Driven by gold and silver imports during the festive season, India’s trade deficit in October surged to a record high even as India’s goods exports entered the positive territory after eight consecutive months of decline due to weak demand in the Western countries and in China due to its property sector crisis.
The trade deficit swelled to $31.46 billion in October after gold imports surged by a massive 95 per cent to $7.2 billion last month compared to October last year. Festive demand also boosted Silver imports which leaped 125 per cent to $1.31 billion, official data released by the Commerce and Industry Ministry on Wednesday showed.
While merchandise exports jumped 6.3 per cent to $33.57 billion compared to October last year, imports surged over 12 per cent to a record $65.03 billion. Notably, labour-intensive sectors such as gems and jewellery, textiles, and leather declined 9.82 per cent, 5 per cent, and 8.08 per cent respectively. On the contrary, outbound shipments of electronic, and engineering goods registered a steep jump of 28.23 per cent and 7.20 per cent respectively last month compared to October last year.
“Given the shift in the festive calendar, we had expected the merchandise trade deficit to enlarge to $22.8 billion in October 2023. The higher than anticipated merchandise trade deficit was on account of gold, oil..,” Aditi Nayar, Chief Economist, Head – Research & Outreach, ICRA Ltd said.
Nayar added that non-oil imports should moderate in November, along with exports given a higher number of holidays.“We foresee the trade deficit for the current month at $22-25 billion. We continue to expect the current account deficit for FY2024 to print in a range of 1.8-2.0 per cent of GDP,” she added.
Commerce Secretary Sunil Barthwal told reporters that trade numbers in October confirm the ‘green shoots’ of recovery.
“We are hoping that the positive growth in merchandise exports will be sustained in the coming months. Interest rates globally continue to be high. This affects new investment which also affects the procurement of infrastructure equipment. In a lot of Western economies, a lot of consumer loans finance the procurement of goods and if interest rates are high consumer loans are affected,” Barthwal said.
EEPC India Chairman Arun Kumar Garodia said that engineering goods exports have risen for the third straight month due to a favorable base.
“While the positive growth witnessed in the past months is reassuring, geo-political tensions and demand slowdown in major advanced economies continue to be a matter of concern for the exporting community. There has been so far the very limited impact of the ongoing war between Israel and Hamas on trade but should the crisis escalate it could hamper the recovery,” Garodia warned.
“The positive growth in exports is good. Still, we need to see if this can be sustained. The worrisome fact is that imports too have gone up at a higher rate. The rise in import of crude and gold this year will pressure the trade balance,” said Madan Sabnavis, Chief Economic Adviser, Bank of Baroda.
No deadline for conclusion of India-UK FTA talks: Commerce Secretary
ENS Economic Bureau
New Delhi: On the ongoing FTA negotiations with the UK, the commerce secretary Sunil Barthwal reiterated that New Delhi is not working on deadlines but on timelines. “We have internal timelines. Issues of complex nature are there and we are looking at these issues carefully,” he added.
The majority of the chapters are either closed or at the advanced stage of negotiations and high-level engagements are various levels are ongoing to iron out the differences, he further told reporters.
“We continue with the 13th round of negotiations and outstanding issues are being discussed. The talks are happening at the track level and also at senior levels… to iron the differences and close it as fast as possible,” an official said.