India’s merchandise trade deficit swells to $19.1 billion in April as gold imports triple

India’s trade deficit widened to $19.1 billion in the first month of fiscal year 2024-25 as against $15.6 billion in March 2024 owing to a steep fall in exports. The deficit figure stood at $14.44 billion in April 2023.

On a month-on-month basis, outbound shipments of goods in April were down 16.1 percent, whereas imports fell by a smaller 5.6 percent during the same period.

While exports rose by 1.1 percent from the year-ago period to $34.99 billion in April, imports shot up by 10.3 percent at $54.09 billion, the commerce ministry said on May 15.

The primary reason behind a wider trade deficit in April 2024 on a year-on-year basis is a three-fold increase in gold imports to $3.11 billion versus $1.01 billion in the same month last fiscal.

“This was the highest merchandise trade deficit print in four months and was also much higher than ICRA’s expectations,” said ICRA chief economist Aditi Nayar, adding that nearly half of the widening in the aggregate goods deficit between April 2023 and April 2024 was on account of the surge in the value of gold imports amid a rise in global prices.

In merchandise exports, 13 of the 30 key sectors exhibited positive growth in April 2024 as compared to same period last year (April 2023), including electronic goods (25.8 percent) and tea (25.74 percent), while in imports, 14 out of 30 sectors witnessed a contraction. These included pearls, precious and semi-precious stone (-21.12 percent), and fertilisers – crude and manufactured (-8.3 percent).

Engineering exports too witnessed a dip of 3 percent year-on-year in April 2024 to $8.66 billion after recording positive growth for four consecutive months. According to EEPC India Chairman, Arun Kumar Garodia, the decline could be attributed to lukewarm demand from some key markets and logistics issues arising from Red Sea crisis.

“However, in recent weeks there have been some signs of improvement in the global economic outlook and as a result trade should rebound. The engineering sector should certainly do better in the current year,” Garodia said.

“April goods exports are higher on year. Hope this positive cycle stabilises. Trade prospects should improve this financial year given better global growth prospects and expectations of lower inflation,” Commerce Secretary Sunil Barthwal said.

India’s trade dynamics is comparatively rosier when it comes to overall exports — services and goods that is seen rising to 6.9 percent in April year-on-year, though imports are expected to witness a steeper increase at 12.8 percent.

Services exports is seen as the bright spot in India’s trade dynamics rising to $29.57 billion in April 2024 versus $25.78 during the same month last fiscal.

Overall, trade deficit (goods plus services) in the first month of the current financial year is expected to be $6.51 billion, higher than $2.62 billion in April 2023.