Gold Imports by India Plunge 52% in Q1 on Curbs, Weaker Demand.

Gold imports by India, the world’s second-largest consumer, dropped by more than half in the first quarter on government restrictions and lower demand, according to the World Gold Council.

Inbound shipments declined 52 percent to 129 metric tons from a year earlier, the London-based group said in a report today. Demand fell 26 percent to 190.3 tons with consumption of bars and coins tumbling 54 percent to 44.7 tons and sales of jewelry sliding 9 percent to 145.6 tons, the council said.

Foreign purchases slumped after India increased the import tax three times last year and introduced rules requiring importers to supply 20 percent of their bullion to jewelers for re-export. The moves were designed to reduce a record current-account deficit and reverse a slump in the rupee. Official imports dropped 4.1 percent to 825 tons last year and unofficial inflows were probably toward the upper end of 150 tons to 200 tons, according to the WGC.

“Gold continues to enter India through unofficial channels,” said Somasundaram P.R., managing director for India. “With the election of the BJP and its declared pro-business approach, there is an expectation that the short-term curbs on gold will be removed.”

The Bharatiya Janata Party and its allies won 336 of the 543 seats up for grabs in the parliamentary election, more than the 272 needed for a majority, poll results showed last week. The BJP, led by Narendra Modi, secured 282 seats, the biggest victory for a single party since 1984, enabling it to pursue an agenda without being constrained by coalition politics.

The country remains a source of strong latent demand, which will be unleashed as and when the government restrictions are relaxed, the council said. Demand may total 900 tons to 1,000 tons this year from 974.8 tons in 2013, it said.

Source : bloomberg.com