The government's move to raise the import duty on gold to reduce imports of the commodity might not yield the desired results. Early indications from the World Gold Council (WGC) showed imports in the quarter ending March were high. Also, imports this year are likely to be high, as auspicious gold-buying occasions this year would be 20 per cent more than last year, WCG has said.
This year, WGC expects India's gold demand to stand at 865-965 tonnes. Last year, it was 864.2 tonnes.
Last year, "gold-buying occasions were less; this would be corrected this year and, therefore, demand would be higher," David Lamb, global managing director (lifestyle and jewellery), WGC, told Business Standard.
Since India doesn't produce gold, the demand is met through imports. Only a small portion of the demand is met through recycled gold. Last year, gold imports stood at 864 tonnes, while recycled gold stood at 117 tonnes.
"While the range of imports is kept wide, as we live in a world with volatile influences such as exchange rate, inflation and consumer confidence. But, on the positive side, 2013 has more auspicious days," said Lamb.
Last year, auspicious dates to buy gold were lower by 20 days, which led to jewellery demand falling 11 per cent to 552 tonnes, according to WGC data. This month, jewellers have seen good demand; they expect this trend to continue till June. Demand would re-emerge in August and in the October-December period.
"We are seeing good sales this year, compared to last year. In value terms, I expect sales to be up 20-25 per cent," said Mehul Choksi, managing director of Gitanjali Gems.
Last year, demand for gold was also hit by the shorter wedding season. However, this year, there are more muhurats, which would lead to a rise in gold sales.
According to a Bloomberg report, Somasundaram P R, managing director of WCG India, said this year, imports would be higher, adding the rise in imports would match the increase in demand. If imports are high and gold prices (in rupees) are in line with last year's, the government's efforts to control the current deficit might not see much success.
"While the current account deficit is a serious issue, increasing the duty and trying to stop gold demand is not a positive way. It is not going to yield results," Somasundaram told Bloomberg. The US economy was showing signs of improvement and this would lead to a boost in exports from India, helping cut the current account deficit, he said.