India’s trade deficit hit a seven-month high in May as gold imports surged, raising fresh concerns about Asia’s third largest economy, data showed on Monday.
The deficit stretched to $20.1 billion from $17.8 billion a month earlier, mainly because of an almost 90 percent jump in gold and silver imports from a year earlier, the data showed.
India is the world’s largest buyer of gold, and April through June saw frenzied buying of the precious metal, including for gifts, thanks to an annual wedding season and a slide in global prices.
“As far as trade deficit is concerned, it is very worrisome… It is largely contributed by heavy imports of gold and silver,” Commerce Secretary S.R. Rao said after releasing the figures.
Imports rose 7 percent in May from a year earlier to $44.65 billion, while merchandise exports fell 1.1 percent year-on-year to $24.51 billion in May.
The gap was $16.9 billion in May last year, data from the ministry of commerce and industry shows.
The figures serve as another warning light for the Indian economy, which grew at its slowest pace in a decade last year due to high inflation and borrowing costs as well as low business confidence.
The embattled government has announced measures, including hiking import duty, to try to curb buying of the metal, one of the main contributors to the widening deficit in the current account, the broadest measure of trade.
The Reserve Bank of India left lending rates unchanged on Monday, warning of inflation due to a weakening rupee, and pointing to the need to curb the current account deficit which hit a record 6.7 percent of GDP in the last quarter.
The Congress-led government has been trying to kickstart the economy but promised pro-market reforms have halted in parliament in part because of corruption scandals.
India's trade deficit widens in May
