Lower Gold Imports to Improve Trade Balance?

India's trade deficit and current account deficit figures are closely watched by many. This is because they have the tendency to influence the strength of the Indian Rupee. The fact is that India's trade balance is poor when compared to its peers. But from the looks of it, the situation is slowly improving.

India's trade deficit narrowed to US$ 9.2 bn in the month of November 2013 . This was largely led by a 24% YoY contraction in non-oil imports. Oil imports on the other hand fell by about 1%. Overall imports declined by 16.4% to US$ 33.8 bn, while exports grew by about 5.9% during the month. 

A key reason for the decline in non-oil imports were the lower gold and silver imports, which fell by a sharp 81% YoY. The same stood at just over US$ 1 bn. A key reason for this reduction has been the hike in import duties levied on them.

However, we believe this is a temporary phase as we all know the love Indians have for gold. As such the focus should be on either curbing oil imports or increasing exports. Having said that, a growing economy such as India will have to meets its energy requirements, for which it will have to continue importing crude. As such, the focus has to be on propping up exports. The same largely depends on the global economy, which seems shaky at the moment. But for India to be competitive on a global scale, the government has focus on measures to boost exports to have a trade surplus or a minimal deficit.