Gold Import Rebounds Again

  • 17-Jun-2017
  • Gold Import Rebounds Again

NEW DELHI: The value of India’s gold demand in the first two months of the current fiscal year exceeded its total imports in the first six months of 2016-17, when demand was muted due to government’s drive against black money, impact of drought in the previous year and a 42-day strike by jewellers protesting introduction of one per cent excise duty on gold.

Trade data published by the Commerce Ministry show that India imported hold worth $8.8 billion in April-May compared with $7.9 billion in April-September of 2016-17. The rise in imports may have been partly triggered by concerns of higher duties and taxes following the implementation of the goods and services tax (GST).

This is the first time since 2013-14 that gold imports have risen to this level at the end of May. Gold prices were much higher in 2013 than they are now when India had imported gold worth $14.4 billion in those two months.

Such a surge in demand had prompted the then Finance Minister P Chidambaram to impose restrictions on the import of the yellow metal.

Data on volume of gold imported in the first two months of 2017-18 are not yet available on the Commerce Ministry website.

In the corresponding months of the last fiscal year, India had imported 78 tonnes of gold and that was about half of the volume of imports in April-May 2015.

In value terms, gold imports is the second most valuable import and now it exceeds import of electronic items, a bulk of which are mobile phones from China. Crude petroleum remains India most valuable import.

Policy interventions in 2016-17 had led to nearly 20 per cent contraction on volume of gold imports that year, government’s trade data show.

India imported about 780 tonnes of gold last fiscal year against 968 tonnes in 2015-16. Significantly, imports had started to rebound in February 2017, when over 100 tonnes of gold was imported. In March, imports rose to nearly 120 tonnes.

The World Gold Council, in a couple of India specific reports in the last few months, expected the country’s gold demand to rebound in the current calendar year after the squeeze experienced in 2016 due to the impact of impact of policy initiatives to purge black money and the shock demonetisation.

However, it cautioned that the implementation of GST “may be disruptive in the short term as the industry adjusts to the new tax regime”.

Among the disruptions it had identified were working capital problems for manufacturers and retailers due to inter-State gold stock transfers. Retail prices are likely to rise due to higher tax liabilities for manufacturers and retailers.

Source: Thehindubusinessline.com

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