- | 5:59 pm
Spike in gold imports widens goods trade deficit in August
Gold imports jumped threefold from $3.13 billion in July to $10.06 billion in August, trade data released by the commerce ministry showed
India’s merchandise trade deficit widened to a 10-month high in August as imports led by gold surged ahead of the festive season driven by lower duties, while exports declined on weak global demand amid geopolitical tensions.
Gold imports jumped threefold from $3.13 billion in July to $10.06 billion in August, trade data released by the commerce ministry showed.
Overall goods imports during the month rose to $64.36 billion from $57.48 billion the previous month and $62.30 billion a year ago.
Merchandise exports, on the other hand, rose to $34.71 billion in August from $33.98 billion in the previous month but declined by 9.33% from $38.28 billion a year ago.
Among exports, trade in petroleum products slumped 37.56% to $5.96 billion from a year ago and that in iron ore plummeted by 54.7% to $100.51 million. Coffee exports rose by 69.55% to $150.6 million from a year ago.
Economic think tank Global Trade Research Initiative (GTRI) said crude oil prices remained relatively stable between these two periods, suggesting that the drop in petroleum product exports is linked to the ongoing disruptions in the Red Sea.
The yearlong ongoing disruptions have forced shipping routes to take longer paths around the Horn of Africa and Cape of Good Hope, rendering exports to Europe less viable, GTRI said.
According to the think tank, if petroleum exports are excluded from the equation, Indian merchandise exports for August 2024 slightly increased by 0.05% compared to August 2023.
On the other hand, India’s crude oil and petroleum imports fell by 32.38% in August 2024, primarily due to decreased demand from Indian refineries amid lower orders from European markets.
The goods trade deficit rose to $29.65 billion against $23.5 billion in July and $24.02 billion a year ago.
While imports of gold during the month doubled from August last year, those of silver jumped eightfold from a year ago to $1.3 billion.
Economic think tank Global Trade Research Initiative (GTRI) founder Ajay Srivastava attributed the surge in gold and silver imports to expectations of a cut in duties.
The government cut customs duties from 15% to 6% for gold bars, from 14.35% to 5.35% for gold and silver dore, and from 15.4% to 6.4% for platinum in the union budget in July.
Gold that was previously smuggled is now coming through legal channels because the government’s reduction of customs duties has diminished the cost advantage of smuggling, Srivastava said, adding: “It looks like much of the gold coming through the smuggling route is now coming through the legal route. We need to watch.”
“We must prepare for challenging times ahead, particularly for high-volume, low-value goods like low end engineering products, textiles, garment and other labor intensive products, as rising freight costs linked to longer shipping routes are likely to exacerbate the situation,” Srivastava added.
Service exports during the month, meanwhile, rose to $30.69 billion from $28.71 billion a year ago. Imports rose to $15.70 billion during August from $15.09 billion in August last year.