India: Export and import growth moderate, but deficit narrows – Nomura

Analysts at Nomura note that India’s export growth eased to 4.5% y-o-y in February (Nomura: -1.5%) from 9.1% in January, as a result of adverse base effects, but export (ex-oil) volume growth also slowed sharply, on our estimates.

Key Quotes

“Within manufacturing, export growth of engineering goods and gems & jewellery sectors moderated the most and the January data suggest sharpest deceleration in exports to China and Asia ex-Japan (ex-China).”

“Import growth sharply moderated to 10.4% y-o-y in February from 26.1% in January, with a broad-based moderation across oil, gold and core (non-oil, gold) imports. Core import growth moderated to 7.3% y-o-y in February from 24.4% and core import volume growth moderated to 8.1% y-o-y (3mma) in February from 13.4%, on our estimates. Overall, the trade deficit narrowed to USD12bn in February from a near 5-year high of USD16.3bn in January.”

“Does this change our economic view? No, although there are trade-related risks due to stuck GST refunds and the RBI’s decision to ban letters of undertaking for trade imports. Given the ongoing cyclical recovery, we expect the current account deficit to widen to 2% of GDP in 2018 from 1.7% in 2017. Although funding should not be an issue, the basic balance of payments will be negative, which makes funding susceptible to global risk sentiment.”