A sharp decline in gold imports helped keep trade deficit in check in April, even as exports rose at a modest pace in the first month of the new fiscal year.
Exports rose 5.2% to $25.91 billion in April. Imports greq 4.6% on year at $39.63 billion, leaving a trade deficit of $13.72 billion, almost the same level as in March.
However, India’s outbound shipments of leather, gems and jewellery, textiles and carpets declined, setting off alarm bells in industry on employment grounds even though global demand looked healthy.
Exports in 16 out of 30 sectors grew and the major commodity groups of export showing positive growth year-on-year were engineering goods (17.63%), organic & inorganic chemicals (38.48%), drugs & pharmaceuticals (13.56%), cotton yarn / handloom products (15.66%) and plastics (30.03%).
Gold imports declined 33% last month to $2.6 billion. Oil imports at $10.41 billion, were 41.5% higher than the same month of previous year. Non-oil imports, however, dipped 4.3% to $29.21 billion. Shift in consumption pattern and a recent rally in gold prices in India were seen as other factors that led to a slump in gold demand.
Domestic consumption of gold in the first quarter of 2018 dropped 12% from a year earlier to 115.6 tonnes, while jewellery demand came down by 12% to 87.7 tonnes, according to the World Gold Council. During the quarter, demand for gold as an investment avenue dropped 13% from a year earlier to 27.9 tonnes. After crude oil, gold is the second-highest imported commodity in India. The country is also the second-largest consumer of the metal.
Though trade deficit expanded marginally, a contraction in imports of gold and precious and semi-precious stones, and electronic goods, mitigated the impact of higher crude oil prices.
Current account deficit is estimated at 1.8% of GDP in FY18, up from 0.7% the year before. With crude prices rising, the deficit could worsen, putting pressure on the rupee and inflation. Services exports rose 7.16% in March at $16.83 billion, as per the RBI, while imports were valued at $10.28 billion.