imports in terms of quantity in the first half of 2017 crossed the entire imports of 2016. According to data compiled by GFMS Thomson Reuters, India imported 510 tonnes of gold
in 2016, while the imports in the January-June 2017 period were 521 tonnes.
In 2016, the imports bill for gold
in value terms according to the Ministry of Commerce
was $23 billion and till June this year, industry estimates stood at $22.2 billion.
Going by industry estimates, gold
import are likely to cross 900 tonnes against the average imports of 709 tonnes in the past five years, and the imports bill is expected to cross $40 billion in 2017. If the estimates come true this would be the highest imports in value terms since 2012.
Industry sources estimate that lower gold
prices, reduced liquidity after demonetisation, lower than feared goods and services tax (GST) rate of 3 per cent, farm loan waivers, good monsoon leading to high rural consumption, possible shift of demand from diamonds to gold
and central government employees’ wage hike will all boost gold
demand in the coming months.
Apart from gold, even silver
imports have picked up in the first six months of 2017 to around 3,050 tonnes, compared to 3,546 tonnes in the whole of 2016. Silver
imports are more price sensitive. With silver
prices falling sharply in the last quarter compared to gold, imports could only go up further, say experts.
After the government announced demonetisation
of Rs 500 and Rs 1,000 notes in November 2016, gold
demand shot up and even after that, it remained strong as prices were low. Fear of high GST
rates for precious metals contributed to that.
and jewellery could play spoilsport in the near future till jewellers and artisans get converge to it. Several jewellers imported gold
to replenish their unaccounted gold
with officially imported gold, which would be shown on the books when GST
would be implemented and sell jewellery made from unaccounted gold
Stores remained quite busy till June and according to Sudheesh Nambiath, lead analyst, precious metals demand, GFMS Thomson Reuters, “Large jewellery manufacturers have seen volumes higher than the monthly average through April to June. Investment led demand has also turned stronger as there has been an increased interest to stash away cash in gold
which many believe may be difficult post GST.
Our estimate is that at least one-third of the wedding related demand that comes up in the fourth quarter has been advanced.” This means that increase in demand in last few months is a borrowed demand from future.
The October-December quarter usually remains busy with festive season demand coming in along with agri-centric gold
demand after a good monsoon and higher realisations for farmers. That has been the case traditionally. However, some demand, which would have come during this period has already been met in advance before GST
Surendra Mehta, Secretary, Indian Bullion and Jewellers Association said, “Gold
demand will continue to remain good even after the 3 per cent GST.
In the next six months, gold
imports could be 400-500 tonnes as demand from precious stones like diamonds could shift to gold.
” Diamond will also now attract 3 per cent GST.
There are other issues in diamonds, especially on whether they are original and the fear of them being synthetic. Mehta also said that falling gold
prices with strong rupee also makes gold
attractive rubbing off the GST
However, there are some reasons to be conservative on immediate gold
demand. The government recently mandated that for purchases over Rs 50,000, the buyer would need to provide permanent account number or Aadhaar. Such measures are intended to curb the growth of the unofficial market.
Council, in general, is of the view that jewellers and artisans will need time to adjust to new GST
norms, which could take a little time.
Alistair Hewitt, director, market intelligence, World Gold
Council, wrote in an article that apart from good monsoon which will boost rural demand, “remonetisation, inflation-busting wage hike for central government employees and pensioners will support consumption.”