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ECONOMICS UPDATE

17 JUN 2016

CAD: 4QFY16
Oil bounty to the fore
The tailwinds provided by falling crude prices were
on full display in the 4QFY16 CAD print. Despite the
fall in exports, remittances and software services,
CAD came in at a mere US$ 0.3bn, the lowest since
4QFY07. The jewellers strike also aided the print.
However, we expect the CAD to widen to 2% of the
GDP from the current sub-1.5% level on account of
increasing crude prices, normalisation of gold
imports and lack of revival in exports (merchandise
and services). A key takeaway was the contraction
in BoP surplus (FY16 to US$ 17.9bn vs. US$ 61.4
YoY). This was a result of negative portfolio flows
(FY16 US$ -4.1bn vs. US$ +40.9bn YoY).

4QFY16 CAD shrunk to US$ -0.3bn vs. US$


-1.3bn YoY and US$ -7.1bn in the last quarter,
the lowest since 4QFY07.

The fall in CAD was on account of lower trade


deficit (US$ -24.8bn vs. US$ -31.7bn YoY and US$
-34bn in the last quarter), which was a result of
lower oil imports (down 33% YoY) and gold
imports (down 38% YoY).

On the invisible side, net exports contracted 20%


Romit Fernandes
romit.fernandes@hdfcsec.com
+91-99301-24556

to US$ 24.4bn vs. 30.4bn YoY. The stumble was


led by software services (US$ 17.3bn vs. US$
18.6bn YoY).

Net private transfers (remittances) at US$ 15bn


fell 10% YoY owing to the fall in crude prices.

On the BoP side, net FDI increased 11% YoY to


US$ 8.8bn and net FPI declined 116% to US$
-1.5bn, led by turbulent markets (Chinese RMB
depreciation in Jan, negative rates by BoJ, etc).

Overall, BoP surplus registered a fall for the


second quarter in a row. It stood at US$3.5bn vs.
US$ 16.9bn YoY, a fall of 79% on YoY basis.

On annual basis, FY16 CAD contracted to 1.1% of


GDP (US$ 22.1bn) vs. 1.3% of GDP (US$ 27bn)
last year, led by the fall in oil imports (-40.1%),
which made up for the drop in exports (-15.9%),
the lowest since FY07.

Net invisibles fell 7.4% led by a fall in


remittances (-4.9%) owing to the feeble macros
of oil exporters.

On the BoP side, the surplus shrank by a


whopping 70.8% to US$ 17.9bn vs. US$ 61.4bn
YoY. The slide was triggered by net FPI, which
registered outflows amounting to US$ 4.1bn vs.
inflows of US$ 40.9bn.

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ECONOMICS UPDATE: CAD

Snapshot Of BOP
4QFY16
65.8
90.6
14.6
5.3
70.7
-24.8
17.3
15.0
-7.9
24.4
-0.3
8.8
-1.5
1.3
-5.1
3.5
3.3

3QFY16
64.9
98.9
20.0
9.0
69.9
-34.0
18.6
15.3
-7.0
26.9
-7.1
10.7
0.6
-2.3
2.0
10.9
4.1

4QFY15
70.8
102.5
21.8
8.5
72.2
-31.7
18.6
16.6
-4.8
30.4
-1.3
7.9
9.8
-1.1
-0.1
16.5
6.9

%YoY
-7%
-12%
-33%
-38%
-2%
-22%
-7%
-10%
63%
-20%
-75%
11%
-116%
-220%
5081%
-79%
-53%

%QoQ
1%
-8%
-27%
-41%
1%
-27%
-7%
-2%
13%
-9%
-96%
-18%
-378%
-155%
-355%
-68%
19%

Source: RBI

Quarterly Trends In Trade Balance

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

%YoY Trade Decficit - RHS

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

Trade Deficit (USD Bn)

1QFY13

Fall in CAD was on account of


lower trade deficit (US$ -24.8bn
vs. US$ -31.7bn YoY and US$
-34bn in the last quarter)

In USD Bn
Exports
Imports
Oil
Gold
Non-oil And Gold
Merchandise Trade Balance
Software Exports
Private Transfers
Other Invisibles
Net Invisibles
Current Account
Net FDI
Net FPI
External Loans
Other Capital Flows
Total Capital Account
Overall BoP

30.00%

(10.00)

20.00%

(20.00)

10.00%

(30.00)
(33.31)(33.15) (30.67) (34.56)

(40.00)
(50.00)
(60.00)
(70.00)

(43.85)

(45.64)

(47.79)
(58.38)

(50.48)

(24.75)
(38.60) (39.29)

(31.72) (34.18)

(37.17)

(33.98)

0.00%
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%

Source: RBI

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ECONOMICS UPDATE: CAD

Quarterly Trends In Net Services Exports


Services (USD bn)

%YoY services - RHS

25.00

On the invisible side, net


exports contracted 20% to US$
24.4bn vs. 30.4bn YoY. The
stumble was led by software
services (US$ 17.3bn vs.
US$18.6bn YoY)

20.00%

20.00
15.00

14.98

16.33 16.65 16.96 16.87

18.37 18.12

19.61
16.99

20.30 19.41
18.99

17.75 17.84 18.01

15.00%
16.08

10.00%
5.00%
0.00%

10.00

-5.00%
-10.00%

5.00

-15.00%

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

-20.00%

Source: RBI

Quarterly Trends In CAD

4QFY16 CAD shrunk to US$ 0.3bn vs. US$


-1.3bn YoY and US$ -7.1bn in
the last quarter, the lowest
since 4QFY07

(5.00)
(15.00)
(25.00)

(16.93)
(20.98)

(1.21)

(0.32)

(1.29)
(7.84)

(10.15)

(8.26)

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

%YoY CAD - RHS

(6.12)

(8.54)

(7.11)

150.00%
100.00%
50.00%
0.00%

(18.08)
(21.77)

-50.00%
-100.00%

(30.00)
(35.00)

3QFY14

(5.15) (4.22)

(10.00)
(20.00)

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

CAD (USD Bn)

(31.86)

-150.00%

Source: RBI

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ECONOMICS UPDATE: CAD

Quaterly Trends In CAD And Net Foreign Inflows


Foreign Flows (FDI+FPI) USD bn
30.0
11.9

6.3

1.9

(10.0)
(17)

(30.0)

(18)

(21)

17.7

10.2

22.1
13.5

(4)

11.3

10.2
3.2

0.3
(5)

(1)
(8)

(1.5)
(8)

(10)

(6)

7.3
(0.3)

(9)

(7)

(22)

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY13

2QFY13

1QFY13

3QFY14

(32)

(40.0)

1QFY14

(20.0)

8.5

2QFY14

10.0

20.3

17.0

4QFY13

Overall, BoP surplus registered


a fall for the second quarter in
a row. BoP surplus at US$ 3.5bn
vs. US$ 16.9bn YoY, a fall of
79% on YoY basis

15.9

20.0

CAD USD bn

Source: RBI

Annual Trends In Current Account Deficit


Current account deficit USD bn (LHS)
FY13

FY16 CAD contracted to 1.1% of


GDP (US$ 22.1bn) vs. 1.3% of
GDP (US$ 27bn) last year led by
a fall in oil imports (-40.1%),
which adequately made up for
the fall in exports (-15.9%)

FY14

CAD as %of GDP


FY15

FY16

0.0%
-1.0%

(20.0)
-1.7%

(40.0)

-1.3%

-1.1%

-2.0%
-3.0%

(60.0)

-4.0%

(80.0)
(100.0)

-5.0%
-4.8%

-6.0%

Source: RBI

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ECONOMICS UPDATE: CAD

Snapshot Of BOP

On the BoP side, surplus shrank


by a whopping 70.8% to US$
17.9bn vs. US$ 61.4bn YoY. The
slide was triggered by net FPI,
which registered outflows
amounting to US$ 4.1bn vs.
inflows of US$ 40.9bn

In USD Bn
Exports
Imports
Oil
Gold
Non oil and gold
Merchandise Trade balance
Software Exports
Private transfers
Other invisibles
Net Invisibles
Current account Balance
Net FDI
Net FPI
External Loans
Other capital flows
Total capital account
Overall BoP
GDP (USD Bn)
CAD as %of GDP

FY13
306.6
502.2
164.0
53.8
284.4
(195.7)
63.5
64.4
(20.0)
107.8
(87.8)
19.8
26.9
31.1
11.5
89.3
3.8
1,829.3
-4.8%

FY14
318.6
466.2
164.8
28.8
272.6
(147.6)
67.0
65.3
(17.0)
115.3
(32.4)
21.6
4.8
7.8
14.6
48.8
15.5
1,863.3
-1.7%

FY15
316.7
460.9
138.3
34.4
288.2
(144.2)
70.4
66.0
(19.7)
116.7
(27.5)
32.6
40.9
3.4
13.0
90.0
61.4
2,040.6
-1.3%

FY16
266.4
396.4
82.9
31.8
281.7
(130.1)
71.5
62.7
(26.2)
108.0
(22.1)
36.0
(4.1)
(4.6)
13.9
41.1
17.9
2,074.3
-1.1%

%YoY
-15.9%
-14.0%
-40.1%
-7.6%
-2.2%
-9.8%
1.5%
-4.9%
32.8%
-7.4%
-19.8%
10.4%
-110.1%
-234.9%
7.0%
-54.3%
-70.8%
2%

Source: RBI

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ECONOMICS UPDATE: CAD

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