India’s gold imports for November 2024 have been revised to $9.84 billion, significantly lower than the preliminary estimate of $14.86 billion announced earlier. This $5 billion reduction in the reported value of gold imports has narrowed the country’s trade deficit, strengthening its macroeconomic position and supporting the rupee.
The Commerce Ministry’s Directorate General of Commercial Intelligence and Statistics released the revised figures, showing a 34% decrease compared to the earlier report. A senior government official noted that this adjustment would positively impact India’s economic fundamentals.
Reason for Overestimation
The inflated gold import figure initially reported was due to a double-counting error. This occurred because of a change in methodology, where gold consignments stored in free trade zone warehouses by custodians were mistakenly added twice—once as imports reported by custodians and again as purchases by domestic banks.
This error led to an overestimation of India’s gold imports, puzzling market analysts who found it improbable that shipments had surged over four times compared to November 2023’s $3.4 billion.
Impact on Trade Deficit
The earlier overestimated gold imports caused India’s trade deficit to reach a record high of $37.8 billion, reflecting a weak external balance. This adversely affected the rupee’s value. However, the revised figures provide a more accurate picture, with a reduced trade deficit that strengthens the country’s economic stability.
Gold Demand in India
India, the world’s second-largest gold consumer after China, heavily relies on imports to meet its demand. Gold is especially sought after during festive and wedding seasons, where it is gifted in large quantities, particularly to brides and grooms.
The demand for gold surged after the government reduced import duties in the Union Budget of July 2024. While this boosted shipments, the sudden spike in November raised concerns, now clarified by the corrected data.
The revised figures underscore the importance of accurate reporting in assessing India’s economic health. With the trade deficit now narrower, India’s external balance is expected to improve, providing relief to policymakers and the financial markets.
