Exports grew for the ninth month running in May, but large gold imports ahead of the GST rollout from July 1spiked imports and pushed trade deficit to a 30-month high. Exports rose 8.3% year on year to $24 billion in May, growing far slowly than imports that were up 33% from a year ago to $37.8 billion. May trade deficit at $13.84 billion was more than double of $6.2 billion trade deficit recorded in the same month last year.
The pace of growth of non-oil, non-gold imports firmed up to 19.8%, indicating strengthening of domestic demand. The growth in merchandise exports in May was broad based, led by petroleum products, engineering goods, gems and jewellery , and food items such as marine products and rice.
Imports of gold, silver and precious and semi-precious stones recorded a growth of 128% in May while gems and jewellery exports rose 6% in the month.
This was the ninth consecutive month of rise in exports. Twenty-one out of 30 sectors showed an increase in exports.
Ready made garments saw 8% growth in May to $1.6 billion while engineering goods shipments added up to $6.2 billion, up 8.25% year on year. The rise was largely due to 236% higher gold imports at $4.9 billion. Other big contributor to imports was electronics goods that saw a 34% rise to $4.15 billion in May. Oil imports in May saw 29.5% spike to $7.7 billion because of higher prices.
Under the GST regime, gold, silver, gold jewellery and processed diamonds would be taxed at 3%. With the existing 10% import duty, consumers will have to pay an effective duty of 13% on gold jewellery, up from 12.5% now.