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Surge in gold buying widens India’s trade deficit to record $15.3 billion

Surge in gold buying widens India's trade deficit to record $15.3 billion

The trade deficit of India surged to $15.3 billion reaching to a five-month peak in April 2019. During the same period, India’s gold imports jumped over 50% and gold led the list of imported products. The export of commodities stagnated and lost their strength in March 2019. The decline was witnessed mainly due to international factors such as growing concerns between the US & China.

 

The exports declined in April 2019, after strong growth in the previous month of March 2019. Indian exports slowed down to a four-month low of 0.64% in April ’19  whereas the imports soared by 4.5%

 

In FY19,  Indian exports grew at a rate of 9.1% whereas the imports grew by 9%. The exports from India stood at $331 billion whereas the imports accounted for $507.4 billion. The trade deficit for the year ended was $176.4. However, in April 2019, exports in China shrank to 2.7%  whereas imports increased by 4%.

 

 

US introduced $200 billion in tariffs for Chinese imports

 

The trade war between the US and China suddenly resurfaced after a break of 10 months. The US re-ignited the trade war by increasing tariffs on Chinese goods by $200 billion. This action was in response to attempts by the Chinese officials trying re-negotiate terms of the terms of trade. The US president, Mr Donald Trump has threatened China that the US would introduce new levies on Chinese imports. This has shaken financial markets worldwide. Further, China has confirmed that it would retaliate the US tariffs by introducing counter-tariffs. China is imposing additional tariffs of $60 billion starting from June 1, 2019,  targeting the US exports to China.

 

 

 Commodity affected

 

In April 2019, Indian exports surged 4% in pharmaceuticals and drugs section & 30.8% in petroleum products. A rise of 15.1%  was witnessed in chemicals along with 4.4% in readymade apparels. A decline was observed in engineering products at 7.1% along with 13.4% in jewellery & gems section.

 

A majority of the imports comprised of gold, leading products in imports which surged 54%. Gold was followed by petroleum products with an increase of 9.3%. Further, iron & steel witnessed a growth of 11%, non-ferrous metals at 1%, electronic goods at 4%. Plastic raw-materials soared at 3.5%, whereas, imports contracted 31.7% in transportation tools & precious stones 8.9%

 

According to the Federation of Indian Export Organisation (FIEO), exports from the labour-intensive industry are under pressure. Further, FIEO also mentioned the widening gap of trade deficit could further worsen in the future. This might result in escalating tensions between the US and China regarding trade.

 

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