Govt revises November gold imports down by $5 billion, easing trade deficit pressure

By: Shantanu Bhattacharji

The government should clarify recent revisions in trade and gold import data, as lack of transparency could harm India’s economic credibility, erode investor confidence, and increase uncertainty in financial markets.

India’s November trade deficit has been revised down by $5 billion to $32.8 billion, correcting an initial record of $37.8 billion due to an overstatement in gold import figures. While the adjustment provides some relief, the deficit remains at an all-time high, signalling sustained pressure on external accounts.

The scale of the revision highlights challenges in real-time trade data accuracy, complicating economic forecasting and policy responses. Analysts caution that, despite the revision, the elevated deficit underscores structural vulnerabilities in India’s trade dynamics, requiring deeper reforms to address imbalances and strengthen the country’s external position.

Notably, several reports mentioned that India’s trade and gold import figures for 2024 are still subject to final revisions, with updated data expected to be released next week alongside December’s figures.

A $5-billion revision in gold import figures has raised eyebrows, attributed to a calculation error involving the alleged double counting of gold shipments in warehouses. This discrepancy came to light following a change in reporting methodology implemented in July, as authorities worked to reconcile data from the DGCIS (Directorate General of Commercial Intelligence and Statistics) and the Central Board of Indirect Taxes and Customs. Despite the significance of the revision, the commerce department has yet to issue an official statement explaining the details or rationale behind the adjustment.

India, the world’s second-largest consumer of gold, relies heavily on imports to meet its demand, which peaks during the festival and wedding season in the December quarter. Despite the downward revision of November’s trade deficit, the country spent a record $47 billion on gold imports in the first 11 months of 2024, surpassing the $42.6 billion for the entirety of 2023, as global gold prices hit record highs.

This surge emphasises the twin challenge of managing domestic demand for gold and its impact on India’s trade deficit, particularly in a year marked by price volatility and sustained external pressures.

In 2024, gold outperformed stocks for Indian investors, boosting demand for coins and bars, as reported by the World Gold Council. This sharp interest came despite import duty cut in July, which saw India slash duties from 15 per cent to 6 per cent, driving a sharp increase in imports. New Delhi imports gold from a diverse range of countries, including African nations, Peru, Switzerland, and the United Arab Emirates (UAE).

Experts say that the government must provide a clear rationale for the recent revisions in trade and gold import data. Without proper explanation, such unexplained adjustments could undermine the credibility of India’s economic reporting, eroding investor confidence and fuelling uncertainty in financial markets.

New Delhi’s imports saw a significant 27 per cent year-on-year increase in November, according to data released by the commerce ministry on December 16, 2023. This surge came despite a 4.9 per cent fall in exports for the same month. A revision in gold import figures, which corrected a $5 billion error, adjusted total imports to $64.95 billion from $69.95 billion. However, this still represented a notable rise from the $55.06 billion recorded in November of the previous year.

Exports, meanwhile, fell to $32.11 billion in November, down from $33.75 billion in the same month the previous year. On a more positive note, services exports showed strong performance, with the surplus reaching a record $18 billion in November, offering some relief amidst the mixed results in the merchandise trade.