Gold demand in India to rise 33% by 2020: WGC

Gold demand in India will continue to be robust in the next decade. The cumulative annual demand will be in excess of 1,200 tonnes by 2020, valued at about Rs 2,50,000 crore at current price levels, registering a growth of 33 per cent.

According to a new research conducted by the World Gold Council (WGC), the demand for gold in India would be driven by rapid GDP growth, urbanisation and rise in income and savings levels of the consumer. The gold purchasing would increase by almost three per cent per annum over the next decade.

The board of directors of WGC, which held its annual board meeting in Bangalore today, released the research findings.

However, in the near term, gold consumption in India is likely to increase marginally by 1.7 per cent during the year 2011 to touch around 980 tonnes compared to 963.1 tonnes consumed in 2010, the research paper, revealed.

Gold jewellery represented around 75 per cent of the total Indian gold demand in 2010, the remainder being accounted for by investment and technology.

Kerala, Maharashtra, Gujarat and Uttar Pradesh are some of the major demand centres of India. The southern states like Kerala, Andhra Pradesh, Tamil Nadu and Karnataka account for over 40 per cent of the country’s gold demand. The western (25-30 per cent) and eastern (10-15 per cent) regions are the next in consumption, the research paper added.

“In gold terms, India is a market with significant scale. We believe that there are over 18,000 tonnes of above-ground gold holdings in the country today. As seen in the last decade, Indian demand for gold will be driven by savings and real income levels, not by price,” Ajay Mitra, managing director, India and the Middle East, WGC, said.

In terms of the retail prices, Mitra declined to comment and said the prices are likely to remain higher in the near term.

“Emerging socio-economic trends may provide some challenges to the gold market, however, purchasing will remain underpinned by India’s long-standing and deep cultural affinity for gold,” he said.

Releasing the contents of the research paper India: Heart of Gold, the second in a series of research papers which focus on India, he said the research includes forecasts from the Centre for Monitoring the Indian Economy (CMIE), as well as contributions from the academics and industry experts.

Gold purchases in India accounted for 32 per cent of the global total in 2010. Mahesh Vyas, managing director & CEO, CMIE said, “Our macroeconomic forecast to 2020 shows India is poised for a very strong period of economic growth and this has significant, positive implications for all forms of gold purchasing in India.”

The research highlights that with 50 per cent of the Indian population under 25 and approximately 150 million weddings anticipated over the next decade, which will drive gold consumption. The WGC expects that wedding related purchasing alone would drive around 500 tonnes a year in India. A further 500 tonnes of existing gold will be gifted by one family to another.