Impact: Negative (Currency, Trade Balance, GDP Growth)

Brief: India’s overall exports have expanded by 8.6% in FY19 as against 10.1% FY18. Growth in overall imports has reduced to 10.2% in FY19 from 21.2%, the previous year. As a result, trade deficit stands at $183 billion for the financial year, which is in line with our estimates during mid of FY19. Central government had increased custom duties in a range of 2.5 to 10% on non-essential commodities in September, 2018. Current fiscal year, commodity prices are expected to remain low on account of weak demand. However, raising energy price (due to oil price) would influence the price of other commodities’ as well.

India’s overall exports have expanded by 8.6% in FY19 as against 10.1% FY18. On a petroleum and non-petroleum perspective, growth in petroleum exports has increased to 23.9% from 18.8%, a year earlier. The higher growth in primarily driven by the oil prices as that inflated the price of petroleum items in the international market. Exports of non-petroleum items, in contrast, have declined by 250 bps. The growth in this segment has undermined by the trade war that adversely impacted the global economic outlook.

On the imports front, growth in overall imports has scaled down to 10.2% in FY19 from 21.2%, the previous year. As a result, trade deficit stands at $183 billion for the financial year, which is in line with our estimates during mid of FY19.

The crude oil imports, which are pivotal in India’s trade deficit, have increased by 29% during the said period as against 25% a year earlier. The higher growth in primarily driven by the oil prices as oil price has increased by same percent during the period. While crude oil imports in quantity terms has increased by only 3.8%. Non-crude oil imports, on the other hand, have registered only 4.3% growth as compared to 20% during the previous year. It is known that central government had increased custom duties in a range of 2.5 to 10% on non-essential commodities in September, 2018. The decision was considered as current account deficit had reached close to 3% and USD-INR currency pair had reached 72.2 during Q2, FY19.

Looking forward, the commodity prices are expected to remain low on account of weak demand. However, raising energy price (due to oil price) would influence the price of other commodities’ as well. Higher oil price and slowing global economy is expected to lower India’s export outlook.

Growth in Exports and Imports: