Early signs are coming in that India could slip from its position as the world’s largest consumer of gold. A senior official of the Metals and Minerals Trading Corporation of India (MMTC) has noted that gold imports are likely to decline by 41% to 500 tons this financial year, on account of the curbs imposed by the government.
MMTC is the largest bullion player in India. Chairman D S Dhesi said around 400 tons were imported in the first six months of this fiscal, and that a maximum of 100 tons would be imported by the end of the financial year. Another official said, “Both August and September witnessed very low imports. Though October saw a jump, given the Diwali season and buying for the Christmas season, imports are not likely to exceed 500 tons this financial year.”
India meets almost its entire demand through imports. Given the prevailing high premiums on gold and to ensure that supply is not restricted to the trade, India’s Finance Ministry has also directed MMTC to focus on supplying gold to export units. At the start of November, the official said MMTC had supplied 1,700 kilograms of gold to the export units.
In Gujarat too, the main hub for the diamond processing industry in India, gold imports in October have reached a new nadir over the last five years. Some 127 kg of gold was imported in October, as compared to 153 kilogram in September. Imports in October this year were less than 0.5% of imports in the same period last year. In October 2012, 27.132 tons of gold was imported, traders said. High gold imports, which totalled $53.8 billion in the last fiscal, have been one of the major reasons for India’s high current account deficit (CAD) of $88.2 billion in 2012-13. Earlier indications by chief officials in the Indian government have also suggested the possibility of a considerable slide in gold imports this year.
The Indian Prime Minister’s key economic advisor C Rangarajan has said that India’s gold imports could come down to $38 billion from $53.8 billion this fiscal, despite demand picking up during the festival period.
In April 2013, world gold prices fell sharply and domestic demand for gold sky rocketed, with imports of gold and silver nearly topping $16 billion, in the first two months of the fiscal. Since then however, gold imports have slowed, said Rangarajan. The numbers for June and July indicate a sharp decline in imports, as well as negligible imports in August.
Gold imports could drop 29% in FY14, Rangarajan added.
Arvind Mayaram, economic affairs secretary at India’s Finance Ministry was of the opinion that India’s gold imports could be lower than 750 tons in the current fiscal year ending March 31, 2014, down 11% from last year. Gold is the most expensive item in India’s import bill and the government has been trying to bring it down, reducing the trade gap and helping bring some stability to the battered rupee.
Between April to July, some 380.5 tons was brought into the country. Following this, imports were choked given the government’s many restrictions. “Last year, buying during October to December was around 261.9 tons, with coins and bars making up about 40% of the total. This is not a figure that can be remotely considered during the same three months of 2013, with buying sputtering near 20 tons each month,” said Prithviraj Kothari, managing director of Riddisiddhi Bullions.
EXPORTS JUMP
One silver lining in this gloomy picture has been gold jewellery exports, which have shown a good pick up for the forthcoming Christmas season. “Exports of gold jewellery have been in the range of 35 tons to 40 tons every quarter. Healthy exports have lifted the spirit of traders,” said Kothari.
Gems and gold jewellery exports from India are expected to rise for a third straight month to $3.1 billion (Rs 198 billion) for October, a rise of 36% from $2.3 billion (Rs 144 billion) achieved in the same month last year.
Gems and Jewellery Export Promotion Council chairman Vipul Shah said many shipments were dispatched to the US market for the forthcoming Christmas season and New Year celebrations. “Increased Christmas demand has boosted exports. Maximum shipments of gems and jewellery were dispatched to countries like the US, Europe, the UAE and Hong Kong, and the jump in exports bodes well for the jewellery sector,” he added.
Source:mineweb
Source:Bullion Bulletin