India's trade deficit widens but experts say it is still 'manageable'

Although exports rose for the first time in 18-months, India's trade deficit refuses to budge. 

Three months ended June 30, 201`6 saw India's trade deficit (difference between exports and imports) grew to $8 billion as against $5-6 billion over the previous quarter. 

Analysts say that this jump was led by increase in imports, especially oil whose prices have firmed over the past few months. Kapil Gupta and Prateek Parekh of Edelweiss Securities, in a report dated July 15, 2016 said, "Overall, exports and imports growth is recovering from lows partly helped by low base effect and the level of deficit remains very contained."

The good news comes from stabilisation of exports. The duo said, "Exports in June were $22.5 billion, similar to last month’s nominal number. Since monthly data is volatile and subject to base effect, we prefer 3MMA (months moving average) data to gauge the underlying trend. On this basis, exports fell 2% yearon-year in June, the 18th consecutive month of dip.

However, this is an improvement over 16% contraction in FY16."

They concluded, "The level of trade deficit remains benign and should continue to hover at $10 billion levels. Export and imports growth has recovered from the lows helped by favourable base effect as well as stabilisation in external demand especially emerging markets.