India’s trade deficit surged to a record $37.8 billion in November, driven by a sharp increase in gold imports and a decline in exports, raising concerns about its impact on the country’s current account deficit (CAD) and the stability of the rupee, according to the latest data released by the commerce department.
Imports soared by 27% to an unprecedented $70 billion in November, fuelled largely by a quadrupling of gold imports, which rose to $14.9 billion. Gold has now become the second-largest import item after petroleum, with the surge attributed to a significant rise in global prices and increasing demand for its safe-haven status amidst volatile stock markets.
In addition to gold, imports of other key commodities also registered notable growth. Electronic products rose by 17.4%, petroleum products increased by 7.9%, and imports of electrical machinery climbed by 12.8%. Chemicals recorded a 6.5% rise, while vegetable oil saw an extraordinary increase of 87.8%, reflecting a broad-based expansion in India’s import bill.
The surge in imports comes amid a decline in exports, exacerbating the trade imbalance. The data has prompted economists to revise their estimates for the current account deficit, which is now projected to widen to 1.4% of GDP for the fiscal year, up from the earlier estimate of 1%. The trade deficit in November is also expected to contribute to a sharper rise in the CAD for the third quarter of FY25, which may touch 2.8% of GDP – the highest level in over two years.
Cumulatively, India’s trade performance between April and November paints a concerning picture. Exports in the first eight months of FY25 rose marginally by 2.2% to $284.31 billion, while imports grew by 8.3% to $486.73 billion. This significant disparity highlights the widening trade imbalance, raising fresh worries about external sector pressures on India’s economy.
The rising trade deficit and the resulting impact on the current account deficit could place downward pressure on the rupee, further complicating the macroeconomic outlook. Analysts point to global factors such as elevated commodity prices, fluctuating gold demand, and sluggish export growth as key contributors to the current trade dynamics.