India’s trade deficit hit a five-month high in March as merchandise exports fell for a second straight month, making it tougher for policymakers to lift curbs on gold imports that have helped to narrow the country’s current account gap.
Asia’s third-largest economy, which is struggling through its longest period of sub-5 percent economic growth since the 1980s, is seen vulnerable to any shift in capital flows.
Among the “Fragile Five” emerging economies, India suffered from massive capital outflows last year, in part on concerns over a bloated current account deficit, after the US Federal Reserve signalled a trimming down of its monetary stimulus.
Heavy outflows sent the rupee to a record low in August, prompting the authorities to build up foreign-currency reserves and clamp down on gold imports.
India’s trade gap in March widened to USD 10.51 billion, its highest since October 2013, data from the Ministry of Commerce and Industry showed on Friday. Overseas sales of goods fell 3.15 percent from a year earlier to USD 29.58 billion in March.
Merchandise exports for the 2013/14 fiscal year, however, grew 3.98 percent on year to USD 312.36 billion. Together with a 8.11 per cent decline in annual imports, that helped sharply narrow the country’s full-year trade shortfall to USD 138.59 billion from USD 190.34 billion a year ago.
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