Trade gap widens in February, silver imports soar

India’s trade deficit widened slightly in February on higher imports fueled by strong domestic demand, data released by the commerce ministry on Friday showed.

Imports rose 12.2% year-on-year to $60.11 billion, while merchandise exports grew 11.9% to $41.40 billion, the highest so far this fiscal year.

Silver imports in February grew 130 times year-on-year to $1.73 billion, while gold imports more than doubled to $6.2 billion during the month.

Indian banks have stopped silver imports after traders procured large quantities of the metal from the United Arab Emirates (UAE) to exploit a duty differential loophole, The Times of India had reported on Thursday, citing dealers and industry officials.

Over the past two months, the UAE has emerged as the primary source of silver imports. India also imports the metal from Britain, China, Russia, and Switzerland.

Engineering goods, electronic items, organic and inorganic chemicals, pharmaceuticals and petroleum products drove exports during the month, data showed.

India had in January raised the import duty on gold and silver ‘findings’ such as pins, clamps, screws and hooks to align their tariff with other forms of the precious metals.

The trade deficit in February rose to $18.71 billion against $17.49 billion in January, which was a nine-month low, and $16.57 billion in February last year, commerce ministry data showed.

India’s overall exports (merchandise and services) in February grew 14.2% to $73.55 billion, while overall imports grew 10.13% to $75.50 billion

Commerce secretary Sunil Barthwal, speaking in New Delhi, highlighted the resilience of Indian exports despite challenging conditions in the wake of the crisis in the Red Sea, the war in Ukraine and geopolitical tensions.

Fitch raises growth expectations

Ratings firm Fitch had on Thursday revised upwards its growth projection for India in the current fiscal by 5 percentage points to 7% from its forecast in December.

Domestic demand, especially investment, will be the main driver of growth, amid sustained levels of business and consumer confidence, it said.

“Our forecasts imply that growth in the short term will outpace the economy’s estimated potential, and that the pace of growth of activity will then moderate towards trend in FY25, with real GDP rising by 6.5%,” Fitch said in the report.

WPI inflation eases marginally

Year-on-year Wholesale Price Index (WPI)-based inflation eased marginally to a four-month low of 0.2% in February, government data released on Thursday showed.

The decline was led by the easing in the inflation for minerals, along with a wider deflation for fuel and power, and core-WPI items in February when compared with January.

WPI inflation may cross the 1%-mark this month on the uptick in global commodity prices as well as an adverse base after a gap of 11 months, rating firm ICRA forecasted.

The escalation of geopolitical tensions and the resultant rise in global commodity prices, as well as a normal and well-distributed monsoon remain key to determine the trajectory for WPI inflation in the next fiscal, it added.