India’s gold imports in November skyrocketed.
The data shows that gold imports hit a record high of $14.8 billion last month.
This was more than twice the gold imports of $7.13 billion in October – and four times more than gold imports in November 2023.
But was there an error in calculating the gold imports? And why does it matter?
Let’s take a closer look
What happened?
As per The Times of India, officials of the commerce department and Central Board of Indirect Taxes are reviewing the data released by the Directorate General of Commercial Intelligence and Statistics (DGCIS).
The DGCIS falls under the ambit of the commerce department.
“On noticing unusual surge, DGCIS has taken up detailed examination of the gold import data and reconciliation would be done with the data received by CBIC,” a DGCIS source told the newspaper.
The CBIC is also examining the data.
Those in the know told the newspaper that a calculation error might have pushed up the overall figure.
A source told the newspaper officials, after a change in methodology in July, seem to have counted gold shipments in warehouses twice.
Around 30 to 50 tonnes of gold – around 30 per cent of India’s imports in November – could have been mistakenly added on.
A senior government official said that the indirect taxes wing of the revenue department shares the overall data from ports.
The DGCIS appears to have made a mistake in counting gold moved from warehouses in special economic zones to the domestic tariff area.
This may have resulted in some double counting.
Officials said the extent of double counting remains unclear at the moment.
According to Moneycontrol, gold isn’t deemed imported until it leaves the warehouse.
Officials are saying that two customs clearing systems being integrated is to blame.
They said till June, the commerce department’s SEZ Online was keeping the bills for ‘warehousing’ and ‘ex-bond goods.’
Meanwhile, Indian Customs Electronic Commerce/Electronic Data Interchange, or ICEGATE was keeping the bills for ‘house consumption’ — also known as imports.
ICEGATE in July integrated both custodian and consumption data under a common system in order to release data faster – which is where the problem may have crept in.
Why does it matter?
As per News18, because the gold imports pushed the trade deficit – calculated by measuring imports vs exports – to a record high.
The merchandise trade deficit was at $37.84 billion in November, according to data released by the commerce ministry.
This far surpassed the economists’ forecast of $23.9 billion.
The trade gap also added to India’s current account deficit and increased pressure on the rupee.
Experts had expressed bafflement after the gold import numbers were released.
“The rise in gold imports this November cannot be explained by festive demand alone, in our view, and represents a meaningful step up in gold purchases for reasons unclear (to us),” Nomura Hanalysts Sonal Varma and Aurodeep Nandi wrote in a note last month, as per Moneycontrol.
As per Indian Express, the Global Trade Research Initiative (GTRI) had noted the rise in gold imports with concern.
It cited several factors such as growing investment demand, tariff reductions, and loopholes in trade agreements and said that this altered the trade balance, left the rupee slumping and increased the current account deficit,
“The reduction of import tariffs from 15 per cent to 6 per cent in the last Budget, aimed at curbing gold imports from Dubai, has further incentivised imports. At the current 6 per cent tariff, domestic gold prices are only slightly higher than global rates, making gold an attractive long-term investment,” GTRI said.
As per The Times of India, an error in the gold imports will require the trade figures to be re-calculated.
This will lead to some improvement in the foreign exchange rate.
The newspaper said this would also calm frantic about the state of the economy as a result of the data.
This, after economists were left wondering if the surge in gold purchases were a cause for concern with some needing to guard against inflation or perhaps a growing demand in the hinterland after a healthy crop.
With inputs from agencies