‘Gold clouds the view’: Capitalmind CEO highlights how gold imports keep India’s current account in deficit despite gains

Deepak Shenoy, CEO of Capitalmind AMC, believes India’s current account may not be as troubled as it often appears — if one crucial factor is removed from the equation: gold. Drawing on data spanning 2011 to 2024, Shenoy argues that excluding gold imports reveals a much healthier picture of India’s external balances, even through periods as disruptive as the Covid-19 pandemic.

In a recent post on X (formerly Twitter), Shenoy shared his perspective: “If you take out gold, India’s current account is a better place even if you consider Covid! Gold is a financial asset and we can’t export gold, so I consider it as part of a financial account (an Indian investment). Therefore, the ‘net of gold’ makes a useful thing to see.”

His analysis is based on a chart titled “India’s Current Account Deficit Net of Gold,” which tracks the country’s current account deficit (CAD) in US dollars from the April-June quarter of 2011 through October-December 2024. The chart splits the data into two parts: blue bars show India’s current account excluding gold (net of gold), while red bars represent the deficit specifically due to gold imports.

Over this period, the data tells a compelling story. Across most quarters, India consistently runs a current account deficit, reflected by bars dropping below zero. Gold imports, shown by the red bars, contribute significantly to these deficits, often ranging from $5-15 billion per quarter, especially between 2011 and 2013.

Yet, there have been notable exceptions. Between mid-2014 and early 2017, and again briefly during 2019 to 2021, India’s current account net of gold swung into surplus. The chart captures peaks of:

• $19,771 million in April-June 2019
• $13,163 million in July-September 2019
• $14,460 million in October-December 2019

These surpluses likely stemmed from lower oil prices, stronger exports, and reduced non-gold imports during Covid-19 lockdowns.

Indeed, the pandemic period triggered significant shifts. India saw a surge in its current account surplus net of gold around 2019-2020, only for the balance to fall sharply back into deficit in 2021 and 2022 as the economy reopened and imports — including gold — surged once more.

More recently, the October-December 2024 quarter paints a mixed picture. India recorded a strong surplus of $22,981 million net of gold, signaling robust underlying economic strength. Yet, gold imports continue to weigh heavily on the broader balance, with gold-related deficits of $9,501 million in Q3 2024 and $19,467 million in Q4 2024. Despite healthy non-gold figures, the overall CAD remains under pressure due to Indians’ persistent appetite for gold.

The takeaway from Shenoy’s analysis is clear: while India’s overall current account often appears in deficit, removing gold imports from the equation reveals moments of significant surplus, reflecting the country’s competitive edge in services and exports. However, consistently high gold imports keep pulling the overall balance into negative territory.

The recent rebound in the CAD net of gold suggests strong fundamentals in India’s economy. Yet, as Shenoy’s data shows, managing gold demand — and further boosting exports and services income — remains essential for achieving a truly sustainable external balance.