New Delhi: Gold imports surged by over six-fold to USD 5.61 billion (over Rs 35,000 crore) in November primarily due to a spike in demand during the marriage and festival season, raising fresh concerns of widening current account deficit.
Imports of the precious metal stood at USD 835.83 million in the same month in 2013.
Both Reserve Bank and government have been saying that CAD levels are comfortable despite an upward trend, but the huge jump in gold imports may cause fresh worries to them. Besides, import curbs were eased on November 28 which could also lead to further rise in imports this month onwards.
Higher gold imports in November have pushed up trade deficit to one-and-a-half year high of USD 16.86 billion in November as against USD 9.57 billion in the same month last year. The previous high deficit was USD 20.1 billion in May 2013.
Sequentially, gold imports have been on an upward trend since August when the inbound shipments rose to USD 2.03 billion from 1.81 billion in July. In September, it was USD 3.75 billion, while in October imports rose to USD 4.17 billion.
Last week the Reserve Bank had said that the current account deficit (CAD) had widened to USD 10.1 billion or 2.1 percent of GDP in July-September. It cited higher trade deficit due to rising gold imports as the primary reason for the spike in CAD.
The current account deficit, which is the excess of foreign exchange outflows over inflows, touched a historic high of 4.8 percent of GDP in 2012-13, mainly due to rising imports of petroleum products and gold.
However, it narrowed sharply to 1.7 percent of GDP in the April-June quarter of this fiscal due to decline in gold imports.
Gold imports were down for quite a long time after the government had imposed restrictions on inbound shipments of the precious metal to narrow the CAD.
India is the largest importer of gold, which is mainly utilised to meet the demand of the jewellery industry.
Commenting on trade figures, rating agency ICRA said the rise in the trade deficit is likely to widen the current account deficit in sequential terms in the third quarter of this fiscal.
"At present, we do not expect the current account deficit to exceed 2 percent of GDP in FY 2015, as the recent slack in commodity prices would ease the pressure on imports," it said.
It also said that the given the substantial gold imports of USD 13.5 billion in September-November and the expectation that jewelry demand would subside post the festive season, the monthly import bill may not sustain at recent levels despite the withdrawal of the 20:80 scheme.
