India's trade deficit hits record high of $37.8B in November
What's the story
India's trade deficit hit a record high of $37.84 billion in November, up from $27.1 billion in the previous month.
The spike can largely be attributed to an 8.35% year-on-year (YoY) increase in imports between April and November, while exports only rose by a meager 2.17% during the same period, according to government data.
Dynamics
Gold imports impact trade deficit
India's exports in November stood at $32.11 billion, while imports soared to $69.95 billion.
This is a huge jump from October's $66.34 billion in imports.
Gold imports hit an all-time high of $14.8 billion in November, after a cut in customs duty from 15% to 6% in July boosted demand amid rising geopolitical tensions.
Economic impact
Trade deficit surpasses expectations, pressures Indian currency
Economists had initially forecasted a trade deficit of $23.9 billion for November, per Reuters poll, but the actual figure far exceeded expectations.
The widening trade deficit could exert further pressure on Rupee which weakened by 0.5% against Dollar last month.
Trade experts suggest that while a trade deficit can be beneficial if it involves importing raw materials or intermediary products for manufacturing and export purposes, it can also strain the domestic currency and economy if it continues to rise unchecked.
Trade relations
India's trade relations and future prospects
India has been recording trade deficits since 1980 owing to robust import growth, especially of fuels and precious stones.
The country faces its biggest trade deficits with China, Switzerland, Saudi Arabia, Iraq, and Indonesia but enjoys trade surpluses with countries such as the US and UAE.
Meanwhile, India and UK will resume talks on a free trade agreement by January's end after two years of intermittent talks.