Hopes of an economic turnaround have sprung anew as India’s exports recorded its third successive month of expansion growing by 11.15% in September while imports, aided by plunging gold consignments that barely trickled in, fell 18.10% during the month narrowing the trade deficit to a 30-month low of $6.7 billion.
The strengthening trade deficit, which was $17.1 billion in the same month last year, triggered expectations that the government will be able to contain the current account deficit (CAD) – the gap between dollar inflows and outflows – within the targetted $70 billion or 3.7% of GDP from the record $88 billion or 4.8% of GDP last year.
India’s September imports of $34.4 billion were the lowest since March 2011.
Gold and silver imports during the month came in at about $800 million against $4.6 billion in September last year mirroring the effect of import curbs – including higher customs duty – on overseas gold purchases as part of the government and RBI’s efforts to control a widening CAD.
The government has raised import duty on gold to 10% and has made it mandatory to export 20% of imported gold in the form of ornaments. The RBI also specified that gold importers would supply the metal only to jewellers or the dealers supplying ornament manufacturers.
Gold imports have fallen from to less than 10 tonnes in September from 142.47 tonnes in April, 161.38 tonnes in May, 31.46 tonnes in June, 47.75 tonnes in July, 3.38 tonnes in August and 7.24 tonnes in September (up to September 25).
India imported 970 tonne of gold in 2012 and this is expected to come down to less than 800 tonnes this year.
Rao said that jewellery exports from India are also expected to surge in the coming months. According to the Gems and Jewellery Export Promotion Council (GJEPC) India exported $2.68 billion worth of gold jewellery in value terms from April to August, down 59.4 % from a year ago.
The government is expected to announce a set of financial incentives for jewellery exporters by the end of this month.