India's April trade deficit rose to $17.8 billion on account of massive surge in imports of cheaper gold and silvers, which were up by 138% to $7.5 billion last month compared with a year earlier as retail consumers in the world’s biggest gold importer went on a buying spree after global prices fell.
Meanwhile, overall merchandise imports rose by 10.9% to $41.95 billion on y-o-y basis, driving the trade deficit up by more than 72% from March. On the other hand, India’s export increased by 1.6% from a year earlier to $24.16 billion, up for the fourth straight month. The increased import has also raised concerns over the current account deficit in Asia's third largest economy.
The government is already concerned over the burgeoning trade deficit as it depreciates the home currency leading to increased rupee cost of import and adds to the subsidy burden. Increasing subsidy adversely affects India’s ability to achieve its fiscal targets and poses serious impediments to tackling inflation. However, the government is taking steps to check the rising import especially of gold like it has hiked the import duty to 6% from 4% on gold import.
