Surge in gold imports widens India’s trade deficit in September 2014

The Dollar Business Bureau | @TheDollarBiz    Higher imports of gold and a moderation in export growth have led to the expansion of India’s trade deficit to $14.25 billion in September 2014, which is up 132.71% from a deficit of $6.12 billion seen in September 2013. The Ministry of Commerce said, “This phenomenal increase in trade deficit is mainly due to rise in imports without adequate rise in exports.” In September 2014, India’s overall merchandise exports stood at $28.9 billion, which is up about 2.73% from $28.1 billion during September 2013. However, India’s imports in the month surged to $43.15 billion, which is up almost 26% compared to imports worth $34.26 billion in September 2013. Imports in September 2014 grew mainly due to increase in India’s non-oil imports which increased 32.2% y-o-y. According to the Commerce Ministry, there was an unusual growth in imports of gold and ores in September 2014. Imports of Metalliferous Ores & Other Minerals stood at $0.82 billion in September 2014, which is up 105.6% y-o-y, while gold imports soared to $3.75 billion, up almost 450% from September 2013 and up 87.5% from $2 billion worth imports in August 2014. It is expected that gold demand in India will continue to remain high due to the onset of the festive season and lower prices. Meanwhile, the Federation of Indian Export Organisations (FIEO) said that the moderation in exports in September 2014 is mainly due to global factors and delay in the announcement of the new Foreign Trade Policy. Rafeeque Ahmed, President, FIEO, said, “WTO has recently lowered global trade forecast for 2014 to 3.1% as against 4.7% predicted earlier, a whopping cut of 1.6%. Moreover, softening of crude prices, which is good for Indian economy, has also contributed to decline in petroleum exports. A sector which normally would have shown around 15% has exhibited 13% decline which has impacted overall exports growth by 5-6%, assuming a share of close to 20%.” The FIEO chief added that the government should end the uncertainty over continuation of interest subvention and announce the new Foreign Trade Policy soon to help exporters finalise new orders. Cumulatively, India’s merchandise exports in the first half of FY 2014-15 now stand at $163.7 billion, which is up about 6.47% from $153.7 billion recorded in the same period last year. Imports during April-September 2014 stand at $234 billion, up 1.57% from $230 billion in the corresponding period last year. India’s trade deficit in April-September 2014-15 is estimated at $70.4 billion, down about 9% from the deficit of $76.72 billion recorded during April-September 2013-14.  The Indian government is targeting total merchandise exports to grow to $340 billion in FY2014-15.

This article was published on October 15, 2014.