What's Behind India's Import Surge In September
Oil led the blowout in September imports but other items contributed too.
An unexpected surge in India's imports in September took the monthly trade deficit to an all-time high of $22.9 billion. The import blowout, economists said, was driven partly by higher oil prices but also improved demand and restocking ahead of the festive season.
Imports soared to $56.38 billion in September, an increase of 84.75% over a year ago, showed preliminary trade data released on Friday. On a seasonally adjusted month-on-month basis, imports rose 21.9%.
Here's how economists are explaining the surge.
QuantEco Research
Oil imports jumped to an all-time high of $17.4 billion in September from $11.7 billion in August. The previous record stood at $16.0 billion in March 2012.
Electronic goods imports clocked a fresh record high level of $6.9 billion in September, from its previous high of $5.9 billion recorded in August.
Among other import items, traction was seen in case of vegetable oils, organic and inorganic chemicals, non-ferrous metals, machinery items, plastic and rubber articles, coal and coke, among others.
Gems and jewellery imports moderated to $8.2 billion in September from $9 billion in August.
"Overall, imports of vegetable oils, electronic items, and petroleum products explain about 80% of the sequential jump in headline merchandise imports in September. Some of this would peter out as the role of one-off factors diminish in the coming months," QuantEco Research said in a note.
The note, however, said imports might continue to show an increasing trend as the economy opens up and due to the spillover from elevated international commodity prices.
Barclays
A large part of the upside surprise in imports was fuelled by an increase in oil imports, reflecting the surge in global oil prices.
On the other hand, gold imports softened in the month.
More refined indicators of domestic demand underscore the continued steady recovery in growth momentum, with non-oil, non-gold and gems imports increasing to $31.3 billion in September.
While part of the surge in September imports could be one-off, the persistence of strong tailwinds — via rising commodity prices and reviving domestic demand — could keep India’s imports at elevated levels in the coming months.
The research house estimates that a $10-a-barrel increase in the crude oil price increases India’s current account deficit by $8.5 billion, which could pose downside risks to its balance of payments forecasts.
Nomura
Oil imports — which account for roughly one-third of the basket — rose nearly 200% year-on-year after a 80.6% gain in August.
The increase in oil imports was not due to price effects but rather reflects a jump in import volumes, despite the gradual domestic recovery. This may have been due to lagged/bunched up oil import contracts or inventory restocking and see this as anomalous.
In addition to oil, core imports (non-oil, gold, gems and jewellery) also rose, but by a more modest 5.8% month-on-month, seasonally adjusted, after a 1.3% contraction in August.
The top contributors include electronic goods, machinery, chemicals, coal, vegetable oils, plastics and non-ferrous metals, which suggests ongoing capex spending and higher commodity prices are both contributing to the rise in core imports.
"The underlying trend of widening trade and current account deficit, however, is likely to continue, driven by higher oil and other global commodity prices, domestic growth upcycle and an overhang on exports due to global supply bottlenecks in the near term and softer demand next year," Nomura said.