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WGC sees gold demand rising in India, as new govt likely to ease curbs

LiveMint logoLiveMint 20-05-2014 Swansy Afonso

Mumbai: Gold consumption in India, world’s second-largest user, will probably increase in the second half of the year as import restrictions are relaxed by the new government, according to the World Gold Council (WGC).

Demand may climb to 900 metric tonnes to 1,000 tonnes this year, said Somasundaram P.R., managing director of WGC India.

That compares with 974.8 tonnes in 2013 and a record of 1,006.3 tonnes in 2010, according to data from the London-based WGC. Imports plunged 52% in the first quarter from a year earlier, the group said in a report on Tuesday.

The Bharatiya Janata Party, led by Narendra Modi, secured a majority of 282 seats in the parliamentary elections, the biggest victory for a single party since 1984, enabling it to pursue an agenda without being constrained by coalition politics, results showed last week.

A move to ease curbs would improve supplies to jewellers before the main festival season, which begins in August and lasts until October.

“Demand in India will pick up very fast this year,” Albert Cheng, the managing director for Far East Asia, told a media briefing in Singapore on Tuesday. “Indian people don’t buy gold to speculate, it’s a necessity.”

In-bound shipments slumped after the government increased the import tax three times last year and introduced rules requiring importers to supply 20% of their bullion to jewellers for re-export. The moves were designed to reduce a record current-account deficit and reverse a slump in the rupee.

“With the election of the BJP and its declared pro- business approach, there is an expectation that the short-term curbs on gold will be removed,” said Somasundaram, without specifying when he expects the curbs to be lifted.

Authorities may be careful in easing rules all at once, as they will try to balance the current-account deficit and the needs of the industry, Cheng said.

Imports declined to 129 tonnes in the first quarter, the report showed. Demand fell 26% to 190.3 tonnes with consumption of bars and coins tumbling 54% to 44.7 tonnes and sales of jewellery sliding 9% to 145.6 tonnes.

Official imports dropped 4.1% to 825 tonnes last year and unofficial inflows were probably toward the upper end of 150 tonnes to 200 tonnes, according to WGC. Bloomberg

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