Government to reexamine ‘unusual’ gold import surge amid indications of double-counting
Thu Dec 19 2024
The Union government has begun a “detailed examination of gold import data” a day after official trade figures showed that India’s gold imports in November surged threefold to an all-time high of $14.8 billion compared to the previous year, a Commerce Ministry official said on Wednesday.
The examination comes as India’s record trade deficit of $38 billion in November pushed the rupee to an all-time low.
While there was no official response to queries on what could have gone wrong, a Bloomberg report said officials are likely to have double-counted gold shipments in warehouses following a change in methodology in July. Efforts are now underway to reconcile the data, which may have been overestimated by as much as 50 tonnes in November of the total imports of the precious metal.
The think tank Global Trade Research Initiative (GTRI) had said that gold imports in India have risen alarmingly, driven by multiple factors, including growing investment demand, tariff reductions, and loopholes in trade agreements.
This surge has raised significant economic concerns by distorting the trade balance, weakening the rupee, and widening the current account deficit, GTRI noted.
“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.
Notably, gold imports reached a staggering $14.9 billion in November 2024, accounting for 21.2 per cent of India’s total merchandise imports of $70 billion. For the first time, gold surpassed crude petroleum as India’s largest single import item. Imports surged by 331.4 per cent in November 2024 compared to November 2023. Excluding gold, India’s merchandise imports would have grown by just 6.7 per cent instead of 27.04 per cent.
This sharp increase pushed India’s monthly trade deficit to its highest level, placing additional pressure on the rupee, which has depreciated against the US dollar. A weaker rupee further raises import costs, worsening the current account deficit. “Most gold enters India as bars and rods with 99.99 per cent purity, but traders are also exploiting other tariff-free or concessional categories to bypass import duties,” GTRI added.
Source: https://indianexpress.com