India's gold imports, a significant factor affecting the country's current account deficit (CAD), surged by 26.7% to reach USD 35.95 billion during the April-December period of the current fiscal year, driven by robust demand. This marked a notable increase from USD 28.4 billion recorded in the corresponding period the previous year. In December 2023 alone, gold imports experienced a remarkable spike of 156.5%, totaling USD 3 billion, according to data released by the commerce ministry.
Switzerland emerged as the leading source of gold imports, contributing approximately 41% of the total share, followed by the UAE (around 13%) and South Africa (about 10%). Gold imports constitute over 5% of India's overall imports. Currently, there is a 15% import duty imposed on gold.
Despite the uptick in gold imports, India's trade deficit (the variance between imports and exports) contracted to USD 188.02 billion in the initial three quarters of the fiscal year, down from USD 212.34 billion recorded in April-December 2022.
India ranks as the second-largest consumer of gold globally, trailing only behind China. The imported gold primarily caters to the demand of the country's jewelry industry. However, the gems and jewelry exports experienced a decline of 16.16%, reaching USD 24.3 billion during the same period.
The Reserve Bank of India (RBI) data, released on December 26 last year, revealed a sharp decline in India's current account deficit to 1% of the GDP or USD 8.3 billion in the second quarter of the financial year. This reduction was attributed to a lower merchandise trade deficit and growth in services exports. A current account deficit arises when a country's payments for goods, services, and other outflows surpass its earnings from exports and other inflows during a specific period.
(With Agency Inputs)
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