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India’s Trade Deficit Falls as Value of Oil Imports Drops

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Indian trade deficit fell to $9.8 billion in November

According to the Indian Ministry of Commerce and Industry, the goods and services deficit fell by 39.8% to $9.8 billion in November 2015 as against a deficit of $16.2 billion in November 2014. With a falling trade deficit, the WisdomTree India Earnings ETF (EPI) and the Direxion Daily India Bull 3X Shares (INDL) rose 1.1% and 4.5%, respectively, as of December 15. Also, Indian stocks Dr. Reddy’s Laboratories (RDY), ICICI Bank (IBN), Vedanta (VEDL), and Tata Motors (TTM) rose 0.50%, 0.69%, 2.1%, and 2.4%, respectively, as of December 15.

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Exports and imports fell

In India, exports contribute about 23.6% of the country’s GDP, or Gross domestic product. Major export products of India include petroleum products, gems and jewelry, pharmacuetical products, and transportation equipment. In November 2015, exports fell 24.4% to $20.0 billion as compared to $26.5 billion in November 2014.

Additionally, imports account for about 26.0% of India’s GDP. The country is a major importer of petroleum crude. Year-over-year, India’s imports fell 30.3% in November, going from $42.7 billion in November 2014 to $29.8 billion in November 2015.

Oil imports fell 45.0% in November

During November 2015, oil imports fell to $6.4 billion as compared to $11.7 billion in the corresponding period last year. Falling crude prices helped India keep its import bills lower by 45.0% from a year ago. Even non-oil imports fell by 24.7% in November 2015 at $23.4 billion as compared to $31.0 billion in November 2014.

The main reason for the fall in India’s trade deficit is a drop in the import value of oil. Whereas, export orders and production levels are staying low in India. The soft rise in order book may remain a major concern for the Indian economy as the country attempts to turn into a manufacturing hub with a “Make in India” initiative launched by Prime Minister Narendra Modi. Also, the delay in passing reform bills such as GST (Goods and Services Tax) highlights the indecisiveness in the action of policy makers. For more information, read “India’s Inflation Rose 5.4% in November.”

Finally, for the latest economic updates, refer to Market Realist’s Global ETF Analysis page.

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