India's rising gold imports should be monitored to assess increasing trade deficit: Report

New Delhi [India], November 18 (ANI): India's widening goods trade deficit in October has raised concerns among analysts, with Nuvama Research highlighting that the country's rising gold imports must be closely watched to assess the future trade deficit trajectory.

According to the report, weak global trade trends and India's gold import trajectory will remain key monitorables.

It stated "global trade trends (with early signs of a slowdown) as well as India's gold import trajectory shall be key monitorables for assessing the trade deficit path".

According to the trade data released on Monday, India's goods trade deficit expanded sharply to a record USD 42 bn in October, compared to USD 32 bn in September. India's gold imports shot up 199 per cent YoY to USD14.7bn from USD 9.6 bn, rising 3 times over the past three months.

This jump was primarily driven by a steep rise of USD 7 bn in the gold deficit, while the oil deficit also increased by USD 2 bn to USD 11 bn during the month.

Gold deficit has surged 3x in the last three months, reaching USD 17 bn, reflecting a significant rise in imports amid elevated global prices. The core deficit (excluding oil and gold) also widened, rising to USD 14 bn in October from USD 13 bn in September.

This came even as the electronics deficit improved slightly to USD 5.5 bn from USD 6.7 bn in September, although deficits in chemicals, ores and engineering goods expanded.

On the export front, merchandise shipments contracted sharply to -11.8 per cent YoY in October, compared to 6.7 per cent growth in September.

This decline was partly due to a high base and also mirrored the global slowdown, with China's exports falling to -1.1 per cent YoY (from 8.3 per cent) and Korea's to 3.5 per cent YoY (from 12.6 per cent) in the same month.

On a trend basis, India's exports weakened to -0.3 per cent YoY, compared with 8.7 per cent in September, reflecting a broad-based slowdown across sectors.

Imports, meanwhile, remained stable at 16.6 per cent YoY in October. However, core imports (excluding oil and gold) eased to 7 per cent YoY, down from 13 per cent in September.

The most notable jump was in gold imports, which shot up 199 per cent YoY to USD14.7bn from USD9.6bn, rising 3x over the past three months. On a trend basis, total imports increased to 7 per cent in October, compared with 4 per cent in September, with core imports holding steady at 6 per cent.

Nuvama Research noted that with global trade showing early signs of slowing, India's gold import trajectory will be crucial to assessing how the trade deficit evolves, especially as elevated gold inflows continue to exert pressure on the country's external balances. (ANI)

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