India's trade deficit worsened sharply in April on higher gold imports

During April, India's gold imports rose 138% to about $7.5 billion as consumer demand for the yellow metal shot up significantly. This has mainly led to widening of the CAD, says Nomura

The Indian government’s move of hiking the import duty on gold to 6% to curb imports of the precious metal to check the widening current account deficit (CAD) seems to have failed. According to Nomura Research, during April, India's gold imports rose 138% to about $7.5 billion as consumer demand for gold shot up significantly. 
“Consumers likely brought forward their purchases in response to the recent sharp fall in gold price. As a result, higher gold import volumes offset the price effect. With consumers bringing forward their gold purchases and weak seasonality, we expect the trade deficit to worsen much more sharply in May,” Nomura said in a research note.
Gold imports in 2011-12 amounted to $56.5 billion and in the financial year 2012-13, till December, they are estimated at $38 billion.
After narrowing to a two-year low, India’s trade deficit worsened to $17.8 billion in April from $10.3 billion in March. Exports rose by 1.6% y-o-y in April, down from 7% in March, while imports rose by 10.9% y-o-y following a 2.9% contraction in March. Non-oil imports remained largely unchanged at $27.8 billion in April, while oil imports rose to $14.1 billion from $13.3 billion. 
According to Nomura, the trade deficit worsened due to three key factors, sharp pick up in gold demand, weak exports and seasonal factors.
Sharp pick up in gold demand:
Although gold imports during April rose sharply, Nomura says the recent fall in gold prices suggested that gold import volumes should moderate this year. “This is not yet happening, but we see the recent rise in gold imports as a bunched up rise in consumption demand, which should fade over the coming quarters. Indeed, excluding oil and gold, import growth remains in negative territory, reflecting weak domestic demand. Hence, we expect this combination of weak domestic demand and low oil/ gold prices to lead to a marginal improvement in the current account deficit to around 4.3% of GDP in FY14 from around 5% in FY13, although this is still above a sustainable level,” the report added.
Weak exports: 
Nomura says momentum in external demand has weakened. “On a three-month seasonally adjusted annualised basis, we estimate that exports rose 12% in April, down from 19% in March, suggesting some moderation in external demand,” the report says.
Seasonal factors: 
India's trade deficit tends to seasonally worsen in April due to higher imports. With gold imports higher, the seasonally adjusted trade deficit rose to $17 billion from $15.7 billion in March. 


India's exports up 1.6% at $24.16 billion in April

Commerce secretary SR Rao attributed the widening of trade deficit to high gold imports. Gold and silver imports during April 2013 jumped by 138% to $7.5 billion against $3.1 billion in the year-ago period

India’s exports grew by 1.6% to $24.16 billion in April this year compared to $23.7 billion in April 2012. On the other hand, imports increased by 10.9% to $41.95 billion in the reporting month from $37.8 billion in the year-ago period.
Due to high imports, the trade deficit rose to $17.8 billion, commerce secretary SR Rao told media persons today.
Rao attributed the widening of trade deficit in the first month of the current fiscal to high gold imports. Gold and silver imports during April 2013 jumped by 138% to $7.5 billion against $3.1 billion in the year-ago period.




3 years ago

It should be $23.7 billion in April 2012 instead of $23.7 million.

CPI inflation falls to 9.39 % in April

Retail inflation in urban areas declined to 9.73% in April while that for the rural population it was 9.16% during the reporting month

Retail inflation fell for the second straight month in April, declining to 9.39%, due to easing of prices of vegetables, edible oil and protein-based items. The Consumer Price Index (CPI) based inflation stood at 10.39% in March.
The prices in the vegetables basket eased to 5.43% in April from 12.16% in March. Inflation in protein-based items—eggs, meat and fish—stood at 13.60% during the month. In oils and fats segment, it was 7.52%.
The overall food and beverages segment saw an inflation of 10.61% in April as against 12.42% in March.
According to the data released on Monday, cereals recorded the highest inflation of 16.65% in April among all the constituents that make the CPI. Besides, inflation in pulses stood at 10.91% and in sugar it was 10.49% on an annual basis. The rate of price rise in clothing and footwear segment stood at 10.22% during the month.
In urban areas, retail inflation declined to 9.73% in April from 10.38% in March. The CPI for rural population fell to 9.16% during the reported month from 10.33% in March.
The CPI had stood at 10.91% in February 2013.
The data for wholesale price index (WPI) based inflation is expected on Tuesday. The March WPI eased to a three-year low of 5.96%, but was still higher than the Reserve Bank of India’s (RBI) comfort level.
In order to accelerate economic growth, the central bank earlier this month cut key interest rates by 0.25%.
“Although headline WPI inflation has eased by March, 2013 to come close to the RBI’s tolerance threshold, it is important to note that food price pressures persist and supply constraints are endemic, which could lead to a generalisation of inflation,” the central bank had said.


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