Gold Imports by India More Than Double Before Tax Increases
Inbound shipments climbed to 338 metric tons in the three months ended June 30 from 153 tons a year earlier, the London-based, producer-funded group said in a report today. Total demand rose 71 percent to 310 tons, with consumption of bars and coins increasing to 122 tons from 56.5 tons and sales of jewelry gaining 51 percent to 188 tons, the council said.
The surge in shipments prompted the government this week to increase a tax on imports for a third time this year to contain a record current-account deficit that’s weakened the rupee to an all-time low. Higher tariffs, and central-bank rules linking overseas purchases to re-exports, may cut imports in the second half to not more than 150 tons from 478 tons in 2012 and spur smuggling, the All India Gems & Jewellery Trade Federation said.
“The strength of second-quarter gold demand again demonstrated how Indians remain committed to gold,” P.R. Somasundaram, managing director for India at the council, said in a statement. “However, in the current quarter, demand in India has slowed down considerably due to the various policy changes undertaken by the government to restrict gold imports.”
Full-year demand is seen at 900 tons to 1,000 tons in 2013 as a reduction in recycled supply, festivals and a good monsoon spur consumption, he said.
“Consumer demand is extremely strong, driven by the price drop,” Somasundaram said. “The import-tax hike will only lead to lesser supply in the official channel.”
Gold plummeted 14 percent in two sessions through April 15 in the worst slide since 1983, boosting demand from India to China and Australia. In the second quarter, bullion slumped 23 percent as some investors lost faith in the metal as a store of value amid expectations that the U.S. economy was recovering.
Spot gold gained 0.5 percent to $1,342.80 an ounce at 5:41 a.m. in Mumbai. The metal rebounded 14 percent since reaching a 34-month low of $1,180.50 on June 28.
Gold is bought in India during festivals, for marriages as part of the bridal trousseau and gifted in the form of jewelry by relatives. The festival season in India runs from August to October, followed by the wedding season from November to December and from late March through early May.
Finance Minister Palaniappan Chidambaram plans to curtail imports to 850 tons in the year ending March 31, compared with 845 tons in 2012-2013. Overseas purchases surged 87 percent to 383 tons in the four months through July from a year earlier, according to the Ministry of Finance.
Consumption in India, which imports almost all the bullion it needs, accounted for about 20 percent of global demand in 2012, according to data from the gold council.
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