US exports to India
India’s latest export and import figures for May 2015 reflect the subdued economic scenario both globally and within the country. India’s exports contracted 20.2 per cent to $22.3 billion from what they were in May 2014, while its imports were down 16.5 per cent over the same period.
India’s exports and imports have both contracted for six consecutive months, that is, from December 2014 onwards. Looking at the previous year, the December 2013 to May 2014 period also saw a continuous contraction in imports, except March 2014, which saw a marginal uptick in imports. Exports in this period, however, saw robust growth, especially in March, April and May 2014. To be sure, these trends have more to do with the global economic scenario than internal reasons.
As can be seen in the chart above, India consistently runs a trade deficit—it imports more than it exports. The most recent contraction in exports and imports has led to a fall in India’s trade deficit to $10.4 billion from $11.2 billion in May 2014 and $11 billion in April 2015.
Looking ahead, the consensus is that poor global growth—especially in the US, China, the euro area and Japan—will continue to affect India’s exports detrimentally. Import growth, on the other hand, might bounce back if gold imports continue trending up. Data shows gold import growth has been positive since August 2014.
Gold imports increased 10.5 per cent over their May 2014 figures, but this is far lower than the 78.3 per cent growth seen in April. In fact, in absolute terms, the $2.4 billion of gold imports in May were a three-month low. The increase in the value of gold imports was driven more by volumes than by the price of gold. India imported 63 tonnes of gold in May 2015, up 19 per cent from the May 2014 figures. Gold prices, on the other hand, were down 7 per cent last month.
This scenario is the converse of what happened with oil imports.
Oil imports in May, at $8.5 billion, were 41 per cent lower than what they were in May 2014, marking the eighth straight month of contraction. Unlike in gold, however, this fall in the value of imports was driven by falling prices rather than a dip in volumes imported. As can be seen from the graph above, the growth in imports and exports of oil faithfully follow the price changes.
Weak global and Indian demand didn’t just affect oil and gold, however. India’s exports in many commodities fell in May 2015. Rice exports, for example, contracted 14.6 per cent over their May 2014 level, while the export of other grains contracted a whopping 77.7 per cent. The exports of iron ore and gems & jewellery similarly fell 86 per cent and 12.9 per cent, respectively.
Overall, it is important to note that the ongoing contraction of imports and exports is an indication of subdued global and Indian demand. At the moment, GDP growth in the US is negative, China’s growth has decelerated to a six-year low and the euro area and Japan are seeing only marginal growth.
Within India, although the Index of Industrial Production for May showed a revival in production and therefore demand, the consensus is that demand still has to pick up significantly to bolster any real growth in the economy.