Trade deficit widens in India

The trade deficit for May was US$16.3 billion even as imports declined.

Morgan Stanley noted:

Exports declined in May on YoY basis: According to provisional trade data released by the Ministry of Commerce, exports (in dollar terms) fell by 4.2% YoY in May after rising by 3.2% YoY in April 2012. On a seasonally adjusted basis, exports grew 2.9% MoM in May 2012 compared with 1.8% MoM in April 2012. The decline in yearly growth could be explained by base impact - exports grew by 56.7% YoY in May 2011.

Imports declined on YoY basis: On a YoY basis, import (in dollar terms) fell 7.4% YoY in May 2012 compared with growth of 3.8% YoY the previous month. On a seasonally adjusted basis, imports grew 7.9% MoM in May 2012 compared with -15% MoM in April 2012. The decline in yearly growth could also be due to the base impact as imports grew 52% YoY in May 2011.

As per provisional estimates, oil imports grew 14% in May (to US$14.9bn) vs. 7% YoY in April. Non-oil imports growth (provisional estimated) declined 16% YoY in May from -2% YoY in March. Gold and silver imports fell 52% YoY in May to US$ 4.3bn, however this can be attributed to base impact as gold imports rose 415% in May 2011. Indeed, gold imports increased from US$3.1bn in April (2% of GDP, annualized) to US$4.3bn in May (2.8% of GDP annualized).

Trade deficit widened: The trade deficit for May widened to US$16.3bn (10.5% of GDP annualized) compared to US$13.4bn in previous month (8.7% of GDP annualized). On a three-month trailing basis, the trade deficit remained steady at 9.4% of GDP, annualized in May, vs. 9.5% of GDP in April 2012. On a 12-month trailing basis, the trade deficit remained steady at 9.9% of GDP in May (vs. 10% of GDP in April).