Big Blunder! India's Gold Imports Hit "Historical High," Surge Due to Calculation Error

On December 18th, Eastern Time, Bloomberg cited sources familiar with the matter stating that the data indicating India's gold imports had "reached a historic high" contained calculation errors. The reason was that the Indian authorities changed the statistical method in July, leading to double counting. This issue may have resulted in the gold import data for November being overestimated by as much as 50 tons, accounting for 30% of the total precious metal imports for that month. Relevant departments are currently verifying the data to accurately reflect the actual import situation.

If the data error is confirmed, India's trade data may be revised. This revision would not only affect adjustments to foreign exchange rates but could also quell current market speculation about the overheating of India's economic conditions. Some economists have expressed confusion over the surge in India's gold imports, trying to determine whether this spike indicates a safe-haven demand amid economic difficulties or reflects the rural economic prosperity brought about by Indian agriculture.

Data shows that India's trade deficit soared to a record $37.8 billion in November, with the surge in gold imports being a major reason. The value of gold imports skyrocketed from $3.44 billion in the same period last year to $14.8 billion, nearly a fourfold increase. Since the Indian government reduced the gold import duty from 15% to 6% in the budget in July, the volume of gold imports has continued to rise.

Statistical Method Adjustment Leads to Double Counting

Sources familiar with India's import system revealed that there has been a phenomenon of double counting in the statistics of gold imports, which may be related to the recent integration of India's customs clearance system.

Under normal circumstances, gold stored in free trade zone warehouses has not officially entered the Indian market; it is merely stored in the free trade zone (similar to a "bonded warehouse"). This gold is not considered "imported" because it has not flowed into the actual market in India. Only gold taken from free trade zone warehouses or directly imported into the market from abroad is considered "imported gold."

In the past, India's Ministry of Commerce was responsible for managing and recording data related to goods within the Special Economic Zones (SEZ), including gold and commodities stored in bonded warehouses. These goods are not counted as "official imports" until they enter the Indian market. Meanwhile, Indian customs manages goods that directly enter the Indian market for household or consumer use. These goods are formal imports, meaning they undergo customs review and flow into the domestic market.

Since July, India's customs ICEGATE system has been integrated with the Ministry of Commerce's SEZ Online system. This means that data previously managed by two different systems is now centralized in the ICEGATE system. This integration was intended to improve efficiency and reduce data transfer time, but it may also have caused issues.

If the ICEGATE system does not correctly distinguish between "gold in storage" and "gold that has entered the market," then double counting may occur. For example, gold in storage could be recorded once, and then again when it is taken out of the warehouse and enters the market, leading to an overestimation of import data.

This issue of data double counting had not received sufficient attention until November, when it became apparent that domestic gold prices in India were about 10% cheaper than international markets, leading to a surge in purchasing and abnormally inflating the statistics for import data Despite the issue of double counting, sources indicate that India's total annual gold imports may still range between 800 to 1,000 tons. The final data verification has not yet been completed, and relevant departments are working to correct the errors. Yogendra Garg, the Chief Director of ICEGATE, and a spokesperson for the Indian Ministry of Commerce have not yet responded to this incident