India: Core imports weaken in April – Nomura

India’s export growth recovered to 5.2% y-o-y in April from -0.7% in March, lower than expected, but the sequential momentum was weak: exports contracted by 1.1% m-o-m, sa, versus 1.3% growth in March, points out the research team at Nomura.

Key Quotes

“Export (ex-oil) volume growth picked up to 3.6% in April on a 3-month moving average (3mma) basis, from 0.6% y-o-y in March.”

“Import growth eased to 4.6% y-o-y in April from 7.2% in March, weaker than expected. Oil imports escalated, gold imports contracted, but core (non-oil, gold) imports fell sharply, contracting by 0.1% y-o-y in April, from 12.2% growth in March. Our analysis shows that core import volume growth eased to 3.7% y-o-y (3mma) from 9.3% in March. We believe that the ban on letters of undertaking may be partly responsible for weaker imports. The trade deficit was unchanged (at USD13.7bn) due to weaker imports.”

“We now expect the current account deficit to widen to 2.7% of GDP in FY19 (versus 2% earlier), up from a deficit of 2% of GDP in FY18. At this level, funding would be a challenge and susceptible to global risks sentiment, as the basic balance of payments (current account + net FDI) would deteriorate further.”