However, gold demand during the auspicious Diwali festival is expected to be better, it said, adding that the long-term demand for gold remains "intact" in India despite government restrictions.
"Rural demand is not looking absolutely great now because rural household savings are coming down even though it is being expected that monsoon will be back to normal," WGC India Managing Director Somasundaram P R told reporters on the sidelines of an Assocham event.
About 7-8 per cent of rural household savings goes into gold buying in India, he said.
Much of Indian gold demand comes from rural households, especially farmers. Good crop production raises income levels and translates into greater bullion demand.
According to the WGC, India's overall gold demand in the 2014 calendar year is estimated to decline to 850-950 tonnes from 974 tonnes in the last year.
Stating that government curbs have encouraged smuggling of gold into the country, Somasundaram said that out of the total demand of 850-950 tonnes projected for 2014 calendar year, about 200 tonnes would be served through grey market.
However with easing of import norms since May, gold shipments have rise, he said adding that the government should review these norms and reverse them soon.
The country would continue to depend on imports as recycled gold is only 10 per cent, he added.
Since the gold demand would remain strong for India in the long term, the WGC India chief emphasised the need to find ways to mobilise and monetise 22,000 tonnes of gold stock worth USD 1 trillion held in private hands via formal financial sector, he added.
Gold is the second largest import item for India after petroleum. To bring down current account deficit, government has imposed several curbs on gold imports.
These curbs include raising the import duty on the metal to 10 per cent and also making it mandatory for traders to export 20 percent of the imported gold.
Emphasising on the quality of gold jewellery, Bureau of Indian Standards (BIS) Director General Sunil Soni said there has been an healthy growth of 25 per cent in hallmarked jewellery in the past one year.
"However, efforts are being made to make jewellery hallmarking system in India more reliable to improve the competitiveness of Indian industry and protect consumers in a much better way," he said.
BIS is working to issue a unique identification number (UIN) for each hallmarked jewellery product so that buyers can trace details of the item in case they feel cheated, he said, adding that this will check hallmarking of substandard jewellery and trace those jewellers and hallmarking centres.
"Some further improvement is certainly possible in the system today as it is not 100 per cent reliable and is not accepted internationally. If the jewellery hallmarked as per Indian standards is accepted internationally, then Indian jewellery could have much better credibility," he said.
However, there are "some misapprehensions and opposition to this idea. We are trying to get those issues sorted out," he added.
The hallmarking of gold, which is voluntary in nature at present, is a purity certification of the precious metal. The BIS, under the Consumer Affairs Ministry, is the administrative authority of hallmarking.
About 13,000 jewellers are registered with BIS, which has set up 300 hallmarking centres across the country. About 2.6 crore jewellery pieces were hallmarked at these centres last year.