India’s Trade Deficit At Its Widest Since May 2013

India’s trade gap in January was at its widest in more than four-and-a-half years on the back of a surge in the import of crude oil, precious jewellery and coal.

The trade deficit, the gap between exports and imports, stood 64.54 percent higher over a year ago at $16.29 billion, according to data released by the Ministry of Commerce. The deficit was at $14.88 billion in December. The gap was last wider in May 2013 at $19.1 billion.

Petroleum and crude oil imports continued to inflate India’s import bill, which went up 26.10 percent from the year-ago month to $40.68 billion. Brent crude prices rallied 24.48 percent last month. Gold imports, however, declined even as prices rose 2 percent last month. Gold and crude together contribute nearly a third of the country’s imports.

Import Highlights

• Gold imports declined 22.07 percent year-on-year to $1.59 billion.
• Oil imports increased 42.64 percent to $11.65 billion from last year.
• Import of pearls, precious and semi-precious stones jumped 55.71 percent to $2.4 billion.
• Organic and inorganic chemical imports went up 48.43 percent $1.79 billion.
• Coal, coke and briquettes imports rose 31.67 percent to $2.2 billion.
• Imports of machinery, both electrical and non-electrical, rose 29.1 percent to $3 billion.

Exports rose 9.07 percent to $24.38 billion as India continued to ship more engineering goods, organic and inorganic chemicals. Morgan Stanley, in a prior note, said that “robust” global demand and favorable base effects were the likely drivers for growth. The stronger global demand was evident in the PMI data of developed markets, and also an uptick in Korea’s export, Morgan Stanley said.

The Reserve Bank of India, in its recent monetary policy review, highlighted that export growth is expected to improve even as elevated commodity prices, like that of crude oil, might drag the aggregate demand levels down.

Export Highlights

• Export of engineering goods rose 15.77 percent over last year to $6.36 billion.
• Gems and jewellery exports grew 0.89 percent to $3.02 billion.
• Export of organic and inorganic chemicals rose 33.60 percent to $1.61 billion.
• The value of petroleum products exports too rose in line with the higher crude prices. Outbound shipments of petroleum products went up 39.5 percent to $3.8 billion in January.
• Exports of readymade garments fell 8.4 percent to $1.39 billion.
• Cotton yarn and fabric exports declined 9.6 percent to $0.84 billion.