India's August goods trade deficit narrows as gold imports plunge

NEW DELHI: India’s goods trade deficit unexpectedly narrowed to $26.86 billion in August, government data showed on Tuesday, as imports, particularly of gold, fell sharply to make up for a slip in exports from the previous month.

The fall in the import bill coincided with an intensifying U.S.-Iran conflict, disrupting oil supplies and shipping, adding to inflation risks in India, the world’s third-largest oil importer and Asia’s third-largest economy.

New strikes on Saudi Arabia and on ships in the Gulf are testing nerves in the Middle East, after an attack on a Saudi oil pipeline and an advance by Yemen’s Houthis threatened to worsen the wartime global crisis.

India’s crude basket averaged $90.19 a barrel in August, up from $82.04 in July, and has climbed to $109.76 so far in September, government data showed.

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Gold imports halve

Economists had expected the goods trade deficit to be $32 billion in August, according to a Reuters poll, almost matching the value recorded in the previous month.

Gold inflow nearly halved to $2.3 billion from $4.16 billion in July, when imports had rebounded sharply on inventory restocking ahead of the festive season.

That helped cut total imports to $70.67 billion from $76.22 billion.

On the trade deficit, Trade Secretary Rajesh Agrawal said, “Surging imports have led to a higher trade deficit in the first five months of this fiscal year, driven by strong domestic economic growth, rising energy needs and demand for critical inputs.”

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Exports slip, still high

Merchandise exports fell marginally to $43.81 billion in August from $44.24 billion in July. Despite that, August exports were the highest for the month in at least a decade.

The country is seeking to diversify its export markets, he said, with its trade deal with Britain now in force and a broader pact with the European Union moving towards implementation, potentially opening up greater access for domestic goods.

Goods and services exports rose almost 25% year-on-year to $82.68 billion in August, while the trade deficit narrowed to $9.41 billion from $11.62 billion a year earlier, Agrawal said, noting a rise in engineering and electronics goods exports.

Export growth in automobiles and resilient services shipments provided some support to India’s overall export performance.

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Automobile exports rose 22.2% year-on-year to 681,000 units in August, driven by strong growth in two-wheelers and three-wheelers, though passenger vehicle exports declined 17%, data released by the Society of Indian Automobile Manufacturers on Tuesday showed.

Services exports remained robust at $38.87 billion, while services imports totalled $21.42 billion, resulting in a surplus of $17.45 billion, trade ministry estimates showed.

The U.S. remained the top destination for Indian exports, with goods shipments rising to $42.79 billion in April-August from $40.39 billion a year earlier.