India's export grew 36.2%, imports jump 43% in Q4FY10.

Some good news to cheer up Dalal Street tomorrow. India’s export grew 36.2% while imports increased 43% in Q4FY10 compared to the corresponding quarter last fiscal, reports Latha Venkatesh of CNBC-TV18.

These are the good signs indicating that Indian economy is on a growth momentum. India’s import grew in a time when oil imports had grown both in terms of volume and price.

During the period, trade deficit widened to USD 31.5 billion up from USD 20.2 billion a year-ago period. Services receipts were up after four consecutive quarters of decline, on a YOY basis. Services receipts was up 13.4% in Q4 FY10 led by software, financial services

Software services export has grown USD 14.2 billion compared to USD 13 billion QoQ. So after seeing a steady to declining trend, software exports have shown both YoY and QoQ growth.

It is a mixed set of numbers. The important point is the current account deficit has grown rather hugely. It has grown to about USD 13 billion only for the fourth quarter and that compares to about USD 700 million or thereaabouts in the year ago quarter. So huge growth quarter on quarter levels forcurrent account deficit. Even if you looked at the full year of FY10 the current account deficit stands at 38.4 billion compared to 20.5 billion year ago.

This is to be expected. It was the growth period – the fourth quarter saw a substantial growth in both exports and imports. Exports have grown by about 36% but imports have grown 43% and then those were times when oil imports had grown substantially both in terms of prices and volumes.

So while the good news is that it indicates India is on a growth momentum a high current account deficit is not very-very good news. Maybe the one source of positive is that software exports have grown very well. Software exports have grown to USD 14.2 billion compared to USD 13 billion a quarter ago.

So software exports after seeing steady to declining trends in the past four quarters have actually shown a year on year as well as quarter on quarter growth. Sosoftware export is positive.

What perhaps is a little bit of a negative is that private transfers, this is basically money which Indians living abroad sent to their families. This was actually maintaining a fairly steady flow even during the Lehman quarters.

In fact the Lehman quarter it actually increased because there was a reverse flow into India. It remained steady at USD 13 billion. One had seen USD 14 billion in previous quarters it has actually declined or remained static that is a bit of disappointment.

It is in the capital flows that the real disappointment comes because FDI stands at USD 7.9 billion down from the USD 8.7 billion that it registered in the third quarter. So that could count as disappointments. ECBs have not grown much. What is most important is that short term credit to India has grown by USD 17.8 billion now that is a huge growth.

Short term credit typically grows one because exports and imports have grown so people take short term credit across even dollar credit but more importantly whenever the rupee is appreciating you will see short term credit growing which is simply an arbitrage opportunity. Just over pricing your imports.

Somehow getting the money into India and putting in a fixed deposit in India which will earn anything like 8-10% where in the world will you get an 8% return on your money. So when the rupee is appreciating you will find short term loans growing – one because there is genuine funding of exports and imports but also more because there are people trying to make a fast buck in transferring it into Indian rupees and earning a fixed income because of high interest rates in India. So that could be a negative.

In any case that has been offset by the very good portfolio flows, FII flows and therefore we still managed a balance of payments (BOP) surplus of USD 53 billion. So healthy as far as BOP is concerned but small trends within the package could be worry.


Source : MoneyControl