Economic Spotlight: Trade Deficit Inches Up

17 Apr

Economic Spotlight: Trade Deficit Inches Up

Trade Deficit came in at USD 10.9 billion in March, making the FY19 trade deficit at USD 176.4 billion up from USD 162 billion in FY18.The March trade deficit is down -19% Y-o-Y, however, has seen a sequential rise from USD 9.5 billion in February 2019.

Key Highlights

  • March 2019 exports grew by 11.02% Y-o-Y to USD 32.4 billion, up from USD 26.6 billion in the previous month. Oil exports grew by 6.5% Y-o-Y to USD 3.5 billion. Non-Oil Exports grew by 11.59% Y-o-Y to USD 29.01 billion.
  • March 2019 imports grew by just 1.4% Y-o-Y to USD 43.4 billion. Petroleum Imports grew by 5.54% Y-o-Y to USD 11.7 billion. Non-PoL imports were flattish growing by -0.01% Y-o-Y and came in at USD 31.6 billion
  • Oil Trade balance for March 2019 is at USD -8.2 billion. Non-Oil Trade Balance is at USD -2.6 billion
  • Gold and Silver Imports grew by 22% Y-o-Y though on a very low base. Thus, the Non-Oil Non-Gold & Silver imports contracted by 2% Y-o-Y in March.
  • The growth in Oil Trade captures the impact of higher crude price. The flattish growth of Non-Oil Imports shows the slack domestic demand in the economy.

Engineering Good Exports shows uptick, Labour Intensive sectors turn positive

  • Engineering Goods grew by 16.26% Y-o-Y to USD 9.4 billion in March up from USD 6.3 billion in February.
  • The growth in Labour Intensive sectors has turned positive. This has to be read with a pinch of salt as the low positive growth comes on a low base prevailing post demonetization. Ready Made Garments grew by 15% Y-o-Y to USD 17.1 billion. Gems and Jewellery contracted by 0.4% Y-o-Y to USD 3.4 billion. However, Leather and Leather Products continued to be in negative territory for another Month, contracting by -6.36% Y-o-Y

Oil Imports rise, Non-Oil Imports flattish

  • Oil Imports rose to USD 11.7 billion in March 2019 from USD 9.3 billion in February. The rise in Oil Imports is largely on back of higher crude prices in March.
  • Non-Oil Imports remained flattish in March growing at -0.01% Y-o-Y.  Electronic Goods contracted by 5.7% Y-o-Y. The fall in Non-Oil Imports shows the low demand prevailing in the domestic economy. All lead indicators show a demand slowdown which has led to resultant low Non-Oil imports.


FY19 Trade deficit is at USD 176.4 billion. This should keep the Current Account deficit for FY19 controlled at 2.2% of GDP. Going forward, we believe that exports should pick up as Global Economies stabilize and Export Demand comes back. However, Imports especially Non-Oil Imports, should also rebound as domestic demand reignites. As the base increases with India being a USD 3 trillion economy in FY20, we believe India likely to be in a comfortable position as far as External Sector is concerned.

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