India export growth remains negative in May

  India's goods trade deficit came in at USD10.4bn for May. The performances of both exports and imports remained in negative territory, with exports falling by 20.2% y/y while imports were down by 16.5% y/y. A large part of the trade compression continues to come from lower oil prices, which impact both exports and imports. 

Gold imports also moderated, falling to USD2.4bn in May, from USD3.1bn in April. However, the non-oil, non-gold trade balance is improving; it fell to USD2.8bn in May, from USD3.8bn in April, estimates Barclays.

Year to date (ie, April-May), the trade deficit stands at USD21.4bn, compared with USD21.2bn last year. Within services, the trade surplus remains resilient, rising to USD5.7bn in April.  


Overall, India's external sector is on a strong footing and will remain so in the coming quarters, says Societe Generale. India has benefitted much from the falls in commodity prices (oil in particular) since Q3 2014. While oil prices have risen in recent months, no major flare up in the near term. 


Given the modest uptick in oil prices since Q1 2015, a risk is seen that India's current account registers a small deficit for FY 15-16. Nevertheless, any current account deficit would likely be materially smaller than the net inflows under the capital and financial accounts. Barclays forecasts, the RBI's forex reserves to reach about USD395bn by March 2016, up from USD352bn currently.