Gold demand in the March quarter dropped 26 per cent to 190 tonnes against 257 tonnes in the same period a year ago.
Demand for the precious metal from the jewellery sector slipped nine per cent to 145 tonnes (159 tonnes).
In terms of value, the demand was down 33 per cent at ₹48,853 crore, while that of the jewellery sector dropped 18 per cent to ₹37,378 crore.
Somasundaram PR, Managing Director (India), World Gold Council, said the drop in gold demand comes on the heels of three straight quarters of curbs on gold imports.
“Policy makers and economists across the spectrum have acknowledged the risks of these types of policies,” he sidd.
With the Narendra Modi-led BJP getting a decisive mandate and his declared pro-business approach, there are expectations that the curbs on gold would be removed, he said.
Import halves Gold imports more than halved to 129 tonnes (268 tonnes) in the quarter under review. In a bid to control the widening current account deficit, the government under the 80:20-scheme allowed nominated agencies to import gold on the condition that 20 per cent of the inward shipment will be exported. The permission to import the next lot would be given on fulfilment of export obligation.
This led to artificial shortage of gold in the domestic market resulting in premium for spot delivery soaring.
Besides, the Government increased the import duty steadily in the last year from two per cent to 10 per cent.
Gold prices in the country are higher by about ₹4,000-5000 per 10 gram compared with the international market due to high import duty and spot premium. For instance, gold prices in rupee terms were down 10 per cent during the March quarter at ₹25,672 for 10 grams, while in dollar terms it was down 21 per cent at $1,293 an ounce.
Recycling of gold was marginally up at 21.3 tonnes (21 tonnes).
Instead of putting artificial curbs, the Government should consider policy measure to source gold domestically, Somasundaram said.
Revival seen Incidentally, State-owned MMTC recently inaugurated the first London Bullion Market Association authorised gold refinery in a joint venture with Swiss refiner PAMP SA.
The Council expects demand in the second quarter to improve due to improved sales witnessed during the Akshaya Tritiya in May. However, Somasundaram said that it may not better last year’s second quarter demand of 310 tonnes as prices had then dropped sharply.