India Insight:Trade deficit widens to highest in 16months

Monthly trade deficit widens to US$13bn (7.2% of GDP annualized) inNovember as imports pick up faster than exports: This compares toUS$10.4bn (5.8% of GDP annualized) registered in October. On a 3-monthtrailing basis, trade deficit widened to 5.8% of GDP annualised in Novembervs. 4.9% of GDP in the previous month.

Goods export growth (in dollar terms) decelerated in November: Goodsexport growth decelerated to 2.3%YoY (vs. 8.2%YoY in Oct). Looking at thebreakdown, the pick-up in exports during the month of Nov was largely led byengineering goods (12%YoY), iron ore, marine products even as slowdownwas visible in gems & jewellery (-13%YoY) and rice among others.

Goods import growth (in dollar terms) accelerated to 10.4%YoY inNovember, highest in two years: This compares with 8%YoY registered inOct. In terms of commodity composition, (a) oil imports were up 5.9%YoY inOct on rise in global crude oil prices, (b) gold imports picked up further toUS$4.4bn (vs. US$3.5bn and US$1.8bn in Oct and Sept) led by inventorybuilding ahead of wedding season demand and somewhat on account of thedemonetisation move as households tried to convert their unaccountedincome into gold, and (c) non-oil non-gold import growth an indicator ofdomestic demand was up 9.6%YoY partly on base effect (vs. 1.7%YoY inOct). Looking at the breakdown the trend was mixed - while some reboundwas seen in imports of peals & precious stones, coal, coke & briquettes andpulses etc amongst others, a decline was seen in other categories includingtransport equipment & iron & steel etc.