>Trade deficit remains static (EDELWEISS)

■ Import growth slow; exports keep up momentum

• India’s trade deficit for July settled at ~USD 6 bn, the same level as that in June; imports stayed put at June levels, while exports exhibited a pick-up.
• M-o-M, imports growth was lower at ~3.4% (against ~17.1% in June), while exports grew ~6.3% (against ~16.5% in June).

■ Outlook hinges on global recovery, effectiveness of policy initiatives

• Trade deficit has come down significantly in the recent months. However, with the rising trajectory of global energy prices, there can be some adverse impact on the import bill in the coming months.
• Pick-up in exports has been a long drawn process, given the slow pace of recovery in case of most major economies and the discretionary nature of Indian exports. However, a simultaneous recovery, as observed in the domestic manufacturing sector and advanced economies, is raising hopes of a turnaround in trade.

While the Foreign Trade Policy creates a framework for a period of 5 years (2010- 2014), the currently announced initiatives would be applicable for the first two years (2010 and 2011). In terms of the targets, the government aims to achieve an annual target growth rate of 15% for exports (an annual target volume of USD 200 bn) for the first two years, and rates of 25% annually from 2012 to 2014.

To see full report: EXTERNAL SECTOR