Exports in February grew 2.4% year-on-year (y-o-y), lower than 3.8% in January and imports grew 9.75% in February. For the period April to February FY19, while exports grew 8.9% y-o-y to $298 billion dollar, imports too, grew 7.3% to $464 billion.
Trade deficit, which declined from $126 billion in FY15 (April-Feb) to $97.9 billion dollar in FY17 same period, rose to $148 billion in FY18 to $165.6 billion in FY19 (April to Feb). Trade deficit has a bearing on the current account deficit and balance of payments which gets reflected in the fundamentals that affect the exchange rate.
Going ahead, trade deficit is expected to rise as exports could slow further owing to weak global demand. Further, oil deficit is likely to be higher in ensuing months. However, lower non-oil and gold imports because of weak domestic demand could partially offset some of the rise in trade deficit.
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India’s bulk of exports are still to Asia. However, the share has fallen from 48.7% in FY15 to 47.6% in FY19 (till Feb). The gain has been more to America which rose from 18.9% in FY15 to 21% in FY19 (till Feb).
The US is the leading country for Indian exports with 16% share in our total exports. So, any development on the side of Generalized System of Preferences (GSP) or other trade actions by the government on imports from India will have a bearing on our exports as it involves around $44 billion of exports.
