World Gold Council (WGC), the industry's market development body, expects India's annual demand to not cross 850 tonnes for another three years.
For this calendar year, it estimates 650-750 tonnes. The past year had seen a 21 per cent fall, to 676 tonnes, lowest in seven years.
"India's demand has fallen sharply in the past but then recovered. Previous attempts by the authorities to clamp on gold (holdings) have failed. Gold is too intimately ingrained in Indian society. On balance, while demand is likely to improve, our view for 2017 is cautious," says WGC on its projection for the year.
"Over time, we anticipate economic growth and greater transparency within India's gold market will push demand higher. By 2020, we see Indian consumers buying between 850 and 950 tonnes," said Alistair Hewitt, the Council's director, market intelligence, while issuing the latest report on Wednesday.
The industry has more to contend with in 2017. The ban on cash transactions over Rs 300,000 (for buying jewellery) could hurt rural demand. And, the coming goods and services tax (GST) could adversely affect the industry in the short term.
"After falling so sharply last year, India's demand is unlikely to fall further. Headwinds will be offset by strong tailwinds. A banking system flush with liquidity, bumper crop after a good monsoon and central government employees' and pensioners' inflation-busting wage hike will all support economic growth. GST will streamline India's byzantine tax structure, which, as well as boosting the economy, promises to make gold's value chain more transparent. Further ahead, the economy will benefit from the groundswell of young Indians entering the workforce - a demographic dividend similar to that which underpinned the stellar growth of the Asian 'tiger' economies of the 1980s and 1990s. All these factors will boost India's economic growth and support gold demand," says the WGC report.
That apart, consumers will move away from cash towards digital payments over time and organised entities should benefit. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under-carating, is the feeling.
Meanwhile, the price has been moving in a narrow range in local markets, despite volatility globally, Indian consumers await a decline on expectations of an increase in the US Federal Reserve's interest rate this month.