NEW DELHI: India’s exports growth slowed to a four-month low in June while heavy buying of gold lifted imports, causing a sharp spike in trade deficit from a year earlier, though the gap narrowed from the previous month.
Exports grew 4.39 per cent to $23.5 billion, while imports rose faster at 19 per cent to $36.5 billion, data from the Commerce Department showed, leaving a trade gap of about $12.9 billion in June, compared with $8.1 billion in the year-earlier period and $13.84 billion in May.
Gold imports doubled from a year earlier to $2.4 billion. For the fiscal first quarter, trade deficit more than doubled to $40 billion from $19.2 billion a year earlier.
“An unabated surge in imports of gold and precious stones contributed to the wider-than-expected merchandise trade deficit of $13 billion in June 2017, even as merchandise exports printed in line with expectations,” said Ms. Aditi Nayar, Principal Economist at ICRA.
Half of the 30 export sectors showed a decline. “This is a cause of concern. This means the diversification policy of the Government is not working,” said Ajay Sahai, Director-General at the Federation of Indian Exports Organisation (FIEO).
Major commodity groups of export that showed growth over the year-earlier period were engineering goods (14.78 per cent), petroleum products (3.6 per cent), organic & inorganic chemicals (13.2 per cent), rice (27.29 per cent) and marine products (24.27 per cent).
India reported these muted numbers at a time when China posted better than expected exports with an 11.3 per cent expansion in June. “It is not encouraging especially when the GST impact is expected to come in July and August.
It will be surprising if exports are positive in July because of clearance of consignments at ports,” Sahai added. Exports were stuck due to confusion over customs rules under GST.
“The currency impact in terms of a stronger rupee hurting exports is clearly visible. Unabated global liquidity flows into Indian financial markets are casting a shadow on the competitiveness of Indian exports,” said EEPC India Chairman Mr. T S Bhasin.
Petroleum, electronic goods, coal, gold, pearl as well as precious and semi-precious stones drove up June’s imports. Oil imports saw a 12.2 per cent spike to $8.12 billion, while non-oil imports were up 21.17 per cent at $28.3 billion.
“Gold imports have exceeded $20 billion in the six months prior to the introduction of GST. It is possible that this surge will stem after July 2017,” Nayar said.
ICRA expects India’s current account deficit to spike to $15-16 billion in the first quarter of 2017-18 from the marginal $0.3 billion recorded in the corresponding quarter of FY17, rivalling the size of the deficit recorded over the four quarters of the previous fiscal year. The pace of growth of non-oil, non-gold imports slowed to 16.7 per cent, suggesting that domestic demand is losing strength.