India’s trade deficit widens to record after exports plunge
The gap between exports and imports stood at US$41.68 billion last month
[NEW DELHI] India’s trade deficit widened to a record last month after exports plunged the most in more than a year following higher US tariffs, while gold imports surged.
The gap between exports and imports stood at US$41.68 billion last month, according to official data on Monday (Nov 17), far above the US$30 billion deficit forecast by economists in a Bloomberg survey. Exports contracted almost 12 per cent from a year earlier, while imports grew at a steady pace of more than 16 per cent.
US President Donald Trump slapped 50 per cent tariffs on Indian goods in August, roiling financial markets and denting growth prospects for the South Asian nation. The record trade gap puts further pressure on the rupee, which is down 3.5 per cent against the dollar this year and trading close to a record low.
Trade Secretary Rajesh Agrawal said on Monday the rise in imports was due to higher prices for gold – which reached a record in October – and silver. Demand for gold also typically rises during India’s religious festival of Diwali, which took place last month, while a reduction in the goods and services tax in September helped to boost overall spending.
“With no respite in gold price spike, the imports pressure is here to stay, even as the festive-led volume effect may ease,” said Madhavi Arora, an economist with Emkay Global Financial Services.
India and the US are currently negotiating a trade deal to lower the tariff rate, with Agrawal indicating on Monday that a resolution was near. Trump said last week that he’ll lower tariffs on India “at some point.”
Most outstanding issues between the two sides have been resolved, Bloomberg News reported earlier. In a sign of shifting dynamics, most Indian oil refiners have skipped purchases of Russian crude for December – a significant change in the country’s energy sourcing pattern.
To further appease Washington, India has also agreed to increase energy purchases from the US. State-run refiners have signed their first long-term deal to import 2.2 million tons of LPG next year, marking a significant step in diversifying the country’s energy sources.
“India has been contemplating purchasing from the US for long,” Agarwal said on Monday. “It’s not part of any negotiation per se,” but to keep trade with the US balanced. BLOOMBERG
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