India's gold demand is likely to pick up in the second half of the year as curbs on bullion imports are expected to be eased by the country's new government, the World Gold Council (WGC) and other industry officials said on Tuesday.
Gold imports by India, the world's No. 2 bullion consumer after China, could double from current levels if the restrictions are eased, according to an industry estimate. This would help global prices that slumped 28 percent last year - the first drop in 13 years - partly due to India's curbs.
Struggling with a ballooning trade deficit, India in 2013 imposed a record high duty of 10 percent on overseas purchases of gold, the second-biggest expense in its import bill, and introduced a rule tying import quantities to export levels.
"The change (in gold policy) is inevitable because Modi seems to be pro-gold," said Albert Cheng, WGC's head of the far east region, referring to Narendra Modi who romped to a landslide victory in the recently concluded general elections in India. "It's just a matter of when he is going to do it."
Modi, who leads the pro-business Bharatiya Janata Party, has said any action on gold should take into account the interests of the public and traders, not just economics and policy.
Indian gold imports plunged by a fifth last year though jewellery and investment demand rose 13 percent. The gap between supply and demand have sent premiums in the country to $100 an ounce above the global benchmark, causing a spurt in smuggling.
Gold demand in India fell by a fourth to 190.3 tonnes in the quarter to March due to the curbs, WGC said in its quarterly report, which also noted that demand in top buyer China fell from the previous year's record levels.
Sudheesh Nambiath, an analyst with metals consultancy GFMS, said there is likely to be an early review to the current policies on gold with the Bharatiya Janata Party (BJP) leading in the centre. GFMS is owned by Thomson Reuters.
"Our current expectation is that any policy review would allow monthly gold imports of an average of 50-60 tonnes a month and a reduction in import duty as well," said Nambiath, who was part of a four-member delegation to detail the current policies on gold to Modi in September.
This would address industry concerns while also keeping the trade deficit in check, he said.
Imports have been running at an average of