Impact: Positive (Exporters)

Brief: India's exports grow faster than its imports in YTD FY19; While refiners are the primary drivers, manufactured merchandise exporters record a solid growth as well

Rising crude oil price and weaker rupee has boosted India's export of petroleum products. Petroleum exports expanded by 53.3% YTD as compared to just 19.6%, same time previous year. Unit realization for refiners has increased by 33%, reaching Rs. 42,856 in May, 2018. In quantity terms, monthly export of petroleum products has reached an all-time high of 8.1 million tons in May, 2018 as against 4.2 million tons in the previous month. This indicates earning for export oriented petroleum product industry remaining strong.

The period is also significant for India's manufacturing exports, which have been accelerating over the last four months reaching 13% in June, 2018. Non-petroleum exports expanded by 9.47% YTD as compared to 8.56% same time last year. We believe that a weaker Indian rupee against the US dollar has created positive environment for exporters. Indian rupee has depreciated nearly 5% in Q1, FY19 as compared to same time previous year. Consequently, India's export to the US have increased by 12.5% during first quarter of FY19. This is encouraging, given the trade tensions creating headwinds for regional exports to the American mainland. The industries driving India's non-petroleum export growth in June 2018 are iron ore (+33%), chemical (+30%), electronic goods (+23.5%), engineering goods (+15%), pharmaceutical (+14.7%).

While rising crude prices have resulted in a windfall for refiners, the commodity's imports are impacting India's import bill significantly. The country's petroleum imports expanded by 48.8% YTD, almost double to same time last year. However, overall imports grew much slower as compared to the FY18 due to massive decline in non-petroleum imports. The latter expanded by less than 3% as compared to 37.4% in FY18. We attribute this to India's protectionist tax policy on several intermediate and consumer items.

YTD Trade Performance