With the Government's favourable changes of import duty and other restrictions, gold demand in the country during the January-March quarter has gone up 15 per cent to 191.7 tonnes as compared with the same period last year. It is expected that the growth trend will continue and India may see another 10-15 per cent growth in demand this year too, according to the World Gold Council (WGC).
“We are happy that the demand growth has shown a positive sentiment this quarter after having a muted demand in the same period last year. Earlier, the Government's policies and Reserve Bank of India's restrictions were weakening the gold imports and increasing the trade uncertainty as well. Now, it has shown a positive trend and we expect that it's likely to grow 10-15 per cent this year in line with demand growth,” Somasundaram PR, Managing Director of WGC (India) told The Pioneer.
The Government had imposed some rules on gold imports over the last two years to curb overseas purchases of the yellow metal, which were hurting its demand growth sentiments. Also the demand weakened last year because of the Government and the central bank's tough steps, such as raising taxes and curbing gold imports as they were driving the country's trade deficit wider and hurting the rupee.
“Due to partial removal of the import curbs with the exception of a duty reduction and the Budget announcements introducing new gold products, the environment for gold has been encouraging in the past few months, resulting in buying behaviour slowly returning to normalcy,” Somasundaram said.
The Government's widespread speculation for dropping of 2-4 percentage points in the duty has been a 'dream' for jewellery federations and traders for long time, rather it has stood at 10 per cent since August 2013 and was raised three times that year from the initial four per cent.
“Due to certain restrictions, sales of bars and coins have faced a lot of headwinds and a part of investment demand has moved to jewellery,” he added. The total demand stood at 167.1 tonnes during the corresponding quarter last year, according to the WGC report. In value terms, India's Q1 2015 gold demand grew 9 per cent to Rs46,730.6 crore, against Rs42,898.6 crore during Q1 of 2014.
But that was lower than Chinese demand, which despite a 7-per cent year-on-year drop, logged demand of 273 tonnes. The two countries alone accounted for 54 per cent of total global consumer demand in the first quarter.
The total jewellery demand for Q1 grew 22 per cent to150.8 tonnes compared with 123.5 tonnes last year. In terms of value, jewellery demand stood at Rs36,761.4 crore, a gain of 16 per cent from Rs31,706.4 crore in Q1 last year.
However, the total investment demand slipped 6 per cent during the January-March quarter to 40.9 tonnes compared with 43.6 tonnes in same period last year. In value terms, investment demand declined 11 per cent to Rs9,969.2 crore from Rs11,192.2 crore in the first quarter of 2014.
Similarly, the total gold recycled in India went down 40 per cent to 18 tonnes in Q1 of 2015, compared with 30 tonnes a year ago. Going forward, Somasundaram said, “The coming quarters are expected to be better than the first one, which in India is not considered a good period for gold demand.”