But trade deficit widens to four-month high driven by a sharp uptick in gold imports
India’s merchandise exports in August touched $33.14 billion, 45.17% higher than a year ago and 27.5% over the pre-pandemic level of August 2019, but the trade deficit widened to a four-month high driven by a sharp uptick in gold imports, as per preliminary estimates released on Thursday.
Merchandise imports during the month grew 51.47% year-on-year to $47 billion, which is also 18% higher than August 2019. The trade deficit widened 69.15% year-on-year to touch $13.87 billion but was just 0.07% higher than the pre-COVID level of 2019.
“With merchandise imports continuing to scale up, even as exports receded from their all-time high, the trade deficit came in higher than anticipated,” said Aditi Nayar, chief economist at rating agency ICRA, expressing concerns about rising gold imports.
In August 2020, gold imports stood at $3.7 billion, implying an 82.22% jump in imports of the yellow metal last month.
“Gold imports surged further to a five-month high of $6.7 billion in August 2021 and were responsible for 88% of the rise in the merchandise trade deficit relative to July 2021. Unless a weaker agricultural outlook restrains demand, gold imports may well touch $40 billion in 2021-22,” Ms. Nayar warned.
Net oil imports remained largely stable, benefiting from a moderation in crude oil prices, despite a rise in mobility in the country, she pointed out.
In the first five months of 2021-22, India’s merchandise exports have now touched $163.67 billion, nearly 67% higher than the same period last year and 22.9% higher than 2019. The government has set a target of merchandise exports worth $400 billion for the year.
Exporters said the steady recovery in global trade was helping their order books but sought urgent attention from the government on the runaway freight rates, rampant container shortages and other policy constraints, including the release of pending benefits under earlier export incentive schemes.
“The government needs to provide freight support to all exports till March 31, 2022, as freight rates have skyrocketed,” said Dr. A. Sakthivel, president of the Federation of Indian Exporters’ Organisations.
Apart from augmenting the flow of empty containers to Indian ports, he suggested that the government should establish a regulatory authority to seek justification of freight hikes and imposition of various charges by shipping lines.
Among the major commodity groups, excluding petroleum, and gems and jewellery, which entail marginal value addition, engineering goods recorded a healthy 58.8% rise to $9.6 billion, while cotton yarn, fabrics and handloom products jumped 55.6% to about $1.3 billion.
Electronics goods exports rose 31.5% from a year ago, to hit $1.15 billion. The employment-intensive readymade garments sector, however, only recorded a 14% growth at $1.23 billion in August.