India’s trade deficit in October rose to its highest in the ongoing financial year as exports declined 5.12% on-year to $24.89 billion after growing in September, led by a fall in outbound shipments of petroleum products, gems and jewellery, leather and engineering goods.

The final contraction in exports is lower than by preliminary estimate of 5.4% decline as shown by the commerce and industry earlier this month.

Trade deficit was $8.71 billion, lower than $8.78 billion shown in the preliminary estimates and narrower than $11.75 billion in October 2019, as imports shrank 11.53% to $33.61 billion. Gold imports rose 35.88% while those of electronics were up 16.12%, official data released Friday showed.

“The merchandise trade deficit for October is in line with our estimates, printing at the highest level for this fiscal year,” said Aditi Nayar, principal economist at ICRA.

After contracting for six straight months, India’s exports had grown in September. In October, 20 of the major 30 export sectors grew.

“With second wave of Covid-19 hitting Europe, and the US reeling under the pandemic, Indian exports face a tough winter of global trade”, said EEPC India Chairman, Mahesh Desai.

During April-October 2020, exports declined 19.02% to $150.14 billion, while imports fell 36.28 % over the same period last year to $182.29 billion.

“It is unclear whether there is a pent-up demand or a sustained one in exports,” said Federation of Indian Export Organisations (FIEO) director general Ajay Sahai.

India’s exports grew 22.5% on year to $6.75 billion in the first week of November.

Sectors which showed growth included handicrafts, chemicals, rice, oil meals, iron ore, oil seeds, pharmaceuticals and cotton yarn.

Imports-mixed picture

Oil imports dipped 38.52% to $5.98 billion in October while non-oil imports were down 2.24% on year.

“The narrowing down of decline in non-oil imports is signifying the resumption of manufacturing activities,” said Prahalathan Iyer, Chief General Manager, Research & Analysis, India Exim Bank.

Experts said going ahead, the imports of gold would be limited as it was due to pent up demand ahead of the festive season.

“The rise in gold imports reflects pent up demand and restocking ahead of the festive and marriage season,” Nayar said.

Non-oil, non-gold imports, an indicator of the strength of domestic demand, was down 4.9% in October compared to 12.63% decline in September.

This, as per Nayar, was led by the base effect, and may not necessarily be a good signal of the strength of the domestic economic recovery.

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