India’s trade deficit narrows to $21.94 billion in December

New Delhi: India’s trade deficit narrowed to $21.94 billion in December from November’s revised $32.84 billion, led by a sharp decline in gold and oil import bills, data released by the Ministry of Commerce and Industry showed on Wednesday.

The country’s merchandise exports fell by nearly 1% to $38.01 billion in December 2024 while imports rose by 4.8% to $59.95 billion.

The November trade data has been rejigged due to an unprecedented error in calculation of gold shipments. Gold import bill for November 2024, which was reported at $14.8 billion, has been lowered $9.8 billion. This is the sharpest ever correction in gold import data.

Addressing a media briefing Commerce Secretary Sunil Barthwal said the government has formed a panel to ensure that such miscalculation in trade data is not repeated.

He said the ministry has created SOPs (standard operating procedures) to ensure better coordination between Directorate General of Commercial Intelligence and Statistics (DGCIS) and the Central Board of Indirect Taxes and Customs (CBIC) for trade data reporting.

Due to a sharp revision in the gold import bill the overall import and trade deficit data has also been significantly lowered. Last month, the ministry had reported the merchandise trade deficit at $37.84 billion. In line with the cut in gold import bill the November trade deficit data has been revised downward to $32.84 billion.

The revision in gold import data will significantly impact the calculation of key macroeconomic indicators like current account deficit (CAD) and economic output.

“The significant sequential dip in the trade deficit number in December 2024, along with the sharp downward revision in the print for the previous month owing to the rectification in the gold import value, is expected to result in a relatively favourable CAD in Q3,” said Aditi Nayar, Chief Economist at ICRA.

In December the value of gold imports declined to $4.7 billion, which is less than half of November’s revised figure of $9.8 billion. Oil import bill fell to $15.2 billion December due to decline in prices of petroleum products in the international markets.

The country’s overall exports (merchandise and services combined) increased marginally to $70.67 billion in December 2024 from $70.02 billion recorded in the same month previous year. While the overall imports increased by 6.4% year-on-year to $77.44 billion in December.

Expressing concern over the decline in merchandise export, Federation of Indian Export Organisations (FIEO) President Ashwani Kumar said the government should announce measures in the upcoming budget to support exporters.

EEPC India Chairman Pankaj Chadha also underlined the need for government support.

“There is growing apprehension that once the Trump 2.0 administration assumes charge, some countries with which the US has a sizable trade deficit could face higher tariffs. This is likely to disrupt global trade and also affect India. As the US remains the top market for Indian engineering goods, we remain cautious of the possible fallout of tariff hikes by the Trump government,” Chadha said.

“We, however, remain hopeful that the government will support the engineering sector in case there is any risk to the growth. Some of our pre-Budget proposals, if accepted by the government, could help the industry continue its stellar performance,” he added.

Exports of engineering goods increased by 8.35% year-on-year to $10.84 billion in December.