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Economy

Trade Deficit at Lowest in 5 years for April, but Total Trade Slumps as Imports Crash

Exports-and-Imports.png

India’s trade deficit has been the lowest in in about five years at a deficit of $4.85 billion.This is on the back of much lower imports and steady exports in the Month of April 2016. 

Exports and Imports

What’s changed? Imports have fallen much more than exports – but both are in negative territory.

Growth In Trade

The problem with falling imports is: what’s really happening? Apparently it might not be so bad – jewellers were on strike for most of March and some of April (the strike was called off on the 13th). Imports would have only started after, but apparently even Gold imports are down 60% year on year. But that’s only the good part of the news. Imports of stuff that indicate a growing economy are also slowing, with the estimates showing that Electronic Goods imports are down 24% and Electrical Machinery imports are down 20%.

Oil and Non Oil Imports

The worst part of the news is that Trade is down if you measure it in total. Average trade per day (a better measure since months have a different number of days) is now down nearly 20% year on year. 

Average Trade Per Day

The total trade number per day is the lowest since 2010.

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Our View: This isn’t great of course, but the gist:

  • World trade numbers are down all over the globe, and India’s seeing the hit too
  • Imports of gold have dropped big time which is a good thing for us. Not a good thing for gold, though.
  • Imports of other, important commodities too have dropped – is there a slowdown within India that’s progressing?
  • A low trade deficit combined with low overall trade numbers is actually more negative than positive for the economy – the bright part is that our fuel bills are lesser, and our gold imports have dropped.