India’s record gold imports are reportedly the result of a mistake in calculations.

India’s trade deficit hit a record high last month, reaching $37.8 billion, mainly because of a huge increase in gold imports, which soared to $14.8 billion from $3.44 billion a year earlier. However, this surge might be due to a mistake in counting, as some officials reportedly double-counted gold stored in warehouses after changing their calculation method in July.

People who know about the situation say that the data might have been overestimated by around 50 tons in November, which is nearly 30% of the total gold imports for that month. If this error is confirmed, the trade numbers could be adjusted, and traders might see some changes in the foreign-exchange rate. This would also help calm worries about the economy that arose from the unexpected gold buying, as experts debated whether the increase was a sign of economic trouble or a sign of prosperity due to good crop yields.

Analysts from Nomura Holdings, Sonal Varma and Aurodeep Nandi, noted that the rise in gold imports this November couldn’t just be explained by festive demand and suggested that there were other reasons behind the significant increase.

Since the government lowered gold import duties from 15% to 6% in July, imports have been rising steadily, but this recent jump surprised many analysts. It seems that officials may have mistakenly combined the gold imports reported by banks with those stored by custodians in free trade zone warehouses.

Gold is usually not seen as an import until it leaves the warehouse. Recently, a new customs clearing system is being looked at as a possible reason for some confusion.

Before the end of June, the SEZ Online system, which is part of the Department of Commerce, kept track of bills of entry for ‘warehousing’ and ‘ex-bond goods,’ which aren’t counted as imports. On the other hand, the bill of entry for ‘house consumption,’ which is considered a real import, was managed by ICEGATE, the Indian Customs Electronic Commerce/Electronic Data Interchange. Since July, ICEGATE has combined both types of data into one system to make sharing information faster.

 

Emails sent to ICEGATE’s Principal Director General Yogendra Garg and a spokesperson for the Trade Ministry didn’t get a reply right away.

The issue of double counting might not have been noticed before, but it became clear in November when local gold prices dropped by at least 10% compared to international prices. This led to more purchases, which made the import numbers look higher than they actually were.

Overall, India might still be importing between 800 and 1,000 tons of gold each year, according to some sources, but a final count hasn’t been confirmed yet.