BackTrade deficit hits 18-month high in November as gold imports surge
Merchandise imports grew 26.79% last month year-on-year to $42.82 billion, while exports grew a tepid 7.27% on year to $25.96 billion
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New Delhi: India’s trade deficit widened to a 18-month high at $16.86 billion in November as merchandise imports rose at a much faster pace than merchandise exports, driven mainly by skyrocketing gold imports.
During the month, while exports rose by 7.27% to $25.96 billion, imports increased by 26.8% to $42.82 billion. Gold imports during November jumped more than sixfold to $5.6 billion. Imports of crude and petroleum imports contracted 9.73% to $11.7 billion due to falling crude oil prices. Non-oil, non-gold imports, which is considered an indicator of the health of domestic demand, contracted 3% to $19.4 billion in November.
Among major export items, shipment of engineering goods ($6.6 billion) and gems and jewellery items ($3.7 billion) rose 30.6% and 44.3%, respectively. Export of petroleum products contracted 14.2% to $4.2 billion.
The Union government eased gold imports last month by removing a restriction that required traders to export 20% of the precious metal they bought overseas—a move that had been aimed at cutting the current account deficit (CAD). The so-called 20:80 norm was introduced in August last year, together with a duty of 10%, at a time when the deficit had widened to a record and gold imports had been surging.
India’s CAD widened to a five-quarter high of 2.1% of gross domestic product (GDP) in the second quarter ended 30 September, as exports growth slowed and imports increased because of a rise in demand for gold.
During the second quarter in the previous fiscal, CAD was at 1.2% of GDP and during the preceding first quarter of the current financial year, it was 1.7% of GDP.
Reserve Bank of India (RBI) deputy governor H.R. Khan, however, said earlier this month that the central bank is “reasonably comfortable" with the CAD scenario because of lower oil prices.
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