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Trade gap shrinks, but exports remain a concern
May 14, 2016

India's trade deficit has hit a five year low. That's indeed a good news. However, do not celebrate just yet. It's not just a case of exports exceeding imports... but both declining at different rates.

Fall in oil imports and jewellers' strike leading to lower gold imports led to the sharp decline in overall imports in the year till date. Even the non-oil imports were down 23% YoY, suggesting weak domestic demand. Decline in the commodity prices has been one of the reasons for keeping imports in check. As the commodity prices recover, the import bill is likely to rise.

As for exports, the situation is worrisome. April was the 17th straight month of decline. Exports comprise a key constituent for GDP growth. With rapid globalization, a lot of Indian companies have expanded presence in export markets. A slowdown in exports is an overhang on companies with a large exposure to export markets. Falling exports is a concern. And it does not get offset by a shrinking trade deficit.

Do you think that falling exports is a significant concern for India Inc. and economic growth?

Data Source: Economic Times,
Ministry of Commerce and Industry.

This Chart Of The Day was published in The 5 Minute WrapUp - This Could Be the Biggest Buying Opportunity Out There

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