India’s Current Account Deficit Looks Healthier Without Gold, Shows Long-Term Data

Excluding gold imports, India’s external balance appears far more stable—even during disruptive events like the Covid-19 pandemic.

India’s current account may not be as vulnerable as often portrayed—if one key factor is removed: gold. A recent analysis using data from 2011 to 2024 suggests that stripping out gold imports from the current account calculation reveals a much stronger and more stable picture of the country’s external sector.

A chart titled “India’s Current Account Deficit Net of Gold” tracks the quarterly deficit in US dollars, highlighting two key elements: the current account balance excluding gold imports (blue bars) and the portion of the deficit attributed specifically to gold (red bars).

The data tells a compelling story. While India consistently posts a current account deficit, gold imports alone contribute significantly—often ranging from $5 billion to $15 billion per quarter, especially during the years 2011 to 2013. In contrast, the non-gold portion of the account has periodically shown surpluses, offering a more nuanced picture.

Notably, between mid-2014 and early 2017, and again during 2019–2021, the current account net of gold moved into surplus. These surpluses, peaking at:

$19.77 billion in April–June 2019

$13.16 billion in July–September 2019

$14.46 billion in October–December 2019

were likely driven by reduced imports, lower oil prices, and stronger export performance during the global Covid-19 disruptions.

The trend reversed as the economy reopened in 2021 and 2022, with a sharp increase in gold imports dragging the overall current account back into deficit.

In the latest data from the October–December 2024 quarter, India posted a robust surplus of $22.98 billion net of gold. However, this was offset by gold imports totaling $19.47 billion, underlining how demand for the yellow metal continues to weigh on the broader current account.

The key takeaway from the analysis is that India’s core economic fundamentals—particularly its services exports and resilient trade base—are stronger than what raw current account numbers might suggest. However, persistently high gold imports obscure this strength, contributing to a distorted picture of external vulnerability.

Going forward, strategies to moderate gold demand and boost high-value exports may be crucial to achieving a truly sustainable and balanced current account.