WTO, the near term outlook for trade growth looks bleak on factors such as lower-than-expected GDP growth, particularly in emerging economies, the escalation of geopolitical tensions and the possible effects of divergent monetary policies in developed economies.

Overall imports declined by 13.4% y-o-y in March to $35.7 billion with majority of decline attributed to oil whose import declined 52.7% y-o-y. Gold imports on the other hand saw a sharp jump of 93.9% y-o-y to $4.9 billion. While growth in non-oil non-gold imports was positive in March, it was lowest at 1.3% y-o-y since it turned positive in May 2014.

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