Gold demand in the world's biggest consumer India risks falling for a second straight year in 2015, as millions of Indian farmers hit by erratic weather and falling commodity prices trim gold purchases. Nearly two-thirds of India's gold demand comes from rural areas where jewellery is a traditional store of wealth for millions who have no access to the formal banking system. A downturn in Indian demand could hit global gold prices\u00a0 already struggling to rebound with a looming hike in U.S. interest rates and slower demand from No.2 consumer China. "Demand could drop to 700 tonnes. There is a liquidity crunch in rural areas," Prithviraj Kothari, vice president of India Bullion & Jewellers' Association, said. "Instead of buying new jewellery, many farmers are exchanging old ornaments for new." Farmer Savliram Barkade had planned to buy a few grams of gold for his family during the Akshaya Tritya festival later this month, considered by many Indians to be an auspicious day to buy jewellery or property. But unseasonal rains destroyed his onion crop and forced him instead to pledge his existing family gold to repay a loan. "The onion yield halved due to heavy rains. Even the harvested crop fetched lower prices due to poor quality," said the 65-year-old, a farmer in the Ahmednagar district in India's western state of Maharashtra, 250 km (160 miles) east of Mumbai. In 2014, India's gold demand was 842.7 tonnes, 14 percent down from the previous year, but still ahead of China. Earlier this year, the World Gold Council forecast a revival in Indian demand to as much as 900 to 1,000 tonnes in 2015, but optimism has faded as farm incomes from winter-sown crops have dwindled. Farmers were betting on winter-sown crops after earnings from summer-sown crops were hit by late and low rainfall. At the same time, prices of almost all farm commodities have dropped, a global trend made worse by India's increasingly uncompetitive farm exports. "Farmers have little disposable income this year. They are either avoiding buying or making smaller purchases," says Ashish Kothari, a jeweller based in Ahmednagar who caters to farmers. DULL DEMAND Government efforts to cut India's current account deficit have also hurt gold demand, with New Delhi seeking to curb import and consumption of gold. In one such measure, the government made it mandatory for buyers to provide their permanent account number (PAN) - which identifies taxpayers - when buying gold ornaments worth more than 100,000 rupees. "Sale of gold jewellery mainly from the rural sector is expected to drop because of the new government policy . Very few people in rural areas have PAN numbers," said Rahul Gupta, director, P.P Jewellers. For larger investors, gold's appeal has been further tarnished by falling inflation and lower returns in the last two years, compared to equity investments. "On the investment demand front, the environment is not conducive. Investors are more interested in the equity market than gold coins and bars," said Daman Prakash Rathod, director with Chennai-based wholesaler MNC Bullion. In the 2014\/15 financial year that ended on March 31, gold prices fell more than 8 percent - against a 25 percent rise in India's benchmark BSE index. Investments in mutual funds rose by a third in the last fiscal year to a record 12 trillion rupees. India's June-September monsoon rainfall determines farm output as more than half of farmland is rainfed. Good rains could lift farmers earning and improve demand. But farmers such as Barkade say it may be too late, given the debts they have now taken on. He is paying 12 percent interest to the bank on his gold-backed loan. "Even next year I can't buy new jewellery. I have to spend to bring back mortgaged gold," says Barkade.