India’s Trade Deficit Narrows to $21.94 Billion in December
In December 2024, India’s merchandise trade deficit decreased to $21.94 billion, a significant reduction from the record $31.86 billion observed in November. This improvement is largely attributed to a substantial decline in gold imports, which halved to $4.7 billion during the month.
Export Performance
Merchandise exports experienced a slight contraction of 1% year-on-year, totaling $38.01 billion in December. Despite ongoing geopolitical tensions affecting global trade, certain sectors demonstrated resilience. Notably, electronics exports surged by 35.11% to reach a 24-month high of $3.58 billion, indicating robust demand and competitive strength in this segment.
Import Dynamics
Imports for December stood at $59.95 billion, marking a 4.9% increase compared to the same period in the previous year. However, this figure represents a 6% decline from November’s revised imports of $63.86 billion. The reduction in gold imports played a pivotal role in narrowing the trade deficit. Additionally, imports of electronics, petroleum products, machinery, organic and inorganic chemicals, and vegetable oils registered year-on-year increases, reflecting sustained domestic demand across these categories.
Data Revisions and Implications
The Commerce Department has undertaken revisions of import data for the April-November 2024 period, adjusting the total from $486.8 billion to $469.3 billion—a downward correction of $17.5 billion. This adjustment primarily addresses overestimations in gold, silver, and electronics imports, with gold import figures reduced by $11.7 billion due to previous calculation errors involving double-counting of warehouse-stored shipments.
These data revisions are expected to influence key macroeconomic indicators, including the current account deficit (CAD) and gross domestic product (GDP). Analysts anticipate that the corrected figures, combined with the December trade performance, will contribute to a more favorable CAD for the third quarter of the fiscal year 2024-25.
Outlook
The sequential decline in the trade deficit, coupled with data corrections, suggests an improving balance of trade for India. Sustained growth in sectors like electronics exports and moderated import levels, particularly in gold, are likely to support this trend. Ongoing efforts to enhance data accuracy and inter-departmental coordination are expected to further refine trade statistics, aiding in more informed economic policymaking.
