New Delhi: India’s trade deficit narrowed to $21.94 billion in December compared to the corresponding figure of $32.84 billion for November, as exports grew while imports declined on a month-to-month basis.
Merchandise exports in December increased to $38.01 billion compared to $32.11 billion in November, while imports declined to $59.95 billion from $64.95 billion in November.
However, on a year-on-year basis, the trade gap widened during December compared to $18.76 billion in December 2023. The merchandise exports declined by 1 per cent in December 2024 from $38.39 billion in the same month of the previous year while imports rose by 4.8 per cent from $57.15 billion in December 2023.
Meanwhile, in a silver lining for the day, the Indian rupee rebounded on Wednesday to post its highest single-day rise in 7 months to close at 86.3625 against the US dollar, which represents a 0.3 per cent increase over the previous day’s lifetime low of 86.6475. A weaker US dollar and the fact that foreign banks sold more dollars helped the rupee to bounce back, according to experts.
India’s revised trade deficit for November was lower than the earlier announcement as the government had scaled down its estimate of gold imports for the month to $9.84 billion from the preliminary estimate of $14.86 billion announced last month.
The $5 billion downward revision in gold imports led to an equivalent reduction in the country’s trade deficit.
The revised figures for inbound shipments of gold in value terms are nearly 34 per cent lower than what was reported last month.
According to sources, the high figure announced earlier was due to a double-counting error in the estimate of gold imports kept in warehouses by custodians after a change in methodology. The imports kept by custodians in free trade zone warehouses were added to that reported by domestic banks which buy the gold from the custodians and this ended up in the same consignments getting counted twice leading to the inflated estimate.
While gold imports have been on the rise after the duty cut announced during the Union Budget in July 2024, the huge surge in shipments during November had puzzled market analysts. The import of gold was shown to have risen over four times compared to the corresponding figure of $3.4 billion for the same month of the previous year which was considered improbable.
This resulted in India’s trade deficit being reported at an all-time high of $37.8 billion reflecting a weak external balance position, which adversely impacted the rupee as well.
India’s foreign exchange reserves have been declining in recent weeks but still stand at a comfortable $634.59 billion as of January 3, according to the latest RBI data.
However, gold reserves, which form part of the foreign exchange kitty, increased by $824 million to $67.1 billion during the week, according to the figures.
India is the world’s second-largest consumer of gold next only to China and relies mainly on imports to meet this demand, especially during the festive and wedding seasons when it is gifted in large quantities to brides and bridegroom.
(IANS)
