Mumbai: Gold imports by India, the world's biggest buyer, probably jumped 33 per cent in January as traders and jewellers rushed to stockpile before the government increased taxes to curb a record current-account deficit.
Overseas purchases may total 75 metric tonnes to 80 tonnes this month compared to 60 tonnes a year earlier, with bulk of the imports being made in the first three weeks, Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation, said by phone. Domestic demand, which has weakened in the past week, may improve in February because of marriages, he said.
India raised the duty on gold and platinum imports to 6 per cent from 4 per cent on January 21 to reduce current-account deficit and moderate demand for the precious metal that's rallied for 12 straight years.
Higher taxes may cut demand, trimming imports to as low as 750 tonnes in the financial year starting April 1 from 855 tonnes estimated for this year, Nomura Holdings said January 22.
"People imported more gold in the first week of January in anticipation of the tax," Bamalwa said. "Imports weakened after the tax was announced and demand is yet to pick up."
Standard Chartered said earlier this month that its gold shipments to India soared on mounting concern the duty would be raised. Physical gold demand has been unusually strong for this time of year, with 'good buying' from Southeast Asia, Standard Bank said on January 22.
Buying gold is considered auspicious in India during religious festivals and weddings. The festivals start in August and end in November, and are followed by the wedding season.
Gold for immediate delivery was little changed at $1,659.62 an ounce in Mumbai. Prices rose 7.1 per cent last year, the smallest annual gain since 2008.
India's current-account deficit widened to $22.3 billion in the three months to September 30 as a faltering global economy hurt exports, the central bank said December 31. About 80 per cent of India's current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports.