Gold purchases by India, the world’s largest user, may fall 5.3 percent this year as the government curbs imports to contain a record current-account deficit.
Inbound shipments are seen at 800 metric tons in the 12 months through March, compared with 845 tons a year earlier, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi today. Falling bullion imports may help the nation cap the current-account deficit at $70 billion this year, he said.
India raised the tax on imports for a third time this year in August to curtail gold demand and tackle the record deficit that weakened the rupee to an all-time low. Higher taxes and tighter rules on financing imports have reduced demand, prompting analysts including Goldman Sachs Group Inc. to predict a moderation in the nation’s broadest measure of trade.
“It is estimated that gold imports could be restricted” with the measures announced in August, Mayaram said. “The current account deficit will be contained at $70 billion.”
The deficit was $21.8 billion in April through June, compared with $18.1 billion in the previous quarter, the Reserve Bank of India said in a statement in Mumbai yesterday. The gap was a record $87.8 billion in the year ended March 31. Imports fell for three straight months through August. Exports climbed 13 percent in August from a year earlier and the trade deficit narrowed to $10.9 billion, from $20.1 billion in May.
“We expect an improvement in the current account due to a falling trade deficit,” Goldman Group analysts Tushar Poddar and Vishal Vaibhaw said in a note. The current-account shortfall will narrow to 3.5 percent of gross domestic product in the year ending March 2014, from 4.8 percent of GDP the previous fiscal year, they said.
Gold imports were 58.37 tons between July 1 and Sept. 25 compared with 335.31 tons in the three months ended June 30, the finance ministry said in a statement today. The declining trend will continue, it said.
Purchases may not be more than 150 tons in the six months through December, according to Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation. The central bank on July 22 made it mandatory for importers to set aside 20 percent for re-exports as jewelry, almost halting imports by by traders and banks.
Spot gold gained 0.2 percent to $1,331.04 an ounce at 3:47 p.m. in Mumbai, paring losses to 21 percent this year. Gold for delivery in October fell 0.4 percent to 30,315 ($487) rupees per 10 grams on the Multi Commodity Exchange of India Ltd.
Gold consumption in India, which ships in almost all the bullion it uses, accounted for 20 percent of global demand in 2012, according to data from the World Gold Council.