DNA Money Edit: Higher trade deficit muddles Budget math

Booming trade deficit is the new trouble brewing in the backdrop. A sharper rise in imports of gold apart from the precious and semi-precious stones, and a drop in the growth of non-oil merchandise exports have helped the trade deficit bloat to a three-year high of $14.9 billion in December 2017, up from $13.83 billion in the previous month.

As per the government's data, merchandise exports for December rose 12.36% to $27.03 billion, while imports stood at $41.91 billion, up 21.12% from a year ago.

Analysts believe the restocking after the festive season may have led to the sudden growth in imports of gold and pearls, precious and semi-precious stones. Interestingly, around 80% of the $7.3 billion year-on-year rise in merchandise imports in December was on account of imports of gold, pearls, precious and semi-precious stones, and petroleum, crude and products.

The 35% expansion in the imports of petroleum, crude and products explains the growth in price and volume compared to December 2016.