Exports and imports dip

India’s exports stood at $22.35 billion in May, down 20.2% y-o-y after falling by 14.0% last month. This marks the sixth consecutive monthly decline. 

Cumulatively during April and May 2015-16, exports declined by 17.2% y-o-y to $44.4 billion. The decline in exports in May was broad-based. 

Services exports too have started feeling the brunt of weak demand. India’s services exports fell by 4.5% y-o-y to $13.1 billion in May. With this, services exports have declined for the second consecutive month. 

Imports too fell for the sixth consecutive month, and fell by 16.5% y-o-y to $32.75 billion in May. The fall was the largest since December 2014 owing to a sudden drop in gold imports. 

A fall in imports was positive for the trade deficit, which improved to $10.41 billion in May from $10.99 billion in April and $11.23 billion in May 2014. Going ahead, export growth is likely to remain weak. Import growth, on the other hand, could revive mildly as domestic demand improves. 

Trade deficit and subsequently the current account deficit (CAD) could therefore see some pressure. 

We expect the CAD to increase to 1.5% of GDP in 2015-16 from 1.3% of GDP in 2014-15.