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World Economy

24

OPEC Monthly Oil Market Report – October 2017

High and persistent inflation in India has presented a serious macroeconomic challenge for the country in

recent years. An increase in the country’s domestic and external vulnerabilities as well as high inflation have

contributed to a historical widening of the current account deficit and a slowdown in the GDP growth rate.

India recorded a current account deficit of $14.3 billion, or 2.4% of GDP, in 2Q17, much higher than a

$400 million gap a year earlier. It was the largest current account gap in four years, as the 2Q17 trade deficit

widened to $41.2 billion from $23.8 billion with imports rising more than exports.

The

Indian Rupee (INR) strengthened

by 0.8% against the US dollar in the first week of October 2017, its

biggest gain in seven months, after the Reserve Bank of India (RBI) kept key rates unchanged as expected.

Graph 3 - 19: Indian current account balance

(CAB)

Graph 3 - 20: INR/US$ exchange rate and

volatility

India's trade deficit

widened sharply to $11.6 billion in August 2017 from $7.7 billion in the same month the

previous year.

Merchandise exports

advanced 10.3% y-o-y to $23.8 billion in August 2017, as sales

increased for engineering goods (19.5%), petroleum products (36.6%), organic and inorganic chemicals,

32.4% drugs, 4.2% pharmaceuticals, and 0.6% textiles.

Merchandise imports

to India rose by 21% y-o-y to

$35.5 billion in August 2017, as purchases increased mainly for petroleum, crude and products (14.2%),

electronic goods (27.4%), machinery, electrical and non-electrical goods (18.4%), pearls, precious and

semiprecious stones (30.9%), and gold (68.9%).

Graph 3 - 21: Indian trade balance

Graph 3 - 22: Indian gold imports

India's industrial production

increased 1.2% y-o-y in July 2017, which was in line with the market

consensus and followed an upwardly revised 0.2% drop in the previous month. Manufacturing production

grew slightly, by 0.1%, after a 0.5 % contraction in June, and output expanded further for both electricity

(rising to 6.5% from 2.1% in June) and mining (reaching 4.8% from 0.4% in June).

-3

-2

-2

-1

-1

0

-16

-14

-12

-10

-8

-6

-4

-2

0

2Q 15

3Q 15

4Q 15

1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

%

US$ bn

CAB (LHS)

As % of GDP (RHS)

Sources: Reserve Bank of India and Haver Analytics.

58

60

62

64

66

68

70

-0.02

-0.01

0.00

0.01

0.02

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

INR/US$ volatility (LHS)

INR/US$ exchange rate (RHS)

Index

Rate

Sources: Ministry of Commerce and Industry, Reserve Bank of

India and Haver Analytics.

23.8

-35.5

-11.6

-50

-40

-30

-20

-10

0

10

20

30

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Exports

Imports

Trade balance

US$ bn

Sources: Ministry of Commerce and Industry and

Haver Analytics.

-100

-50

0

50

100

150

200

250

300

350

-2

0

2

4

6

8

Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

US$ bn

Gold imports (LHS)

Change y-o-y (RHS)

Sources: Ministry of Commerce and Industry and

Haver Analytics.

Percentage