Trade gap widens to a record high in November as gold imports soar

India’s trade deficit widened in November to hit a record high as gold imports soared to an all-time high, government data released on Monday showed.

The gap between imports and exports in November widened to $37.8 billion from $27.1 billion in October.

While exports in November declined about 5% from a year ago to $32.11 billion, imports rose 27% to $69.95 billion.

Pointing to the higher inbound shipments, trade secretary Sunil Barthwal said the import demand is higher as the nation is growing much faster than the global economy.

The expanding deficit, meanwhile, has put pressure on the rupee, which slumped to an all-time low against the dollar on Monday.

The domestic currency has weakened 0.5% against the greenback last month in the worst such decline since March.

This fiscal, the domestic currency has depreciated by 1.7%, hitting multiple new record lows in recent months.  Since 11 October, it has remained above the 84 per dollar mark.

Imports of gold in November jumped to a peak of $14.86 billion on a drastic reduction of customs duty from 15% to 6%, and as investors preferred the safe-haven appeal of the precious metal.

Imports from Switzerland, primarily of gold, saw a more than fourfold jump to $7.23 billion, while those from South Africa rose threefold to $2.50 billion, and shipments from the UAE doubled to $6.13 billion.

Exports during the month to Australia jumped 64% to $644 million, while those to Italy rose by 38% to $675 million, and Indian shipments to Malaysia rose 27% to $717 million.

The US, the United Arab Emirates (UAE) and the Netherlands were the top export destinations for goods from India at $5.7 billion, $3 billion and $1.4 billion, respectively.

For those shipments destined for India, China was the top source destination, followed by the UAE and Russia at $8.8 billion, $6.1 billion, and $5 billion, respectively.

WPI inflation eases to a three-month low

Meanwhile, inflation based on the Wholesale Price Index (WPI) eased to a three-month low of 1.89% in November, provisional data released by the government on Monday showed. WPI inflation was at 2.4% in October.

The decline was primarily driven by a fall in the prices of commodities such as petroleum products and some manufactured goods.

Inflation in primary food articles fell to a three-month low of 8.6% and from 13.5% in October amid a broad-based easing across items, aided by a favorable base, ICRA Ltd analysts led by chief economist Aditi Nayar said in a note.

Looking ahead, the headline WPI inflation may inch up to 2.5-3% in December despite a favorable base amid an increase in food inflation, narrowing year-on-year deflation in global commodity and crude oil prices, and a mild depreciation of the local currency, ICRA said.

“Looking beyond the ongoing month, the arrival of kharif crops in the market, and the robust outlook for the rabi crop amid healthy sowing trends and elevated reservoir levels, augur well for the food inflation and consequently, the WPI inflation outlook,” the ratings firm said. “However, the extent of the seasonal dip in food prices remains a key monitorable.”