India’s record gold imports reportedly attributed to a calculation error
A surge in gold imports, which led to a record trade deficit in India last month and pushed the rupee to an all-time low, is reportedly the result of a calculation error, according to sources familiar with the matter.
Officials are said to have double-counted gold shipments stored in warehouses after a change in methodology in July. This error could have overstated imports by as much as 50 tons in November, or nearly 30% of the total gold imports that month, the sources added. Efforts are underway to reconcile the data, with a formal clarification expected soon.
If the error is confirmed, trade figures are likely to be revised, and traders might anticipate a correction in the foreign exchange rate. This could also alleviate concerns about the state of the economy, as some had speculated that the surge in gold imports signaled either economic distress or a sign of prosperity in rural areas due to good crop yields.
The sharp rise in gold imports in November went beyond just festive demand, with analysts from Nomura Holdings Inc., Sonal Varma and Aurodeep Nandi, noting in a report that it represented a significant and unexplained increase in purchases.
India’s trade deficit reached an unprecedented $37.8 billion in November, driven by a four-fold jump in gold imports to a record $14.8 billion, up from $3.44 billion a year earlier.
While gold imports have been rising steadily since the government reduced duties on the metal in July, the sharp spike took analysts by surprise. Sources familiar with the import process suggest that the double-counting occurred when officials included gold stored in free trade zone warehouses along with figures reported by domestic banks that had bought the gold. Normally, gold is not counted as an import until it is withdrawn from the warehouse, but a recent integration of customs systems may have caused the issue.
Until June, warehousing and “ex-bond” entries were recorded separately from actual imports, but since July, both custodian and consumption data have been merged into a single system for quicker data processing.
The double-counting likely went unnoticed until November, when domestic gold prices fell to a discount of at least 10% below international prices, spurring increased purchases that exaggerated the import figures.
Overall, gold imports are expected to fall within the typical annual range of 800-1,000 tons, although the final reconciliation of data has not yet been completed.
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