(Bloomberg) -- India’s trade deficit expanded to a record high in November, as the nation’s import bill ballooned, particularly due to a rise in gold shipments.
The gap between exports and imports stood at $37.8 billion in November, trade ministry data showed Monday, much higher than the $23 billion deficit forecast by economists in a Bloomberg survey. Trade deficit in October stood at $27.1 billion.
A widening trade gap may put pressure on India’s current account deficit and the local currency, which weakened 0.5% against the dollar last month, marking its worst month since March. The rupee closed at a record low on Monday, falling 0.1% to 84.8712 per dollar. Bonds were little changed.
Imports rose 27% in November from a year earlier to $69.95 billion, while exports stood at $32.11 billion, down 4.9%.
India’s import demand is “obviously” higher as the nation is growing much faster than the global economy, Trade Secretary Sunil Barthwal told reporters in New Delhi.
Gold imports shot up to a record high of $14.8 billion in November as demand for the yellow metal increased after the government slashed the custom duty to 6% from 15% in July. Investors are also turning to gold as rising geopolitical tensions drive them toward safe havens, the government said in a presentation.
“Both the consumption and investment demand for gold have shot up, while the global price of gold has also risen materially,” said Madhavi Arora, an economist with Emkay Global Financial Services Ltd.
What Bloomberg Economics Says
India’s highest-ever trade deficit in November will weaken the rupee further. Record gold buying pushed imports up while exports declined. We believe the Reserve Bank of India’s FX sales will need to continue for now to prevent a sharp fall in the currency.
Abhishek Gupta, India economist
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While India reported its slowest growth in almost two years in the July-September quarter, there’s some rebound in high-frequency indicators in the last few months. However, rising conflict in the Middle East and Donald Trump’s proposed tariffs may complicate the growth outlook in 2025.
The World Trade Organization last week said the outlook for global trade is clouded by rising economic uncertainty, including possible shifts in trade policy.
“The impact on current account deficit is partly countered” as services exports remained strong, said Gaurav Kapur, an economist with IndusInd Bank Ltd. “But the sharp rise in gold imports since July needs to monitored closely.”
--With assistance from Malavika Kaur Makol and Anup Roy.
(Updates to add comments from trade secretary in fifth paragraph.)
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