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Charts & Analysis

Charts: Software Exports Fell 20% in March, Even as Jeweller Strike Rescues Rupee and Trade Balance


The whole trade situation continues to suck. I mean big time.
India’s merchandise (physical goods) trade deficit narrowed to the lowest in nearly 5 years, at a tiny $5 billion for the month of March. However, this is largely because of the sudden drop in Gold imports, as Jewellers were on strike for most of March. The budget in 2016 introduced a clause requiring jewellers to pay 1% excise duty and to require more documentation of gold buyers, which prompted them to shut shop. This has provided a big relief to imports as the rupee also gained from the temporarily lopsided merchandise trade balance.
Exports and Imports of India
Gold imports have fallen 80% to $0.97 billion in March (Source: the Hindu) after a 34% drop in February (Economic Times). Are Indians losing their gold fascination? It’s too early to call, but a reduced rate of inflation, a potential success in the Gold Monetization and Gold Bond schemes and a falling price of Gold will change consumption patterns over time.

Bright Spot: Export Trends Look Marginally Better

Exports look better this month. We take a look at Exports per Day, which is a better measure than total exports, since the number of days in each month is different. This time India’s exports per day fell to $733 million per day (from about $775 million per day in March 2015). This is still a fall of 5.5% but it’s a smaller fall than earlier, and the raw numbers on a month-on-month basis seem to be showing a recovery.
Exports per day

But Services Show A SlowDown

We are net importers in Merchandise, but net exporters in Services. Most of Service Exports are Computer Software and IT. But here, the trade balance has fallen substantially, to the lowest in two years:
Service Trade Balance
Service Exports per day
Service Exports fell 20% year on year, which is a cause for concern.
Here’s what we think about this data:

  • Gold imports will resume in April – the Jewellers strike has been called off. We will know next month how much Indians continue to love Gold.
  • Service export slowdown points to potentially weak IT results. Infy and TCS results were okay, but Wipro was low and smaller companies like Cyient, abysmal. This might be the beginning of a trend.
  • This trend might stretch the rupee back to the 67-69 levels if it continues.



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