Mumbai: Gold imports by India, the world's biggest consumer after China, will probably decline for a third year as the government keeps curbs on shipments to prevent the current-account deficit from widening and to support the rupee.
Foreign purchases may drop 15 per cent to 700 metric tonnes in 2014, according to the median of estimates from nine analysts and jewellers including Gitanjali Gems and Rajesh Exports. Imports fell 44 per cent to 350 tonnes in the first half, government and World Gold Council data show.
China and India demand
Weakening demand from China and India, which account for half of global consumption, may limit increases in bullion prices which advanced 9 per cent this year on increasing tensions in Ukraine and the Middle East. Usage in China dropped 19 per cent in the first half as investors bought fewer bars and coins. Indian Finance Minister Arun Jaitley retained import curbs in his annual budget last month.
"I don't see the measures going away immediately," said Devendra Pant, chief economist at India Ratings & Research, the local unit of Fitch Ratings. "If we allow gold imports to grow, that will have an impact on our current account," he said by phone from New Delhi.
Gold for immediate delivery traded at $1,309.35 an ounce in Singapore yesterday. Futures on the Multi Commodity Exchange of India, which have risen 1 per cent this year, dropped 0.1 per cent to Rs28,701 per 10gm.
India increased the gold import duty three times last year to 10 per cent as it sought to narrow the record current-account deficit and stem a decline in the currency. Importers also have to supply 20 per cent of their cargo to jewelers for re-export.
"We can see a pick-up in imports only next year as things are slowly opening up," said Mehul Choksi, chairman of Gitanjali Gems, the biggest listed gold and diamond jewellery retailer by revenue.
Inbound shipments surge
"The government has taken some measures such as allowing star trading houses to import, but the measures are still evolving, so it will take some time for the momentum to increase," he said by phone from Mumbai.
Inbound shipments surged 65 per cent in value to $3.12 billion in June from a year earlier after the central bank allowed more banks and traders to buy gold overseas. Rising imports could pressure the current-account deficit and prompt a strategy change from easing to more curbs, UBS said on July 17.
"June imports were very high so the decision on easing the restrictions took a back seat," said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation.
Purchases in the second half may be 250 tonnes to 300 tonnes, he said by phone from Kolkata.
The controls helped narrow the deficit to $32.4 billion in the year ended March 31 from a record $87.8 billion a year earlier, the central bank estimates. That was the lowest shortfall since 2008-2009.