Analysts see export growth sustaining, relief on CAD front
Continued pick up in trade numbers and decline in imports show that the country's external deficit is finally turning around and the fall in oil and gold prices will improve the outlook for the country's strained current account deficit, analysts have said.
April 22, 2013 / 08:36 IST
Continued pick up in trade numbers and decline in imports show that the country's external deficit is finally turning around and the fall in oil and gold prices will improve the outlook for the country's strained current account deficit, analysts have said.
Credit Suisse Asian economics director Robert Prior-Wandesforde said in a note: "The latest trade position shows a second consecutive improvement in March, supporting the argument that the external deficit is finally turning around. "The improvement in exports is encouraging and fits with our view that the lagged effects of the weaker currency are beginning to feed through. Our statistical analysis suggests it takes up to 18 months for the lagged effects of a weaker rupee to come through and it is now just over 18 months since the rupee started to drop," said Prior-Wandesforde. In March, the trade deficit fell sharply to USD 10.3 billion from an expected USD 13 billion, on the back of a 6.9 per cent spike in exports. The trade gap represented an improvement of USD 4.6 billion from February and USD 3.2 billion from March 2012. For the full fiscal, the exports stood at USD 300. 6 billion, way below the USD 350 billion targeted in the beginning of the year, and 1.76 per cent lower than last years' USD 307 billion, following the slowdown in key markets. Also read: Will government`s new incentives rekindle exports?However, on the positive side, the shipments logged third consecutive rise in March -- from 0.8 per cent in January to 4.3 per cent in Febuary and 6.76 per cent to USD 28.8 billion in March. The official data released showed the trade deficit for the full fiscal widened to USD 190.91 billion, higher than USD 183.4 billion in the previous year. Imports fell 2.87 per cent to USD 41.16 billion in March, the first time in seven months and leaving the trade deficit at USD 10.31 billion. According to him, the modest recovery in exports in the past three months augurs well for CAD, which has emerged as a tough policy challenge for the government and crossed 6.7 per cent in the third quarter of last fiscal. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
