A big surge in imports to a record $70 billion, driven by inbound shipments of gold, pushed the monthly merchandise trade deficit to the highest-ever level of $37.84 billion in November, according to data released by the commerce and industry ministry on Monday.
At $14.9 billion, November gold imports were more than double the level recorded in October and up 331% on year.
Overall imports in the previous month were more than double the exports, which declined 4.9% on year to $32.11 billion. The decline in outbound shipments was largely due to a 49.7% fall in exports of petroleum products to $3.7 billion from $7.3 billion a year ago.
Last month also saw services exports ($35.67 billion) surpassing merchandise shipments ($32.11 billion) for the first time.
The record November trade deficit could lead to a sharp widening of the current account deficit (CAD) to 2.6-2.8% of GDP in Q3FY25, analysts said. Earlier estimates of CAD for the quarter were around 2%.
“More than a 30% year-on-year increase in gold prices is a large contributor to high gold imports numbers. The fall in prices of crude oil this year has resulted in lower imports of petroleum products in value terms though shipments have grown in volume terms,” commerce secretary Sunil Barthwal told reporters.
Non-petroleum exports in November were up $28.4 billion on year. The unit price of petroleum products exported from India fell to $627.16 per tonne in April-October this year from $800 per tonne in April-October 2023. In volume terms, the exports of petroleum products grew to 65.19 million tonne in April-October from 59.47 million tonne a year ago.
Apart from global prices that are driving gold imports, the reduction in basic custom duty on the metal to 6%, from 15%, also pushed shipments. In April-November, gold imports were up 49% to $49 billion. While gold imports were up, exports of gems and jewellery declined 26% to $2 billion, and in April-November, the decline was 10% to $19.2 billion. This suggests that the imported gold is largely being consumed locally, either for investments or jewellery.
The finance ministry had said in its latest monthly economic report: “Going forward, there is likely to be a continued upward pressure on trade deficit, driven by a faster pace of import growth. Rising commodity prices, particularly for industrial inputs and metals, are expected to contribute to imported inflation and increase the import bill. Exports face greater uncertainties influenced by geopolitical risks and the modest monetary policy responses of major global central banks.”
Barthwal, however, said he is upbeat about exports in the remaining part of the financial year and overall earnings from foreign trade – goods and services – would be well in the excess of $800 billion.
Goods exports in November got support from engineering, electronics, readymade garments and rice. Engineering exports grew 13.7% to $8.8 billion, electronics exports were up 54.7% at $3.4 billion, rice exports increased 95.1% to $1.1 billion as trade curbs were removed. The exports of readymade garments were up 9.8% at $1.1 billion.
Services exports in November grew 34% to $36.67 billion while imports were up 29.2% at $17,68 billion. Overall exports in November were up 9.6% at $ 67.8 billion and imports were up 27% at $87.63 billion.
In April-November, merchandise exports were up 2.17% to $284.3 billion while imports rose 8.3% to $486.7 billion. Services exports during the period grew 14.4% to $251.9 billion and imports were up 14.1% at $132.4 billion. Overall exports in April-November were up 7.6% at $536.2 billion while imports grew 9.5% to $619 billion.
According to Aditi Nayar, chief economist at Icra, the high levels of gold imports seen in November were likely driven by festive and marriage-related demand. These, she said, are unlikely to sustain in the ensuing months, which would help cool the upcoming merchandise trade deficit prints. In the light of the latest data, Icra has revised its FY25 forecast for the CAD to ~1.4% of GDP from ~1.0% earlier.