‘Largely due to the heavy import of gold and silver’
The continued rise in import of gold, silver and crude oil has helped the trade deficit touch a seven-month high of $20.1 billion. Exports declined by 1.1 per cent in May. Official figures released on Monday showed the trade deficit widening to $20.1 billion this month from $17.8 billion in April. The gap was $16.9 billion in May, 2012 . Gold imports jumped by 89.7 per cent to $8.4 billion while exports declined by 1.1 per cent to $24.51 billion. “The trade deficit is very worrisome. It is largely due to the heavy import of gold and silver,” Commerce Secretary S. R. Rao told reporters here.
The decline in shipments was mainly due to the steps taken by the government to restrict gold trading in special economic zones (SEZs). Gold exports from SEZs in May declined by $0.8 billion. The weak demand from the Eurozone markets also had an adverse impact on the growth of exports. The country's exports in May stood at $24.51 billion compared to $24.78 billion in May 2012.
Imports in May grew by 6.99 per cent to $44.65 billion. Gold and silver imports, during May, grew by 89 per cent to $8.39 billion. During April-May period, it grew by 109 per cent to $15.88 billion. However, exports during the first two months of the fiscal grew by 0.21 per cent to $48.67 billion. Imports during that period were up by 8.88 per cent at $86.6 billion. Crude oil and non-oil imports in May grew by 3 per cent and 9.1 per cent to $15 billion and $29.62 billion.
Mr. Rao expressed hope that from June exports would bounce back with the resumption of gold trading activities in SEZs. “We have now made it mandatory that even in a SEZ, gold units shall comply with the DGFT notification of minimum value addition of 3 per cent in gold jewellery and 5 per cent in gold and precious stone studded jewellery,” he added.
Prior to May 1, the value addition norm was not applicable for SEZ exports. “In May, because we stopped gold trading in SEZs, gold exports declined by $0.8 billion. And if you look at export figure for May, our shortfall has been much less than $0.8 billion,’’ the Commerce Secretary said.
He said although the U.S. market was improving, the EU was still not out of the woods. Both markets account for about 30 per cent of India's exports.
He expressed hope that in June the trade deficit would be contained and exports would continue to perform well.
“What is important is to contain the balance of trade, which directly contributes to the current account deficit (CAD). Even if nothing has been done to boost exports per se, measures are being taken to contain imports. It is good for the economy,” he added.
The Federation of Indian Export Organisation (FIEO) said the export figures indicated that the global recovery was still weak. “We may be seeing some decline in trade deficit due to softening of commodity prices and dip in gold import due to RBI restrictions and hike in (its) import duty,” M. Rafeeque Ahmed, President, FIEO, said.
He said that even in large emerging economies such as China, Brazil, Russia, South Africa, sluggish external demand and lack of investment were pulling down economic activity.