India’s gold imports in the final quarter of this year are set for a quantum jump, fuelled by rising domestic demand for jewellery and concerns on rising inflation, leading to large-scale investments in bullion – historically considered an inflation-hedge asset, industry experts said.
The rising trend in gold imports will be good news for the UAE, which is the second largest exporter of the yellow metal to the South Asian country.
Gold imports by India saw a whopping 750 percent jump in September to $5.1 billion from a relatively meagre $601 million in September 2020.
In volume terms, India’s imports were estimated at 91 tonnes last month, compared to 12 tonnes in September last year – when the gold retail industry was reeling under the pandemic-induced demand crash.
“Gold imports by India are set to surpass the pre-pandemic levels as we expect a significant rise in the imports of gold in the remaining three months of this year,” Surendra Mehta, national secretary of Indian Bullion and Jewellers Association (IBJA), told Arabian Business.
“Rising domestic demand and also the current surge in India’s exports of jewellery would be pushing up increased requirements for imports in the coming months,” Mehta added.
India, the second largest consumer of gold after China, depends mostly on imports for meeting its domestic and re-export requirements.
Pent-up demand and the upcoming festival and wedding season purchases are expected to see a surge in the retail sales of gold jewellery in India this year.
Traders and retailers are said to be restocking in large volumes ahead of the upcoming festive and wedding season, after a major slump in demand due to the pandemic-induced market and mobility restrictions and rising gold prices internationally in most of 2020 and the early part of this year.
Prices of 22 carat gold have softened to $624 per 10 gms currently from a high of $695 a year ago.
Mehta (pictured above) said besides the rising demand for jewellery, the market is expecting a major jump in demand for bullion as investors are expected to divert their investments from equity and bond markets in view of expectations of a rise in gold prices globally on the back of firming up of inflation in most major countries.
Lowering of imports duty by India is another factor, which is seen pushing up gold imports to the country. India announced a cut in the import duty for the yellow metal in this year’s budget from 12.5 percent to an effective 10 percent – 7.5 percent customs duty plus 2.5 percent agriculture infrastructure and development cess.
In the pre-pandemic years, India’s gold imports were in the range of 800-900 tonnes annually.
However, gold demand fell sharply in 2020 to about 450 tonnes, the lowest since 1994, due to the pandemic-driven lockdown.
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