Trade Deficit Hits 18-month High as Gold Imports Surge Indias trade deficit widened to an 18-month record in November after a spike in gold purchases pushed imports higher, threatening to further weaken the rupee that slumped to an 11-month low on Monday and taking the sheen off good export numbers. Exports rose 7.27% in November after a 5% contraction last month, mainly led by a pickup in shipments of textiles, engineering goods and gems and jewelry items from the country , data released on Monday showed. Imports were up 26.8% in November to $42.8 billion, leading to a trade deficit of $16.9 billion, almost double the $9.6 billion in the same month last year. Exports were pegged at $26 billion in November. “The rise in the trade deficit is likely to widen the current account deficit in sequential terms in Q3FY15, in line with the trend seen in the previous two quarters,“ said Aditi Nayar, senior economist, ICRA. The current account deficit rose to a five-quarter high of 2.1% of GDP in the July-September quarter from 1.7% in AprilJune. Gold imports jumped to $5.6 billion in November from $835 million a year ago, contributing to much of the rise in imports. Oil imports were down 9.7% because of softer crude prices. The withdrawal of gold import restrictions by the government that mandated traders to export one-fifth of the consignment bought overseas is expected to further amplify inbound shipments of the yellow metal, swelling the import bill. The rupee fell 65 paise to close at a nearly 11-month low of 62.94 against the dollar. “The trade deficit for November is much wider than market expectations. It may not have an immediate impact on the rupee, but we will need to wait for a few more months to see that,“ said Shubhada Rao, chief economist, Yes Bank. “The surge in gold imports may prompt government and RBI to look at the matter afresh after relaxing norms last month,“ she added. The silver lining was the rise in import of machine tools (41%), machinery (20.3%) and transport equipment (23%) that suggested a strengthening domestic economy . Non-oil, non-gold imports were up 26% in November. Exports were up because of higher shipments of textiles, engineering goods and gems and jewellery . The higher gold supply translated into a 44% growth in gems and jewelry exports worth $3.6 billion. The government last month did away with the 80:20 scheme to restrict gold imports, freeing shipments of the yellow metal, after RBI said the current account deficit situation was comfortable due to low oil prices. “At present, we do not expect the current account deficit to exceed 2% of GDP in FY15, as the recent slack in commodity pric es would ease the pressure on imports,“ said Nayar of ICRA. The decline in global crude oil prices led to a 14.15% contraction in exports of refined products. The engineering sector and readymade garments posted 14% and 15% export growth, respectively, in November. Services exports showed a trade surplus of $6.2 billion in November. The government is expected to announce a five-year foreign trade policy in the next fiscal that will not only focus on enhancing exports, but also on boosting domestic manufacturing. “With a little push in the next four months, we would be able to achieve the export target of $340 billion fixed for the current fiscal. The exports have already reached $216 billion and with exports of $31 billion each month we would reach the target,“ said M Rafeeque Ahmed, president, Federation of Indian Export Organisations.
Posted on: Tue, 16 Dec 2014 11:20:07 +0000
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