NEW DELHI: The export boost that helped propel India’s stocks skyward last year has bottomed. The magic show of dynamic duo Narendra Modi and his central banker Raghuram Rajan is no longer surprising. The market, while still bullish on India overall, is waiting for signs of a domestic recovery.
India’s goods trade deficit came in at $10.4 billion last month, broadly in line with consensus forecasts. The performances of both exports and imports remain negative, with exports falling by a whopping 20.2% year over year in May while imports dropped 16.5% yearly.
A large part of the drop comes from lower oil prices, which impact both exports and imports. Gold imports also moderated, falling to $2.4 billion in May from the $3.1 billion in April. The non-oil, non-gold trade balance is improving, though it fell by around $2.8 billion compared to a $3.8 billion drop-off in April.
The trade deficit for this fiscal year — which just started in April — stands at $21.4 billion, up from $21.2 billion in the first two trade months of last year.
Within the services sector, however, the trade surplus remains resilient, rising to $5.7 billion in April. India is one of the world’s largest exporters of IT services.
Barclays Capital analysts led by Rahul Bajoria said Tuesday that their current account forecast is for a small deficit in the second quarter of 2015, along similar lines as in the first quarter.
India’s external sector is on a strong footing and will remain so in the coming quarters,” says Bajoria.
