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Gold import volume almost trebles in June

The Financial Express logo The Financial Express 05-07-2022 Subham Mitra
Domestic gold prices inched up in February in response to geopolitical tension and continued the upward movement in March before falling from late April. © Provided by The Financial Express Domestic gold prices inched up in February in response to geopolitical tension and continued the upward movement in March before falling from late April.

Volume of India’s gold import almost trebled in June from a year before to 49 tonne, albeit on a low base, as jewellers continued to stock up after good sales during the Akshaya Tritiya, considered auspicious for buying the precious metal. Easing gold prices from a year before also spurred some buying interests among consumers.

In value term, imports spiked to $2.61 billion in June from $969 million a year before, according to the latest commerce ministry data. Sequentially, however, the growth in import eased substantially from the May level when it had surged as much as 789% to $6 billion.

The recent spurt in imports of gold, considered an idle asset by many analysts, prompted the government to raise the import duty on the precious metal on Friday to 15% from 10.75%. The idea is to ease pressure on the country’s current account, caused by rising trade imbalance, especially when even the capital account is witnessing pressure. Apart from a spike in petroleum and coal imports, purchases of gold from overseas also contributed substantially to the trade deficit, which hit a record $25.6 billion in June.

ICRA chief economist Aditi Nayar expects the CAD to more than double to $30 billion in the June quarter, from $13 billion the fourth quarter of FY22. Of course, senior government officials have assuaged concerns about financing the CAD.

Domestic gold prices inched up in February in response to geopolitical tension and continued the upward movement in March before falling from late April. MCX spot gold prices in Ahmedabad hit this year’s peak of Rs 54,062 per 10 gram on March 9 before starting to ease. On Tuesday, the price stood at Rs 52,164 per 10 gram.

While gold demand in the March quarter remained subdued partly due to high prices, the persistence of high inflation (retail inflation exceeded 6% for a fifth straight month and hit 7.03% in May) and the expectation of elevated price pressure have prompted many people to buy gold, considered a hedge against inflation, analysts said.

Having remained between $28 billion and $35 billion from FY17 to FY21, gold imports witnessed a sharp 33% jump in the last fiscal to hit $46 billion.

The move to raise the import duty will likely discourage official gold imports but it will increase smuggling, industry executives said, urging the government to reconsider its decision.

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