EXTERNALTRADE

Widenssharply
IndiaEquityResearch|Economy

November trade deficit widened surprisingly to ~USD17bn versus

~USD13.4bn in October, primarily due to the 27% YoY growth in imports.
Withinimports,goldimportsclimbedto18monthhigh,whilenonoiland
nongoldimportspickedupledbycoal,iron&steel,andelectronicgoods.
Exports recovered from October weakness (lesser number of production
days),butthereboundwasnotuptoexpectations.Goingahead,weexpect
tradedeficittonormalisebacktotheUSD1314bnrangefollowingfurther
fall in crude oil prices and some normalisation in gold imports after the

sharp uptick. However, in case gold imports remain high around current

levels,weseeupsideriskstoourFY15CADforecastof~USD35bn.

Exports:ModestreboundfromOctoberweakness

Exports improved to 7.3% YoY in November from the 5% contraction in October. The
improvement in nonoil exports was impressive (13% growth in November from 6%
contraction in October), which probably was on account of payback from low working
daysofOctober.However,whenseenontrendbasis(3MMA)thereappearstobesome
moderation,withnonoilexportsgrowing4.4%YoYversus6.1%and5.5%YoYgrowthin
Q1and Q2FY14,respectively. Moderation wasseenin manufacturing goodscategories
suchasengineeringgoods,leatherproductsandreadymadegarments.

Goingahead,weexpectexportsmomentumtoimprovetillMarch2015albeitlargelyon
lowbase(harshwinterhaddampenedexportsgrowth).

Imports:Goldimportssurge
ImportssurgedsharplyinNovembertoUSD43bn(from~USD40bninOctober),driven
mainly by gold and nonoil nongold imports, while oil imports declined sequentially
and on YoY basis. November marked the third consecutive month of spurt in gold
importsandthehighestsinceMay2013.Thistrendingoldimportsissurprisingandits
sustenanceremainstobeseen.Nonoilandnongoldimportscontinuedtopostrobust
growthowingtohighcommodityimportssteel(owingtocheaperpricesinChina)and
coal, and also due to electronic goods, perhaps reflecting some improvement in
domesticdemand.

Deficit:TonarrowbacktoUSD1314bnrange
AprilNovember trade deficit stands at USD100bn (versus USD98bn in the same period
lastyear),whichisatcontainedlevels.Goingahead,weexpecttradedeficittoscaleback
to the USD1314bn range due to normalisation in gold imports and lower oil imports
(crude has further corrected in December). However, if gold continues to remain at
elevatedlevels,thenweseeupsideriskstoourFY15CADforecastof~USD35bn.

KapilGupta
+912240635406
kapil.gupta@edelweissfin.com

PrateekParekh
+912266233469
prateek.parekh@edelweissfin.com

December15,2014

EdelweissSecuritiesLimited

Economy
Table1:Indiasmerchandisetrade
(USDbn)
Imports
Oilimports
Goldimports
Nonoilandgoldimports
Exports
Tradebalance

Nov14
42.8
11.7
5.6
25.5
26.0
(16.9)

Oct14
39.5
12.4
4.2
22.9
26.1
(13.4)

Sep14
43.2
14.5
3.8
24.9
28.9
(14.2)

Aug14
37.8
12.8
2.0
22.9
27.0
(10.8)

AprNov
FY15
FY14
316.4
303.1
106.6
110.2
24.4
22.3
185.4
170.6
215.8
205.4
(100.6)
(97.6)

Source:CMIE,MinistryofCommerce

Chart1:Tradedeficitwidens
(5.0)

(USDbn,3MMA)

(8.0)
(11.0)
(14.0)
(17.0)
(20.0)
Nov12

Mar13

Jul13

Nov13

Mar14

Jul14

Nov14

Tradebalance

(USDbn,3MMA%YoY)

Chart2:Oildeficitdeclinetohelpcontaintradedeficit
25.0
15.0
5.0
(5.0)
(15.0)

Oildeficit

Nov14

Sep14

Jul14

May14

Mar14

Jan14

Nov13

Sep13

Jul13

May13

Mar13

Jan13

Nov12

(25.0)

Source:CMIE,MinistryofCommerce,Edelweissresearch

EdelweissSecuritiesLimited

ExternalTrade
Chart3:Goldimportssurgesharply
7.5

(USDbn,3MMA)

6.0
4.5
3.0
1.5
0.0
Nov12

May13

Nov13

May14

Nov14

Goldimports

Chart4:Nonoil,nongoldimportswitnessuptickowingtodomesticrecovery
30.0

(3MMA,%YoY)

20.0
10.0
0.0
(10.0)

Totalimports

Nov14

Sep14

Jul14

May14

Mar14

Jan14

Nov13

Sep13

Jul13

May13

Mar13

Jan13

Nov12

(20.0)

Nonoilandgoldimports

Chart5:Sequentialmomentuminexportsincreasesbutstillweak
5.0

(3MMASA,%MoM)

3.0
1.0
(1.0)
(3.0)

Exportsgrowth

Nov14

Aug14

May14

Feb14

Nov13

Aug13

May13

Feb13

Nov12

Aug12

May12

Feb12

Nov11

(5.0)

Source:CMIE,MinistryofCommerce,Edelweissresearch

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Economy
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