October trade deficit jumps, but trends seen positive

12 November, 2013

India’s trade deficit jumped in October, rebounding from a 2-1/2 year low the previous month, as purchases of gold picked up ahead of the festival season, provisional government data showed on Monday.

Last month’s deficit stood at $10.56 billion, compared with $6.7 billion in September, the trade ministry said.

Analysts said the October trade deficit came within expectations and continued to point to positive underlying trends, including a 13.47 per cent year-on-year rise in merchandise exports.

“I would say that the data is good. Exports have risen for the fourth month, while the rise in gold imports is expected due to the seasonality,” said Rupa Rege Nitsure, chief economist at Bank of Baroda.

“The trade deficit will be controlled and $68-$70 billion deficit for the whole year may be feasible,” she added.

Although gold and silver imports rose to $1.37 billion in October compared with $800 million in the previous month, imports in total fell 14.5 per cent year-on-year to $37.83 billion.

India celebrates a slew of festivals in November, which has traditionally sparked an increase in demand for gold.

Still purchases of the yellow metal have been hit this year after the country took steps to curb imports of gold, including imposing a record 10 per cent import duty and requiring that 20 per cent of imports be re-exported.

Falling imports and rising exports have been cited as a key reason behind the improving outlook for the current account deficit. Finance Minister P. Chidambaram said this month the current account gap would be $60 billion or lower, well below the previous estimate of $70 billion.

S. R. Rao, India’s trade secretary, told reporters on Monday the government was confident of reaching its export target of $325 billion.

“All major sectors having significant contribution to export basket have shown a positive trend,” he said.

Bond and forex markets were largely unmoved by the in-line trade data.


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October trade deficit jumps, but trends seen positive

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