India's trade deficit widens as festive demand for gold soared in October

India's Trade Deficit: India's trade deficit widened to $31.5 billion in October as the festival demand led to a sharp increase in the import of gold and silver. The deficit surged even with positive export growth that was aided by a favourable base.

Exports vs Imports

The data released by the Commerce Department shows that merchandise exports grew at the fastest pace of 6.2% in 11 months while imports also rose at the fastest pace in 13 months. The imports rose 12.3% to $65.03 billion. The gold imports alone rose by 95.4% to $7.2 billion and silver imports increased by 124.6% to $1.3 billion during the month.

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As per Commerce Secretary Sunil Barthwal, the government believed that the October data was a signal towards the “stabilising” of green shoots.

“The greenshoots that we have talked about during the August data are now stabilising (and) we are hopeful that we will be crossing last year’s high figures,” Barthwal said.

“This is happening despite a fall in the commodity prices globally, as [they] along with, high interest rate and exchange rates continues to remain a challenge. We are also doing a thorough analysis of new markets which we can target,” Barthwal said.

Exports are impacted due to the geopolitical situation and other risks like high inflation and economic slowdown in advanced economies; the Russia-Ukraine war; China-Taiwan and China-US issues; and the Israel-Palestine war.

The country's exports were in a negative zone during February-July. After a revision of numbers by the ministry, the shipments showed 3.88% positive growth in August, but in September it contracted by 2.6%.

According to the data, 22 of the 30 key sectors exhibited positive growth in October, and that includes iron ore, meat, dairy and poultry products, pharma, electronic goods, carpet, plastic, marine and engineering goods.

The World Trade Organisation (WTO) has forecasted that global trade will grow only by 0.8% in 2023.