Gold Imports by India Seen Rising as RBI Relaxes Curbs

Gold imports by India, the world’s second-biggest user, will probably rise after the Reserve Bank of India allowed more companies to buy the metal from overseas.

Inbound shipments may expand by 10 metric tons to 15 tons a month, increasing domestic supplies, Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, said by phone, without giving monthly totals.

The victory by Narendra Modi in national elections, the stronger rupee and narrowing of the current account deficit spurred speculation that controls may be eased. The government still levies a 10 percent import duty and requires importers to supply 20 percent of bullion to jewelers for export. Higher deliveries may lower costs at Titan Co. (TTAN) and Gitanjali Gems Ltd. (GITG) before the festival months from August to October.

“Supply will increase, bringing down the prices and premiums in the local markets and we will see demand improving,” Bamalwa said. The fees that jewelers pay importing banks and dealers may drop to $40-$50 an ounce over the London cash price from $90 in the next 15 days, he said from Kolkata.

Importers sell the remaining 80 percent to the domestic market and need to wait until the 20 percent share is exported as jewelry before shipping in the next consignment.

The central bank allowed star and premier trading companies approved by the Directorate General of Foreign Trade to import gold under the 20:80 rule, it said yesterday. The RBI also eased some financing rules allowing banks to give gold metal loans to jewelers. There are five to seven trading companies that may start importing gold within 10 days, Bamalwa said.

Gitanjali Gems

Gold for immediate delivery climbed 0.2 percent to $1,295.12 an ounce at 3:44 p.m. in Singapore. Futures on the Multi Commodity Exchange of India Ltd. fell 0.3 percent to 27,285 rupees per 10 grams after dropping 2.9 percent yesterday to the lowest close for the most-active contract since July.

Gitanjali Gems jumped as much as 19 percent to 109 rupees in Mumbai as Titan climbed 14 percent to 353.10 rupees and Tribhovandas Bhimji Zaveri Ltd. (TBZL) surged 20 percent.

“The jewelry companies will benefit as their working capital will be better, interest costs will be reduced, and their liquidity levels will improve,” Harish Galipelli, head of commodities and currencies at JRG Wealth Management, said by phone from Hyderabad. “Slowly people will return to gold as a form of investment as we see further easing in curbs.”

Demand Climbing

Gold consumption will probably increase in the second half as the new government relaxes import curbs, the World Gold Council said May 20. Demand may climb as high as 1,000 tons this year, said Somasundaram P.R., the managing director for India. That compares with 974.8 tons in 2013, council data showed.

The Bharatiya Janata Party, led byModi, secured a majority of 282 seats in the elections, the biggest victory for a single party since 1984, enabling it to pursue an agenda without being constrained by coalition politics, results showed last week. Modi will be sworn in as Prime Minister on May 26.

Imports fell after the government increased the import tax three times last year and introduced rules to cut a record current-account deficit and reverse a slump in the rupee.

Shipments dropped to 129 tons in the first quarter, WGC data show. Demand fell 26 percent to 190.3 tons with consumption of bars and coins tumbling 54 percent to 44.7 tons and sales of jewelry sliding 9 percent to 145.6 tons.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net

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