InvestorQ : What can the government really do to reduce the trade deficit to more manageable levels?
Mitali Bhutta made post

What can the government really do to reduce the trade deficit to more manageable levels?

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2 months ago
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There are broadly, 2 factors that are causing the trade deficit to rise viz. crude oil and gold. Let us look at crude oil first. Crude surged from $30/bbl to $81/bbl in more than a year. Even as OPEC struggles to bring in adequate supplies as promised, the US supply is impacted by the hurricane. This has resulted in a sharp drawdown in US crude inventories at Cushing, Oklahoma resulting in fears that crude could cross the $100/bbl mark.

But the bigger worry is the 750% spike in gold imports at above $5.11 billion. That is a lot of precious forex spent on unproductive gold imports. This is largely on the back of stocking ahead of the festive season in India. We could see curbs on gold imports that are either quantity-based or levy-based or both. That is the best way to trim the trade deficit which threatens to spiral out of control now.

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