While India’s gold demand grew by 9.1% to 727 tonnes in 2017, it remained below the 10-year average of 800 tonnes. In 2016, the total demand was 666.1 tonnes, data from World Gold Council show. Net import of the metal grew 59% to 888 tonnes in 2017 as compared with 558 tonnes the year before. The demand for the metal last year was mainly driven by jewellery, which was up by 12% at 563 tonnes compared to 504.5 tonnes in 2016. However, investment demand (bar and coin) remained flat. Total gold recycled in India was 88.4 tonnes in 2017 compared to 79.5 tonnes in 2016. Gold exchange traded funds (ETFs) of mutual funds are fast losing sheen and in the past four years have seen a surge of money coming into equity funds and money moving out of gold ETFs. Globally, gold prices remained flat last year and the rupee hasn’t depreciated much in the last three years. As a result, gold prices in India haven’t gone up much lately.
Going ahead, gold demand will lag because of a higher goods and services tax on bullion purchases and various measures taken by the government to track gold purchases. In this year’s Union Budget, the finance minister has said that the government will formulate a comprehensive gold policy to develop the metal as an asset class and the existing Gold Monetisation Scheme will be revamped to enable people to open a hassle-free Gold Deposit Account.
In 2015, the government launched two gold-related schemes—gold monetisation schemes and sovereign bond scheme—to tap household gold stocks of over 20,000 tonnes and reduce imports of the precious metal. However, the response from investors is tepid for both the schemes.