Record Trade Deficit Triggered by Gold Import Spike; Goods Exports Down 12%

India’s goods trade deficit widened dramatically in October, hitting a record high of $42 billion, according to data released by the Ministry of Commerce and Industry. This unprecedented gap was driven by a 12% decline in exports and a simultaneous surge in imports, which rose to an all-time high of $76 billion. The fall in exports came amid steep US tariffs and a challenging global economic environment, while the rise in imports was primarily led by a steep increase in gold purchases, making the deficit balloon to historic levels.

Trade analysts attributed the unusual spike in gold imports to a sharp rise in gold prices ahead of the festive season, which often boosts demand for the precious metal. They noted that this sudden surge may have been driven by speculative buying, which is unlikely to be sustained in the coming months. As a result, experts expect some moderation in gold imports going forward.

Aditi Nayar, Chief Economist at ICRA, highlighted that India’s gold imports tripled year-on-year to reach $14.7 billion in October, even as crude oil imports declined. She pointed out that not only gold but also non-oil, non-gold imports recorded a healthy increase. These imports rose by 12.4%, driven by higher demand for fertilisers, electronic items, machinery, silver, and non-ferrous metals, indicating strong domestic consumption in certain sectors.

Official data further showed that while total imports grew by 16.63% to $76.06 billion, exports fell to $34.38 billion. The metal segment, especially precious metals, played a major role in the surge. Gold imports rose by 200%, while silver imports showed a staggering 528% increase, reaching $2.7 billion. These sharp increases came even though crude oil imports dropped to $14.8 billion, down from $18.9 billion in the same month last year. Despite reduced petroleum inflows, the rise in other categories outweighed the decline, widening the deficit sharply from $31.15 billion in September to $41.68 billion in October.

Commerce Secretary Rajesh Agrawal acknowledged the challenging international environment but noted that Indian exporters are still holding firm. He explained that the recent decline in exports is also partly due to the base effect, meaning last year’s unusually high export figures make the current numbers look weaker by comparison. Sector-wise performance was mixed: engineering goods exports contracted by 16.71% to $9.37 billion, ready-made garment exports fell by more than 8%, and gems and jewellery exports plunged over 26%. In contrast, electronic goods exports grew by 25%, offering a silver lining amid the broader downturn.

SC Ralhan, president of the Federation of Indian Export Organisations (FIEO), said the pressure on India’s exports reflects the broader global economic slowdown. This slowdown has been exacerbated by geopolitical tensions, weak demand across major international markets, and persistent volatility in commodity prices. He noted that despite these headwinds, Indian exporters have demonstrated resilience. However, rising logistics costs and fluctuating input prices continue to challenge the competitiveness of Indian goods in the global marketplace.

Overall, the data underscores a complex economic landscape marked by strong import demand, weakening exports, and volatile global conditions, all contributing to India’s highest-ever monthly trade deficit.