India’s Foreign Trade – April to July 2011

by Manshu on September 2, 2011

in Economy

I’ve been looking at the monthly foreign trade numbers for quite some time now and there are three things that are more or less consistent every month. These have become a consistent feature of India’s numbers, and it’s a good idea to be aware of them.

The first thing is the huge rise year over year. Numbers are declared for every month, and usually they represent a huge jump over the same month in the previous year. In July 2011 – exports grew by 81.79% and imports grew by 51.52%.

If you look at the growth figures for the 4 months from April to July then the numbers are slightly lower (but still quite high) at an export growth of 53.98% and import growth of 40%.

This brings me to the second point – trade deficit.

Exports may have been growing faster than imports but who knows when India will run a trade surplus?

While a lot of our Asian neighbors have grown using the export route – I couldn’t find any data about an Indian trade surplus – not at least in this decade.

I think it’s very interesting that the huge diaspora abroad remits money, and in some ways make up for the lack of exports, but surely, we want to run a trade surplus at some point?

India Foreign Trade April to July 2011

India Foreign Trade April to July 2011

The third thing is how much of the imports are oil imports. This is no surprise, and if you want growth you need oil – there is no denying that, but the huge oil bill makes you wonder if fast enough progress is being made in trying to produce oil domestically.

According to this DNA article – India’s domestic oil production is 715,000 barrels per day, whereas its consumption is 2.6 million barrels per day. That means about 27.5% of the oil consumed is produced domestically.

That article was about Cairn developing their new finds in Rajasthan and that’s expected to raise production there to 350,000 barrels per day from the current 125,000 barrels per day.

So there are ways to increase the domestic oil production, and that not only helps reducing the trade deficit but reduce the oil bill and bring down inflation as well.

I feel that it’s inevitable that domestic oil production increases with time, but what’s not so certain is that it keeps pace with the growth in demand. And it’s not clear what will spur the next big push in exports; which areas can India focus on as far as the next big export push is concerned. It seems that it should be in manufacturing, but then which niche in manufacturing?

{ 11 comments… read them below or add one }

ankm83 September 2, 2011 at 10:15 am

hi manshu, a large portion of this growth is price driven, given high commodity prices (eg crude oil) in recent times. The volume or the growth in real terms would be lower i guess.

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Manshu September 2, 2011 at 7:55 pm

Growth of what, and over what time frame?

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ankm83 September 2, 2011 at 11:30 pm

:-), y-o-y growth in both exports and imports.

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ankm83 September 2, 2011 at 11:45 pm

If we look at India’s exports basket, there is a significant increase in share of petroleum (refined products, india has surplus refinery capacity) and engineering goods (which are based on metal prices). These two product categories are heavily influenced by commodity prices (crude oil, metals), which have had an upward bias over last 1 year, thus the exports growth is abnormally high. Same goes for imports as well. Also, this is why in 2008-09, these export and import growth figures were very high, while we were staring at economic slowdown.

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Manshu September 4, 2011 at 3:19 am

Thanks for your comment – it gives me a good idea for another post about the constituents of India’s exports and how they have changed over the last two decades.

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ankm83 September 5, 2011 at 11:57 pm

Hey welcome. Your posts are very insightful, they cover a variety of economic & financial topics. Just on a different topic, religare finvest is comin out with NCD. Would be a good idea to analyse it like you did for other NCDs before. Thanks

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Manshu September 6, 2011 at 4:27 am

Absolutely – I don’t think the terms have been declared yet, have they? I’ll do a post as soon as they declare the terms etc. Thanks again!

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ankm83 September 6, 2011 at 4:46 pm

Hey, the terms are out 12.5% for 5 years. Link for prospectus is given below:

http://www.religarefinvest.com/pdf/Religare_Finvest_Limited_Prospectus.pdf

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Manshu September 7, 2011 at 5:21 am

Thanks – will write about it this week! I didn’t realize the terms are out as well.

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HJ September 4, 2011 at 2:15 am

great stuff manshu…just a few points if i may; Why will we any day want trade surplus – it will force our currency to appreciate because generally it is trade deficit (rather current account but because our current account direction is primarily defined by trade and not remittances as remittances are generally inelastic) which keeps a country’s currency weak in my view (budget deficit generally gets reflected through yield curve most of times) Coming back to currency..who would want to get a stronger currency when you as a country will add largest share to the world labour pool over the next, say atleast 30 years – we have to get them jobs; One would have loved to choose domestic inclusive growth pathl but i guess we as a country are capital deficient. They have not budged the rupee when inflation is threatening the govt so i dont think so they will do anything to get to trade surplus which should ultimately strengthen partially free floating INR

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Manshu September 4, 2011 at 3:03 am

Interesting, I had never thought of it that way. In my mind the way to transition from emerging to advanced is to make stuff that the rest of the world wants to buy. Is there a study or an example of a country that made the transition without relying on exports?

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