India’s trade deficit widened in March amid rising imports, including higher inbound shipments of gold.
Trade deficit for March stood at $13.93 billion compared to a deficit of $12.61 billion in February according to data published by the Ministry of Commerce and Industry on April 15.
- Merchandise exports rose 60.29% year-on-year in March to $34.45 billion. It stood at $27.93 billion in February.
- Merchandise imports rose 53.74% over last year to $48.38 billion. It stood at $40.54 billion last month.
- Non-oil, non-gold imports rose by 46.66% to $29.62 billion, compared to $26.27 billion a month ago.
The sharp expansion in merchandise exports and imports in March 2021 reflects a combination of factors such as a muted base, rising commodity prices reflecting post-vaccine optimism, as well as a surge in volumes at the end of the year, according to Aditi Nayar, principal economist at ICRA.
Key Export Items
- Petroleum products rose 35.52%.
- Organic & inorganic chemicals up 46.5%.
- Gems & jewellery jumped 78.93%.
- Ready made garments increased 27.51%.
- Drugs and pharmaceuticals up 48.49%.
- Engineering goods rose 71.3%.
- Electronic goods increased 91.98%.
Key Import Items
Gold saw the sharpest surge in imports, rising 591.73% year-on-year to 8.49 billion tonnes in March.
- Coal, coke and briquettes rose 7.84%.
- Petroleum, crude and and products up 2.23%.
- Machinery, electrical & non-electrical increased 60.15%.
- Electronic goods rose 34.05%.
- Pearls, precious and semi precious stones up 81.43%
- Organic and inorganic chemicals rose 55.7%.
On a cumulative basis, merchandise exports contracted by 6.66% between April 2020-March 2021, while merchandise imports contracted by 16.53%.
With the rise in commodity prices and surge in gold imports, we expect the current account deficit to widen to $5-7 billion in Q4 FY21, limiting the size of the annual current account surplus to $26-28 billion in FY21 as a whole, Nayar said.
If localised restrictions proliferate, both exports and imports may be adversely impacted in the ongoing quarter in sequential terms. Given the surge in Covid-19 infections, we expect some demand to get shifted from Q1 FY22 to the later part of the year, which may temporarily dampen imports, she said.