July sees trade back in deficit as gold, pharma imports rise

Exports rise in 16 of 30 major products; petro products, gems and jewellery drag

India returned in July to a trade deficit, of $4.83 billion, after posting a monthly trade surplus for the first time in 18 years in June.

The flip was propelled by year-on-year growth in imports of gold, fertilisers, edible oil and medicinal and pharmaceutical products, according to data released by the Commerce Ministry on Friday. Overall, merchandise imports declined more than 28%, a recovery from the June decline of 48%.

Exports fell for the fifth straight month, but the contraction narrowed to 10%, supported by growth in 16 out of 30 selected major commodities, especially in rice and other cereals, iron ore and oil seeds. Several employment-generating sectors such as cotton yarn and handloom, jute, carpets, ceramics and glassware also saw expansions. Exports of petroleum products and gems and jewellery, however, posted sharp declines of about 50% each.

“In an encouraging trend, exports excluding petroleum products and gems and jewellery recorded a YoY rise in July,” said Aditi Nayar, Principal Economist, ICRA Ltd. “With the imports of some diverse categories of goods recovering in July 2020 relative to the previous month” domestic demand appeared to be re-emerging, she added.

July’s growth in gold imports may signal that investors are looking for a safe haven amid the continuing economic uncertainty due to the COVID-19 pandemic, as well as expectations of a pick up in retail demand in the upcoming festival season.

Non-oil, non-gold imports — which can be a signal of domestic demand — fell 29%, but the contraction narrowed from June’s 41%.

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