A surge in gold imports that pushed India’s trade deficit to a record last month and pushed the rupee to an all-time low was due to an arithmetic error, according to people with knowledge of the matter.
Officials double-counted gold shipments in warehouses after a change in methodology in July, the people said, asking not to be identified ahead of an expected formal clarification. Efforts are underway to reconcile the data, which could have been overestimated in November by as much as 50 tons or nearly 30 percent of the metal’s total imports that month, some people said.
If an error is indeed identified, trade figures will likely be revised and traders can expect some correction in the exchange rate. It would also ease the feverish speculation about the state of the economy caused by the data, as economists wondered whether the surge in gold purchases was a sign of distress and a need to hedge against inflation, or of a move which pointed to prosperity in the hinterland, caused by a healthy harvest. .
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“The increase in gold imports in November, in our view, cannot be explained by festive demand alone and represents a meaningful step up in gold buying for reasons that are unclear (to us),” analysts Sonal Varma and Aurodeep Nandi of Nomura Holdings had said. Inc. written. in a note after the trade numbers were published.
India’s trade deficit rose to an unprecedented $37.8 billion in November, driven by a fourfold increase in gold imports to a record $14.8 billion, from just $3.44 billion a year ago. Although gold imports have risen steadily since the government cut import duties on the precious metal to 6 percent from 15 percent in the July budget, the sharp spike had stunned analysts.
According to people familiar with India’s import system, officials likely added the imports held by custodians in free trade zone warehouses to the figures reported by domestic banks that buy the gold from the custodians.
Normally, the gold is not considered an import until it has been checked out of the warehouse. However, a recent integration of customs clearance systems has been identified as a potential culprit.
Until the end of June, the bills of lading for ‘warehousing’ and ‘ex-bond goods’ – both not considered imports – were kept by SEZ Online, a system of the Ministry of Commerce, while the bills of lading for ‘household consumption’ – which are considered actual imports considered, was handled by the Indian Customs Electronic Commerce/Electronic Data Interchange, or ICEGATE. Since July, ICEGATE has integrated both retention and consumption data into a common system for faster data dissemination.
Emails to ICEGATE director general Yogendra Garg and the Commerce Ministry spokesperson were not immediately answered.
The double counting may have gone unnoticed previously, but only became apparent in November, as domestic prices showed a discount of at least 10 percent compared to international prices, leading to higher purchases that disproportionately pushed up import figures.
Total gold imports could still be within the 800 to 1,000 tonnes that India ships annually, some people said, but added that final reconciliation has not yet been achieved.
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