India's gold imports plunged 57.7 per cent year-on-year to $2.3 billion in August, even as overall merchandise imports rose 14.1 per cent to $70.67 billion, according to government data released on Tuesday.
Merchandise exports surged 26.1 per cent year-on-year to $43.81 billion in August, helping narrow India's trade deficit to $26.9 billion from $31.98 billion in July.
The improvement in the trade deficit could provide some relief to the rupee, which has remained under pressure this year.
Commerce Secretary Rajesh Agrawal said strong demand from the US, the European Union and emerging markets supported the sharp rise in exports. The growth was broad-based, with engineering goods, petroleum products, chemicals and textiles among the key sectors contributing to the increase.
The sharp decline in gold imports came amid elevated global gold prices and repeated appeals by Prime Minister Narendra Modi to curb gold purchases to help contain the country's import bill.
Gold imports stood at $2.3 billion in August, compared with $4.16 billion in July, marking a steep month-on-month decline as well as a 57.7 per cent fall from the year-ago period.
Meanwhile, the rise in merchandise imports was supported by domestic economic activity and demand for inputs used in manufacturing. Higher energy prices also contributed to the overall import bill.
Prime Minister Narendra Modi described India's trade performance as a "herculean feat" despite oil shocks, supply-chain disruptions and global uncertainty.
Modi has also appealed to people to curb foreign travel, gold purchases and lavish weddings to conserve foreign exchange, which remains important for an economy that depends heavily on imports for several critical inputs.
As the Indian economy expands rapidly, demand for energy and technology-related inputs is also increasing. The country requires foreign exchange to pay for precision machinery, materials, CPUs, GPUs and advanced software needed to support economic growth.
The narrowing trade deficit, coupled with the strong export performance, offers some support to India's external sector at a time when global economic uncertainty and currency pressures remain key concerns.
