After a 47% drop in 2013-14, India's gold imports jumped almost 20% in the last fiscal from a year before.
After a 47% drop in 2013-14, India’s gold imports jumped almost 20% in the last fiscal from a year before, helped by a spurt in jewellery demand following a drop in prices and the relaxation of curbs on supplies by the central bank.
Imports by India, the world’s second-largest gold buyer, touched $34.3 billion in 2014-15, compared with $28.7 billion a year before, showed the latest commerce ministry data. Gold imports in March doubled to $4.98 billion from a year before, as jewellers stocked up well to cater to demand during the Akshaya Tritiya and the marriage season.
Although the Reserve Bank of India (RBI) and the government have observed that the current account deficit level is comfortable, but the latest surge in gold imports may stoke fresh concerns. The CAD eased to 1.7% of gross domestic product (GDP) during the first nine months of the last fiscal from 2.3% a year earlier. In 2013-14, the imports were adversely affected by a series of measures by the govenrment and the central bank, including a 10% customs duty on the precious metal and tougher conditions for fresh imports under the so-called 80:20 rule.
A roughly 10% drop in prices from a year before, too, prompted people to buy jewellery last fiscal, although demand for bars and coins declined as investors feared a further slump in bullion rates. After allowing more players to import gold in May last year, the RBI had in November scrapped the 80:20 rule, under which at least 20% of the imported gold had to be exported before bringing in new lots. The central bank followed it up with more clarifications in February on the operational aspects of gold purchases from overseas and allowed banks to import gold on a consignment basis — under which they act as intermediaries and don’t pay for the precious metal stocks until they find buyers. These factors boosted gold imports.
Somasundaram PR, managing director (India) of the WGC, said, “It is the right time to look at all aspects of gold policy with a longer term perspective, going beyond just import policy and incremental changes. The focus of government must be on making gold a smoothly fungible asset in the hands of the millions of households.”
The WGC has projected gold demand to rise to anywhere between 900 and 1,000 tonne this calendar year from 843 tonne in 2014.