The World Gold Council (WCG) has revised its forecast for India's gold imports to 1000 tonnes from 865-965 tonnes projected earlier on the back of spurt in demand during the April-June quarter of 2013. Despite a series of hikes in import duty and other restrictions imposed by the government, the reported quarter witnessed record gold imports of 310 tonnes, highest in the last ten years.
According to the WCG report, the demand was mainly due to falling prices in gold. Gold prices came off by around 13%, or by Rs 3,835 per 10 gram, in the reported quarter, which increased domestic jewellery demand around 51% and investment demand by 116% in the same period. India and China together accounted for almost 60% of the world’s gold demand during the quarter. Strong demand of gold has become a worrying factor for Indian policymakers as the country is facing a high current account deficit (CAD), which widened to a record high of 4.8% in the previous fiscal year.
Further, the report said that the increase in gold import duty in June and the change in payment for gold imports only had a limited impact on end-user demand however, the situation could improve, going forward. The WCG expects that the demand for jewellery is likely to remain high in the near term on account of wedding season and a good monsoon, while, the demand for investments will come down as most jewellers have strictly suspended the sale of gold coins and bars.
Meanwhile, to curb the gold import, the government has taken several steps, including raising import duty. Recently, the government has hiked imports duty on gold for a third time in eight months to 10% from the earlier 8%. Further, the Reserve Bank of India (RBI) too had put restrictions on banks on gold imports, which has led to forex outflow.
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