Trade woes

India’s trade woes mounted as exports contracted for the first time in seven months in May, while trade deficit widened on rising import bill. On both counts, the government put the blame on gold.
Commerce secretary S R Rao told reporters that exports declined 1.1% to $24.5 billion in May 2013 from $24.8 billion a year ago due to a fall in gold shipments after the government suspended trading of the precious metal in special economic zones. Data showed that gold exports from SEZs dropped by $800 million. In addition, weak demand in Europe was responsible for the fall.
Import growth too slowed, albeit marginally, resulting in a higher trade deficit. Imports in May grew 7% to $44.6 billion, resulting in a trade deficit of $20.1 billion, compared to around $17 billion in May 2012.
“As far as trade deficit is concerned, it is very worrisome...It is largely contributed by heavy imports of gold and silver,” Rao said. During May, gold and silver imports went up by 89% to $8.4 billion, while the cumulative value of bullion shipments into the country during the first two months of the current fiscal has more than doubled to $15.9 billion. Higher trade deficit is a major area of concern for policymakers as it is resulting in a higher current account deficit that touched a high of 6.7% during the quarter-ended December 2012.