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Indian Trade Deficit Widens as Gold Imports Surge 176% |
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India’s trade deficit widened in August from a year earlier as imports of gold surged 176 percent after policy makers eased shipment curbs.
The shortfall was $10.8 billion last month, wider than $10.7 billion a year earlier, with exports rising 2.4 percent and imports growing 2.1 percent. Gold shipments surged to $2 billion from $739 million in August last year after the government allowed more banks and traders to buy bullion overseas.
India is easing emergency measures taken when the current-account deficit widened to an all-time high, as faster growth boosts inflows. While the shortfall will widen this year through March 2015 after shrinking in the previous 12 months, it will stay sustainable, according to a Reserve Bank of India report last month.
“We can manage with monthly gold imports of about $2 billion and the jump in the August number is largely due to last year’s low base after a sudden clamp down,” Shubhada Rao, an economist at Yes Bank Ltd. in Mumbai, said yesterday. “The jump may look alarming, but there is no reason for panic.”
Controls on imports will probably be permanent and the government may keep a rule that requires importers to supply 20 percent of their cargo to jewelers for re-export or introduce a system of quotas or licenses, said Rajesh Khosla, managing director at MMTC-PAMP India Pvt. Ltd., the country’s biggest refiner, on Aug. 21. India’s imports in August are estimated at 63 tons compared with 38 tons in July, he said on Sept. 2.
Foreign investors have poured more than $14 billion into India’s stocks this year, exchange data show. The economy grew 5.7 percent in the quarter ended June 30, the fastest pace since 2012.
Source : bloomberg.com
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