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Gold imports went up 64 per cent during April-September 2011. Should this trend continue, full-year imports will add up to $65 billion, way above the all-time high of $40 billion during 2010-11.
The average price of gold imports over this period was $1607 an ounce, up 31 per cent. But this large hike was not much of a dampener on demand. In quantity terms, imports rose 25 per cent to 554 tonnes.
A recent RBI report flags the insensitivity of demand for gold (and oil, for which some part of the inelasticity is due to subsidies) to price as a cause for concern. It is easy to see why. The way things are headed, we could, in a year of sluggish capital flows, end up with a current account deficit of $65 billion, as against the $55 billion projected by the Prime Minister's Economic Advisory Council last July.
Though the customs duty on gold was hiked recently, to 2 per cent, it is still practically zero. Whether and how much the fall of the rupee will moderate the growth in the demand for gold is not clear.
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