* June trade deficit at $11.76 bln, highest since July 2013
* Imports grow for first time in 13 months
* Exports rise for third straight month
* Current account deficit seen widening on higher import
(Adds more details, analyst quotes)
By Rajesh Kumar Singh
NEW DELHI, July 16 A surge in gold imports
widened India's trade deficit to an 11-month high in June,
adding to the uncertainty from global oil prices that could pile
more pressure on its current account balance.
The trade deficit swelled to $11.76 billion last
month, its highest level since July 2013, after a central bank
decision to ease tough gold import rules led to a 65 percent
annual rise in overseas purchases of the yellow metal.
A voracious appetite for gold among Indian consumers has
made the bullion the country's second-biggest import item after
oil and was one of the principal factors in putting it on the
brink of a full-scale balance of payments crisis last year.
In a desperate bid to trim a gaping current account deficit,
India last year increased import duties on gold and imposed a
rule that required a fifth of all bullion imports be
While those measures had dramatically reduced gold imports
and improved the current account balance, they also pushed up
premiums in the domestic market, sparking a rise in smuggling.
But a strong rebound in gold imports could mean the curbs
stay in place for some time as the country's overall import bill
is expected to rise on the back of an improvement in investment
and consumption activity, adding to the trade shortfall.
"The industry has been demanding for removal of curbs on
gold imports but a high trade deficit in the backdrop of
geo-political tension and a recovering investment environment
could make the government a little more wary," said Radhika Rao,
an economist at DBS Bank in Singapore.
Finance Minister Arun Jaitley surprised bullion markets by
keeping the import duty on gold and silver unchanged at 10
percent in his maiden budget last week.
IMPORTS TO WORSEN DEFICIT
A jump in overseas purchases of gold along with a revival in
demand for iron and steel helped imports post an annual growth
of 8.33 percent in June, their first rise in 13 months.
Analysts reckon a recovery in imports will likely worsen the
current account deficit this fiscal year. Rao, for example,
expects the deficit to hit 2.6 percent of gross domestic
product, sharply higher than 1.7 percent last year.
Merchandise exports, meanwhile, grew for a third straight
month in June, helped by a pick-up in external demand and a weak
currency, bolstering the outlook for an economy that is battling
the longest sub-par growth in more than a quarter of a century.
Exports in June rose 10.22 percent from a year
earlier to $26.48 billion, a slower pace than May but
underlining a turnaround since March on improving global growth.
The data comes on the heels of a sharp drop in inflation and
a strong rebound in industrial production, offering some cheer
to Prime Minister Narendra Modi who swept to power in May on a
promise to revive Asia's third-largest economy.
Economic growth has been stuck below 5 percent for the past
two years, weighed down by weak investments, tepid domestic and
external demand, and high inflation and interest rates.
However, poor monsoon rains this summer could hit farm
exports and slow down overall export growth. The waning of a
favourable statistical base and a relatively stable currency are
also expected to weigh on the sector.
"Export growth is expected to be moderate in the coming
months," said Aditi Nayar, senior economist at rating agency
Concerns about global crude oil prices from unrest in the
Middle East, also remain a risk. A spike in crude prices will
push up India's import bill and swell the trade shortfall, since
the country imports nearly 80 percent of its oil.
Oil imports picked up in June, rising 10.9 percent on year
to $13.34 billion from an annual increase of 2.5 percent a month
(Editing by Jacqueline Wong)