India’s trade deficit in November widened to an all-time high of $37.84 billion in November against $27.14 billion in October on account of mounting gold imports even as exports fell because of weak global demand.

A Reuters poll of economists had forecast a deficit of $23.9 billion in November.

The bigger trade gap will widen India’s current account deficit and add to the pressure on the rupee, which closed at 84.86 on Monday.

Gold imports in November surged to $14.8 billion more than doubling from $7.13 billion in October as the fall in global gold prices in November prompted many importers to ramp up inventories to meet rising demand.

“Gold imports have been a major culprit in the overshoot of trade deficit, having seen nearly 50 per cent increase year-to-date vs last year,” said Madhavi Arora, chief economist at Emkay Global Financial Services.

India’s commerce ministry said gold, with about 25 per cent average annual return, is one of the best-performing assets in 2024 (till November) and high imports indicate strong investor confidence in the precious metal as a safe asset.

The other reasons include asset diversification towards gold due to global uncertainties, increasing demand from banks and a cut in customs duties to 6 per cent from 15 per cent in July.

Exports fell to $32.11 billion from $39.2 billion in October.

“The merchandise exports have taken a hit mainly due to a fall in global crude prices,” Sunil Barthwal, India’s commerce secretary, told reporters, while releasing the trade figures.

Barthwal said despite the fall in merchandise exports, the outlook for non-petroleum exports and services remains positive for the next four months, with total exports seen at over $800 billion in the current fiscal year ending in March 2025.

Aditi Nayar, chief economist at Icra, said: “India’s merchandise trade deficit for November 2024 was the highest on record, fueled by unprecedented gold imports of $14.9 billion and increased overall imports.

“These elevated levels are unlikely to be sustained in the coming months, which should ease the trade deficit trajectory. However, the third quarter CAD is expected to widen sharply to 2.8 per cent of GDP, the highest in over two years.”

The government has intensified efforts to bolster exports by focusing on 20 key countries and six manufacturing sectors with strong global demand potential.

Meanwhile, the Directorate General of Trade Remedies (DGTR) has initiated a probe into a potential surge in steel imports, a move that has sparked a debate between domestic steel producers and downstream industries.

Commerce secretary Barthwal confirmed the investigation, stating the DGTR will consider the entire value chain, including the impact on downstream industries such as MSMEs.

With inputs from Reuters