India: Lower gold imports reduce trade deficit
July 12, 2013
In June the trade balance reported a deficit of USD 12.2 billion, which was greater than the USD 11.2 billion deficit reported in the same month last year, but narrower than the USD 20.1 billion shortfall observed in the previous month. The market had estimated a trade deficit of USD 14.8 billion.
Exports contracted 4.6% over the same month last year in USD terms. This figure is below the 1.1% decline registered in May and represents the steepest fall since November 2012. Meanwhile, imports contracted 0.4% in June (May: +7.0% year-on-year), the first drop recorded since August 2012. The monthly drop primarily reflected lower imports of gold, India's second-largest imported commodity by value after oil. Gold imports declined after the government hiked the import duty to 8% in June to curb demand for the metal.
The government has set an export target of USD 325 billion for this fiscal year. In order to achieve this goal, the government announced a package worth an estimated INR 30 billion (USD 550 million) to stimulate the country's exports.
FocusEconomics Consensus Forecast panellists expect exports to increase 11.8% in FY 2013/14, reaching USD 330 billion. In FY14/15, the panel sees exports expanding 15.7%.
Author: Ricardo Aceves, Senior Economist