5 min readNew DelhiJan 13, 2025 03:20 PM IST
First published on: Jan 11, 2025 at 04:12 PM IST
An unusual 331% year-on-year surge in gold imports during November 2024 — which had an impact on the domestic currency almost hitting its all-time low against the US dollar — and subsequent redflags raised by the gold industry has forced the government to undertake a broad-based process of comparing and matching trade data from multiple sources, including tax collection data, to verify accuracy.
This initial reconciliation effort involving imports between April and November resulted in one of the steepest revisions of gold import figures in the recent past. For November alone, the gold import figures were revised down by $5 billion, and cumulatively between April and November, the import figures were revised down by $12 billion to $37 billion.
This revision was officially attributed to a problem in a data migration process that commenced in July last year. It was discovered subsequently that an error occurred due to the transition of the data transmission mechanism from the Special Economic Zone (SEZ) to the Indian Customs Electronic Gateway (ICEGATE), leading to “double counting” in the case of gold imports.
The revision comes just weeks ahead of the Union Budget presentation, and assumes significance, as gold imports had been rising to record levels ever since the duty on gold was slashed from 15% to 6% in the last Budget. This had led to calls for tightening the rates in the upcoming Budget to help limit the widening trade deficit, which has contributed to the weakening rupee.
Industry fear of increase in gold duty amid high imports
The likely increase in gold duty rates in the upcoming Budget, based on inaccurate data, could have hurt the labour-intensive gems and jewellery industries, for which gold is a key input material. During what would normally be a strong period for exports driven by festive demand, gems and jewellery exports slipped by 13% in November.
This decline comes as the jewellery industry is already facing challenges on both the demand and supply sides. Weak demand in Europe and China has curtailed exports to these lucrative markets, while sanctions on Russia due to the Ukraine war have created difficulties in accessing rough diamonds.
The correction in the data, therefore, reduces the chances of an increase in the gold import duty in the upcoming Budget, as the revised numbers suggest that gold imports from January to November 2024 are below the annual average of 800 tonnes.
‘200 tonnes of gold smuggled on average’
To be sure, high duties on gold have always been an ineffective revenue strategy, as they lead to an increase in gold smuggling in the country. Even at a 6% duty on gold, Delhi customs last month intercepted a passenger attempting to smuggle gold in their rectum.
Up to one-quarter of the total volume of gold entering India is believed to come via illicit trade, according to a report from the Indian Institute of Management Ahmedabad (IIMA) on gold smuggling, which suggests that up to 200 tonnes of gold is being smuggled into the country. India imports around 800–900 tonnes of gold every year, while the annual consumption is around 1,000 tonnes, according to the report,
‘Gold data double counting’
In its official explanation of the counting error, the Ministry of Commerce and Industry stated that data from the Commerce Ministry and the Finance Ministry had been reconciled. During the data migration process, it was discovered that an error occurred due to the transition of the data transmission mechanism from the Special Economic Zone (SEZ) to the Indian Customs Electronic Gateway (ICEGATE). The transition came into effect on 1 July.
The Ministry clarified that the figures for precious metals required revision, as it was found that the system had been counting both imports into the SEZ and subsequent clearances into the Domestic Tariff Area (DTA) as separate transactions after the migration, due to a “technical glitch.”
‘Migration still not complete’
The Ministry of Commerce stated that, due to the persistence of “certain technical glitches”, the migration is still not complete, and both SEZ Online and ICEGATE continue to capture and transmit mutually exclusive EXIM data to DGCIS.
The Ministry confirmed that the revision had been made for trade figures from April 2024 to November 2024, which are published in accordance with the regular publication cycle maintained under international standards for data dissemination. It further stated that a committee had been formed with stakeholders from DGCIS, DG Systems (CBIC), and SEZs to establish a robust mechanism for publishing consistent data.
High duties on gold lead to an increase in gold smuggling in the country. (Pixabay) 
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