March trade deficit stood at USD 10.5 billion against USD 8.13 billion on a month-on-month basis. The exports were at USD 29.57 billion and imports at USD 40.08 billion on a month-on-month basis.
Samiran Chakrabarty, Head of Research, Standard Chartered Bank, said the numbers are definitely higher than what was anticipated as imports data was much stronger.
Chakrabarty thinks that high oil imports may have had an effect on trade deficit numbers. The oil imports for the month were up at USD 15.78 billion against USD 13.7 billion, and non-oil imports stood at USD 24.3 billion against USD 20.12 billion on a month-on-month basis.
He believes capital inflows will become critical for rupee from hereon until there's a clear idea on election outcome. He also rules out removal of gold import curbs anytime soon.
Rupa Rege Nitsure, Chief Economist, Bank of Baroda , attaches more credence to the deteriorating export scenario. She said declining exports is worrisome as it was the only bright spot seen in FY14.
Rege Nitsure agrees the picture on import front is definitely not very encouraging, but she thinks that the overall outlook for rupee will remain positive. "Currently, forex traders are not paying too much attention to fundamental factors and the way problems have been engulfing our peers, especially Brazil, Russia, Indonesia, I think capital flows will keep coming to India," she said.
Below is the transcript of Samiran Chakrabarty and Rupa Rege Nitsure's interview to CNBC-TV18's Latha Venkatesh
Q: USD 10.5 billion trade deficit as well its USD 40 billion in terms of imports and USD 29 billion in terms of exports, first thoughts?
Chakrabarty: The trade deficit number is much higher than what we were anticipating and that is primarily because of the imports numbers being much stronger. So this is the highest imports that we have seen after May 2013 for a particular month. Now what it means is that the total trade deficit for this quarter is going to be USD 30 billion. So it means that the current account for the quarter which we were anticipating might turn into a surplus, might not happen now with this trade deficit number.
Q: Exports have come in at USD 29 billion, is that a disappointment?
Chakrabarty: Little bit but on a year-on-year basis both the February and March print were about minus 3 percent. So there is not too much of deterioration. So I am not so concerned about the export numbers but more concerned about the import numbers where particularly the oil import could be because of bunched up oil demand. The non-oil import component has also grown but as you said it could be the March effect.
Q: USD 10.5 billion trade deficit taking the overall trade deficit to a little over USD 30 billion for the quarter, your thoughts?
Nitsure: I will attach more credence to deteriorating export scenario which is a more worrisome thing because that was the only bright spot that we had seen in FY14. And for last two months after a gap of eight months again exports have entered into a negative growth zone. So that is definitely a negative news. And I feel from the banks perspective because that was the only sector actually which had started showing some early signs of credit demand, especially demand for term loans, for capacity creation. And I feel the way rupee has appreciated again between August 2013 and today by 12-13 percent, again in price terms exports have become non competitive and our consumer price index (CPI) led inflation has not eased to that extent.
Q: Would you want to read any positive at all into the import number going up? Would it be engineering export, would it indicate that India is once again on the growth track and therefore importing more engineering, chemicals whatever?
Nitsure: That requires access to more disaggregated level of information because if the raw materials and capital goods imports have picked up that is definitely a good sign. But non oil imports is such a big composite figure, we cannot make out whether it includes any consumer goods.
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