OPEC Monthly Oil Market Report – August 2017
gap widened 59.7% y-o-y to $12.96 bn in June of 2017, slightly higher than market
expectations of a $12.52 bn deficit. Exports increased 4.39% to $23.56 bn, the least since January.
However, as export performance is irregular, the trade deficit is under some pressure. Import growth has
started to moderate as a surge in oil and gold imports diminishes. But ‘core’ imports appear to be rising at a
healthy pace which is a positive signal about the state of domestic demand. Imports to India rose 19% y-o-y
to $36.52 bn in June of 2017, the smallest gain since January. Purchases increased mainly for petroleum,
crude and products; electronic goods; pearls, precious and semiprecious stones; machinery, electrical and
non-electrical and gold. In terms of trade, the Commerce Ministry of India is negotiating as many as 21 trade
agreements. India is negotiating free trade areas (FTAs) with the European Union, as well as with Sri Lanka,
Thailand, New Zealand and Canada. Imports from China stood at $1.96 bn, which is 44.1%. One of the
reasons behind this is related to the price competitiveness of these products in China.
Graph 3 - 19: Contributions to Indian GDP growth
survey data indicated that the introduction of GST weighed heavily on the Indian
manufacturing industry in July. New orders and output decreased for the first time since the demonetisation
related downturn recorded in December last year, with rates of contraction the steepest since February 2009
in both cases. Consequently, companies purchased fewer quantities of inputs for use in the production
process, leading to an overall decline in holdings of raw materials and semi-finished items. Cost burdens
increased further, but factory gate charges were lowered as firms attempted to win new business. The PMI
was at 47.9 in July, down from 50.9 in June, which was its lowest mark since February 2009. It highlighted
the first deterioration in business conditions in 2017 so far. The downturn was widespread across the three
broad areas of manufacturing, with intermediate goods producers the worst affected. Incoming new work
dropped for the first time in the year-to-date and at the steepest pace since early 2009.
Subjective evidence indicated that the GST creates disadvantages for demand. Different to the trend for total
order books, new export orders continued to rise in July. That said, the rate of expansion softened from
June’s eight-month high. The weakening trend for demand, relatively muted cost inflationary pressures and
discounted factory gate charges provide powerful tools for monetary policy easing, which has the potential to
revive economic growth. Upcoming PMI releases will show whether underlying conditions remain on the
downside or if July’s contraction was a temporary blip. Goods producers foresee the latter, with panellists
widely commenting that a lack of clarity regarding tax rates caused confusion among suppliers and
manufacturers themselves when agreeing on prices. As such, businesses expect GST information to
become clearer in coming months.
1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17
% change y-o-y
Sources: Central Statistics Office and Haver Analytics.