India's Trade Gap Widens as Gold Imports Jump to 138% in April

A girl trying a gold necklace inside a jewellery showroom in Mumbai.

India has reported a wider trade deficit in April after the country imported large quantities of gold to satisfy local demand.

According to trade ministry officials in New Delhi, India's trade deficit rose to $17.8bn (£11.6bn/€13.7bn), a 72% increase from March.

Merchandise imports in Asia's third largest economy rose 10.9% to $41.95bn, while exports grew 1.6% from a year earlier to $24.16bn, a fourth straight monthly increase. This compares with exports and imports to the tune of $23.7bn and $37.8bn, respectively, in 2012.

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Government data in the world's top importer of the yellow metal showed that gold and silver imports soared 138% to $7.5bn in April when compared to the year-ago period, as shoppers loosened their purse strings when the prices of gold fell.

The export-import data along with mixed response in the European markets and most of Asia weighed in on India's stock market. The benchmark S&P BSE Sensex slipped below the psychological 20,000 mark, to close at 19691.67, down 2 .1% or 430.65 points.

India's trade gaps have averaged about $16bn a month in 2012 and about $13.5bn a month in 2011, a huge increase over the monthly average of $9.5bn between 2008 and 2010. The country posted its highest ever trade gap of $21bn in October, 2012.

In February, a Moody's analysis of the country's widening trade balance said trade deficits could weaken the Indian rupee and could raise the local prices of imported commodities, fuelling inflation which is already on the higher side.

Slowing global growth that has lowered the demand for Indian goods and the rising prices of gold and oil, both heavily imported commodities, have contributed to India's widening trade balance over the past two years, Moody's said.

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