It seems as though India's export sectors continued to face difficult times. The country's exports declined by 1.6% YoY to US$ 23.2bn. The negative sentiments are further upheld given that this is the sixth consecutive month of declines in exports. On the other hand, imports rose by about 7.4% YoY to US$ 44.2 bn.
Trade deficit is defined as a situation that arises when a country's monetary value of imports is in excess of the monetary value of exports. For India it expanded to US$ 110 bn in the year till date (April to October 2012) from US$ 106.8 bn in the corresponding period last year.
Amongst the factors that led to the trade deficit to expand, was the lower exports of petroleum products. Exports of the same are believed to have declined by over 7% during the seven month period in the year till date.
It may be noted that such a drop in exports of such products was not anticipated on the back of the expansion in refining capacities in the country. In particular because of the completion of large projects located at Bina and Bathinda.
Exports of petroleum products contribute to about US$ 59 bn (Rs 3.2 trillion) annually. This makes them the largest contributor to India's exports. As reported by a leading business daily, the drop in output is seemingly on the back of delays and shut down in certain refineries. As mentioned by the daily, there is a possibility of lower volumes due to inventories built up in the supply chain. This is given the high volatility in product prices and the exchange rate.
At the same time there has been a strong demand from the domestic markets!
Though data of the seven month period FY13 is not available yet. However, as per the petroleum ministry's data wing - the Petroleum Products Planning and Analysis Cell (PPAC) - petroleum product exports during 1HFY13 (first six months of the year) dropped by 7.6% YoY to 28.9 m tonnes. It is believed that the PPAC expects this year's export to be 68 to 70 mt. Total exports in FY12 stood at about 60.8 mt.
The PPPA on the other hand has set a higher target in terms of volumes of petroleum products,. But going by the data available as of date, it seems that the targets may need to be reworked. While refinery output during 1HFY13 rose by 4% YoY to 104.3 mt, it does indicate that the India's domestic consumption has increased. Domestic consumption is believed to have increased by about 6% YoY during 1HFY13. It is possibly on account of higher consumption of auto fuels given the boom period in the sector has seen over the past few years.
However, the PPPA believes that once the new refineries stabilize exports will increase. They would also be driven by the export demand which is expected to remain high.