Nov-24 trade deficit at record high of $37.84 Billion on gold surge

24 Dec 2024 , 10:08 AM

INDIA NOVEMBER 2024 TRADE – QUICK DATA POINTS

For the month of November 2024, merchandise trade deficit surged to a record high of $37.84 Billion amidst a sharp spike in gold imports. That is about 20.3% higher than the previous record trade deficit of $31.46 Billion in October 2023. Total trade (exports plus imports) for November was lower sequentially at $102.06 Billion. Let us look at the top drivers of the export story for November 2024. Key contributors to the export basket in Nov-24 were Engineering Goods $8.90 Billion (+13.8%), petroleum products at $3.72 Billion (-49.7%), Electronic Goods $3.47 Billion (+54.7%), Drugs & Pharmaceuticals $2.16 Billion (+1.1%), Gems & Jewellery $2.07 Billion (-26.3%), and Organic & Inorganic Chemicals $1.99 Billion (+4.1%). The key import contributors were crude & petroleum products $16.11 Billion (+7.9%), Gold $14.86 Billion (+331.4%), Electronic Goods $7.62 Billion (+17.4%), Machinery $4.49 Billion (+12.9%), and Transport Equipment $2.60 Billion (-5.2%).

Let us talk about key export destinations and import sources. Top export destinations for November 2024 were United States $5.71 Billion, United Arab Emirates $3.01 Billion, the Netherlands $1.43 Billion, and China $1.17 Billion. What where the big sources of imports of goods for India. For November 2024, top import origin nations were China $8.80 Billion, Switzerland $7.23 Billion, United Arab Emirates $6.13 Billion, Russia $5.05 Billion, United States of America $3.79 Billion, Saudi Arabia $3.58 Billion, and South Africa $2.50 Billion. Clearly, the surge in imports in November was led by gold.

HOW MERCHANDISE TRADE EVOLVED IN LAST 1 YEAR

Here is the monthly data of merchandise exports, imports, and trade deficit over last one year. Merchandise trade deficit spiked to $27.14 Billion in October 2024.

Monthly Data	Exports ($ Billion)	Imports ($ Billion)	Total Trade	Trade Surplus / Deficit
Nov-23	33.90	54.48	88.38	-20.58
Dec-23	38.45	58.25	96.70	-19.80
Jan-24	36.92	54.41	91.33	-17.49
Feb-24	41.40	60.11	101.51	-18.71
Mar-24	41.68	57.28	98.96	-15.60
Apr-24	34.99	54.09	89.08	-19.10
May-24	38.13	61.91	100.04	-23.78
Jun-24	35.20	56.18	91.38	-20.98
Jul-24	33.98	57.48	91.46	-23.50
Aug-24	34.71	64.36	99.07	-29.65
Sep-24	34.58	55.36	89.94	-20.78
Oct-24	39.20	66.34	105.54	-27.14
Nov-24	32.11	69.95	102.06	-37.84

Data Source: DGFT

How do the trade figures compare with the averages of the last 12 months. Over the previous 12 months, the average merchandise exports stood at $36.93 Billion, while average merchandise imports stood at $58.35 Billion. The November exports are sharply lower than the 1-year average while imports are sharply above average. The average trade deficit in last 12 months stood at stood at $21.43 Billion. Clearly, November 2024 trade deficit at $37.84 Billion in acutely higher.

TRADE GAP – WHAT BOOSTED EXPORTS AND WHAT REDUCED IMPORTS

Here is a look at the star export performers in November 2024, based on the yoy percentage increase in exports. Rice (+95.2%), Electronic Goods (+54.7%), Tobacco (+50.5%), Jute (+36.1%), Cashew (+23.6%), Meat/Dairy/Poultry (+21.4%), Marine Products (+17.8%), Coffee (+16.3%), Tea (+15.0%), Engineering Goods (+13.8%), and Plastics (+10.9%) were the key export growth drivers in the month of November 2024.

Major items in the trade basket that showed lower imports yoy in November 2024 included Leather Products (-41.6%), Coal/Coke/Briquettes (-29.3%), Iron & Steel (-28.6%), Dyeing & Colouring Material (-5.3%), and Transport Equipment (-5.2%). The top 5 import sources, in terms of change in absolute value of imports in November 2024 over November 2023 included United Arab Emirates (15.3%), Netherlands (23.0%), the US (5.3%), Singapore (20.7%), and the UK (15.2%).

TRADE DATA BREAK-UP FOR NOVEMBER 2024

Here is a break up of the merchandise and services export and import data and the individual deficit / surplus along with the overall picture.

Macro Variables (Trade Related)	Nov-24 ($ Billion)	Oct-24 ($ Billion)	Nov-23 ($ Billion)	Change YOY (%)
Merchandise Exports	32.11	39.20	33.75	-4.86%
Merchandise Imports	69.95	66.34	55.06	27.04%
Total Merchandise Trade	102.06	105.54	88.81	14.92%
Merchandise Trade Deficit	-37.84	-27.14	-21.31	77.57%
Services Exports	35.67	34.02	28.11	26.89%
Services Imports	17.68	17.00	13.68	29.24%
Total Services Trade	53.35	51.02	41.79	27.66%
Services Trade Surplus	17.99	17.02	14.43	24.67%
Combined Exports	67.78	73.22	61.86	9.57%
Combined Imports	87.63	83.34	68.74	27.48%
Overall Trade Volume	155.41	156.56	130.60	19.00%
Overall Trade Deficit	-19.85	-10.12	-6.88	188.52%

Data Source: DGFT and RBI

What is the broad picture that we gather here? The overall trade deficit (combining merchandise deficit and services surplus) still stand at $-19.85 Billion. That is 189% up yoy and 96% up sequentially. This has been largely triggered by a 77.6% spike in merchandise trade deficit to an all-time high of $-37.84 Billion. The services surplus has improved by 25.5% on a yoy basis to $18.0 Billion in November, but was insufficient to offset the sharp surge in merchandise deficit, due to a surprising predominance of gold imports.

CUMULATIVE TRADE DATA BREAK-UP FOR FY25 (APR-NOV)

Having seen the monthly picture of November 2024, here is a cumulative picture of the first 8 months of FY25.

Macro Variables (Year-to-Date)	FY25 (Apr-Nov)	FY25 (Apr-Oct)	FY24 (Apr-Nov)	Change YOY (%)
Merchandise Exports	284.31	213.22	278.26	2.17%
Merchandise Imports	486.73	350.66	449.24	8.35%
Total Merchandise Trade	771.04	563.88	727.50	5.98%
Merchandise Trade Deficit	-202.42	-137.44	-170.98	18.39%
Services Exports	251.94	180.00	220.08	14.48%
Services Imports	132.47	97.39	116.01	14.19%
Total Services Trade	384.41	277.39	336.09	14.38%
Services Trade Surplus	119.47	82.61	104.07	14.80%
Combined Exports	536.25	393.22	498.34	7.61%
Combined Imports	619.20	448.05	565.25	9.54%
Overall Trade Volume	1,155.45	841.27	1,063.59	8.64%
Overall Trade Deficit	-82.95	-54.83	-66.91	23.97%

Data Source: DGFT and RBI (Trade data in Billion $)

Here is what we gathered from the FY25 story? The overall trade deficit (combining merchandise deficit and services surplus) still stand at $-82.95 Billion. That is 24.0% up yoy and 51.3% up sequentially. This has been largely triggered by an 18.4% spike in merchandise trade deficit in FY25 over FY24. The services surplus has improved by 14.8% on a yoy basis to $119.5 Billion in November, but was insufficient to offset the sharp surge in merchandise deficit. Oil and gold have led to the ballooning of the deficit in FY25.

CURRENT ACCOUNT DEFICIT OUTLOOK FOR FY25

For FY25, we have actual data for Q1FY25 and the Q2 data will be out by end of December. In Q1FY25, the current account deficit (CAD) was 1.1% of GDP. That is higher than the previous year when it was just 0.6% of GDP. Q2FY25 current account deficit is already being pegged at 1.6% of GDP. However, looking at the latest numbers, it looks very likely that Q3FY25 CAD could be above 2% of GDP. Rampant gold imports are just not helping!