India's gold imports could pick up in the next few months after slumping 81 percent in June as falling prices spur buying, a government source said, adding to New Delhi's anxiety over a record-low rupee and a wide current account deficit.
Indians snapped up a record 162 tonnes of gold in May, prompting a hike in import duty to 8 percent and tight restrictions on supplies at the world's biggest buyer.
Gold is second only to crude oil in India's import bill, which the government wants to cut back to ease the current account deficit and help the weak rupee back on its feet.
"Gold imports came down in June to around 31.5 tonnes. But they are expected to go up again," a senior government official, who is familiar with the gold import data, said, adding that with the fall in gold prices, people were already buying more of the metal in the domestic market.
That would still mean imports in the fiscal year are on track for a record, beating 2011's 969 tonnes and threatening to blow out the current account deficit, which hit a record 4.8 percent of gross domestic product in the last fiscal year.
India is expected to officially release by mid-July economic data that gives the value of June gold imports.
The prime minister has now summoned industry leaders to a crunch meeting on July 29 on the deficit and the tumbling rupee, which hit a record low of 61.21 against the U.S. dollar earlier in the day.
Industry experts and analysts said gold imports could pick up as demand remained strong despite difficulties in obtaining supplies, raising the possibility of further action from the government or the central bank to curb appetite.
Gold imports "will be somewhat the same or slightly more for July as some bargain hunting interest was seen", said Gnanasekar Thiagarajan, a director with Commtrendz Research.
Kumar Jain, vice-chairman of the Mumbai Jewellers Association, put July imports at over 50 tonnes.
Gold prices in India have now dropped back to around 26,063 rupees per 10 grams, their lowest levels since the buying frenzy started in April.
And with a good monsoon promising a boost to rural incomes, as well as the approach of the wedding season and festivals like Diwali coming up in November, imports in coming months could rise steadily.
"In mid-August, we may see some increase (in imports) because that's when Indians start to accumulate ahead of the wedding season and Diwali (festival)," said Joyce Liu, investment analyst at Phillip Futures Pte Ltd in Singapore.
"Imports may fall year-over-year but I don't think the extent of drop will be very big, as demand will be strong. That may mean Indian premiums shooting up because supply is restricted and demand is high," she added.
Gold forms an essential part of a bride's dowry in India and is also considered auspicious as a gift or offering at religious festivals. Rural areas make up about 60 percent of demand in the country.
Thiagarajan of Commtrendz Research said any further moves to curb buying could depend on the rupee's health.
"If the rupee is in a comfortable zone then such restrictions look unlikely," he said.