India’s exports post deepest fall in 13 months; gold imports at record high. Find out why?

Trade deficit: India’s exports posted their steepest decline in more than a year, falling 9.3% in August to $34.71 billion, amid growing global economic uncertainty. India’s trade deficit widened to a 10-month high at $29.65 billion, according to government data.

Gold and silver shipments

Gold imports surged in August, more than doubling to a record $10.06 billion, driven by a significant reduction in tariffs and strong festive demand, according to the Commerce Ministry. In August 2023, gold imports were valued at $4.93 billion. Commenting on the increase, Commerce Secretary Sunil Barthwal noted that the sharp reduction in tariffs on gold was aimed at curbing smuggling and related illegal activities.

India’s gold imports rose by 30 per cent between 2023 and 2024, reaching $45.54 billion.

Why are gold imports increasing?

Switzerland remains the largest supplier, accounting for around 40% of gold imports to India, followed by the United Arab Emirates (over 16%) and South Africa (around 10%).

Gold accounts for more than 5 percent of India’s total imports. The surge in imports also widened the country’s trade deficit to $29.65 billion in August.

India, the world’s second largest gold consumer after China, imports gold mainly to meet demand from the jewellery sector.

Imports, meanwhile, rose 3.3 percent to a record $64.36 billion. The increase was driven by a significant increase in gold and silver shipments. Gold imports more than doubled to $10.06 billion in August, compared to $4.93 billion in the same month last year. Similarly, silver imports rose sharply to $727 million, compared to $159 million in August 2023.

Import of crude oil

However, crude oil imports fell sharply by 32.38 percent to $11 billion, mainly due to the fall in crude oil prices. This fall in crude oil prices also negatively affected India’s merchandise exports.

Trade deficit in October 2023 stood at $30.43 billion. India’s merchandise exports fell by over 10% in July, down from a modest 1.5% decline in the same month this year.

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In the April-August period of the fiscal year, exports rose 1.14 per cent to $178.68 billion, while imports rose 7 per cent to $295.32 billion. The merchandise trade deficit in April-August 2024 stood at $116.64 billion compared to $99.16 billion in the same period last year.

Export Challenges

Commerce Secretary Sunil Barthwal said the current global environment is posing significant challenges for exports. Factors such as China’s economic slowdown, the continuing recession in the EU and the US, falling oil prices and rising shipping costs due to the Red Sea crisis are all contributing to the difficulties faced by exporters.

“There are a lot of challenges in trade,” Barthwal said at a news briefing. However, he added that despite these hurdles, India’s exports have shown positive growth in the first five months of this fiscal year.

Petroleum product exports fell 37.56 percent in August to $5.95 billion. To further boost exports, the commerce ministry is focusing on exploring new markets, particularly in Africa. It has also identified 12 “master services” sectors, including education, healthcare, shipping and transportation, to target for growth as they offer significant opportunities.

Other sectors that recorded negative export growth in August included rice, oil meals, marine products, iron ore, and precious stones and jewellery. However, exports of electronic goods, pharmaceuticals and engineering products grew by 7.85 per cent, 4.67 per cent and 4.36 per cent, respectively.

The estimated value of services exports in April-August 2024 was $150.18 billion, compared to $135.5 billion in the same period last year.

Barthwal expressed optimism about these sectors, saying, “If we are to achieve the target of $2 trillion in exports of goods and services, 50 per cent will come from the services sector.”He added that these sectors are less affected by global issues compared to goods exports. “Despite the dark clouds, India is a bright spot,” the secretary said, reiterating the country’s potential in the global market.

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