Authorities double-counted gold shipments to warehouses after a change in methodology in July, the people asked not to be identified ahead of an expected formal clarification. Efforts are underway to reconcile the figure, which is estimated at more than 50 tonnes in November, or nearly 30 percent of the month’s total precious metal imports, some of the people said.
If the error is indeed identified, trade figures are likely to be revised and traders can expect some improvement in the foreign exchange rate. It will also calm wild speculation about the state of the economy triggered by the data, as economists speculated that the rise in gold purchases could be a hedge against recession and inflation, or a sign of prosperity at home due to healthy crops. .
“The increase in gold imports this November cannot be explained solely by festive demand in our view and represents a meaningful move in gold buying for (us) unclear reasons,” Nomura Holdings Inc analysts Sonal Verma and Arodeep Nandy wrote. In a note after publication of trade no.
India’s trade deficit widened to an unprecedented $37.8 billion in November, driven by a four-fold increase in gold imports to a record $14.8 billion, from just $3.44 billion a year ago. After the government reduced the customs duty on the precious metal from 15 per cent to 6 per cent in the July budget, gold imports have continued to rise and the rapid pace has shocked analysts.
According to people familiar with India’s import system, officials may have added imports held by custodians in free trade zone warehouses with the length reported by domestic banks buying gold from custodians.
Generally, gold is not considered imported unless it is checked by the warehouse. However, the recent integration of customs clearing systems has been identified as a potential culprit.
Till the end of June, bills of entry for ‘warehouse’ and ‘ex-bond goods’ – both not considered as imports – were maintained by the Department of Commerce, SEZ online, while bills of entry for ‘home consumption’ -. Those considered genuine imports — were handled by the Indian Customs Electronic Commerce/Electronic Data Interchange, or ICEGATE. Since July, ICEGATE has integrated both patronage and consumption data into a common system for faster data distribution.
Emails to ICEGATE Principal Director General Yogendra Garg and a Commerce Ministry spokesperson were not immediately responded to.
The double counting may have gone unnoticed before, but only became apparent in November as domestic prices went at a discount of at least 10% from international prices, triggering increased purchases that disproportionately inflated the import figures. Overall gold imports may still be within the 800-1,000 tonnes that India sends annually, some say, although the final reconciliation has not been done.