India's Exports See Steepest Decline In 13 Months; Gold Imports At Record High. Find Out Why?

Trade Deficit: Imports jumped by 3.3 per cent to a record high of $64.36 billion, driven by a significant increase in the inbound shipments of gold and silver

Trade Deficit: Crude oil imports saw a sharp drop of 32.38 per cent, falling to $11 billion, largely due to a decline in petroleum prices.

Source : Pixabay

Trade Deficit: India's exports registered their sharpest decline in over a year, dipping by 9.3 per cent in August to $34.71 billion, amid growing global economic uncertainties. India's trade deficit soared to a 10-month high, reaching $29.65 billion, according to government data.

Gold & Silver shipments  

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

For the 2023-24 period, India’s gold imports have risen by 30 per cent, reaching $45.54 billion.

Why gold imports surge?

Switzerland remains the largest supplier, accounting for around 40 per cent of India's gold imports, followed by the UAE (over 16 per cent) and South Africa (about 10 per cent).

Gold represents over 5 per cent of India's total imports. The surge in imports has also widened the country’s trade deficit to $29.65 billion in August.

India, the second-largest gold consumer globally after China, primarily imports gold to meet demand from the jewelry sector.

Imports, on the other hand, jumped by 3.3 per cent to a record high of $64.36 billion. This surge was driven by a significant increase in the inbound shipments of gold and silver. Gold imports more than doubled to $10.06 billion in August, compared to $4.93 billion during the same month last year. Similarly, silver imports rose sharply to $727 million, up from $159 million in August 2023.

Crude oil imports

Crude oil imports, however, saw a sharp drop of 32.38 per cent, falling to $11 billion, largely due to a decline in petroleum prices. This dip in oil prices has also negatively impacted India's merchandise exports.

The trade deficit in October 2023 was $30.43 billion. India's merchandise exports in July had contracted by over 10 per cent, with a slight dip of 1.5 per cent recorded in the same month this year.

For the fiscal year’s April-August period, exports rose by 1.14 per cent to $178.68 billion, while imports grew by 7 per cent to $295.32 billion. The merchandise trade deficit for the April-August 2024 period stood at $116.64 billion, compared to $99.16 billion during the same period last year.

Challenges for exports

Commerce Secretary Sunil Barthwal said that the current global environment poses significant challenges for exports. Factors such as China's economic slowdown, continued recessions in the EU and the US, declining oil prices, and rising transportation 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 during a media briefing. However, he said that despite these obstacles, India’s exports in the first five months of this fiscal year have shown positive growth.

Exports of petroleum products fell by 37.56 per cent in August, amounting to $5.95 billion. To boost exports further, the commerce ministry is focusing on exploring new markets, particularly in Africa. Additionally, 12 "champion services" sectors, including education, healthcare, shipping, and transportation, have been identified for targeted growth as they present significant opportunities.

Other sectors that witnessed negative growth in exports in August include rice, oil meals, marine products, iron ore, and gems and jewellery. However, exports of electronic goods, pharmaceuticals, and engineering products rose by 7.85 per cent, 4.67 per cent, and 4.36 per cent, respectively.

The estimated value of service exports during April-August 2024 stood at $150.18 billion, compared to $135.5 billion during the same period last year.

Barthwal expressed optimism about these sectors, saying, "If we have to reach the $2 trillion exports target of goods and services, 50 per cent will be coming from the services sector." He added that these sectors are less impacted by global issues compared to merchandise exports. "Despite dark clouds, India is a bright spot," the secretary said, reiterating the country's potential in the global market.