Surge in import of precious stones adds to trade deficit

Import of pearls, precious and semi-precious stones rose by 40% to $33.3 billion in FY18 and accounted for nearly 44% of the total incremental trade deficit, according to the data from the Ministry of Commerce and Industry. The surge in the import of pearls and precious stones amidst moderating gem and jewellery exports has confounded economists.

According to observers, there can be two major factors responsible for this trend. First, the implied rising demand for pearls and precious stones even as the gold, a traditional favourite physical asset, loses its glitter.

The share of pearls and precious stones in the total import of gems and jewellery rose to 48% in FY18 compared with 36% two years ago. In March 2018, the country imported pearls, precious and semi-precious stones worth $ 3.03 billion, while the import of gold and silver was worth $ 2.7 billion together.

Another factor may be the flight of capital. Neelkanth Mishra, India strategist at Credit Suisse, said in a note: “While gold import volumes have moderated, imports of precious stones and pearls have not. As the latter are hard to value objectively, they hint at capital flight.”

This may put pressure on the rupee amid widening trade deficit. The merchandise trade deficit expanded to $157 billion in FY18, the widest since FY13 when it touched $190 billion.