The Aryavarth Express
Agency(New Delhi): India, the world’s second-largest consumer of gold, is poised to witness a dramatic decline in its gold imports in March, with estimates suggesting a plunge of more than 90% compared to the previous month. According to a government official and two bank dealers who spoke to Reuters, gold imports are likely to hit their lowest level since the COVID pandemic, as banks cut imports in response to record-high prices that have significantly impacted demand.
The government official, who declined to be named due to not being authorized to speak to the media, stated that India’s gold imports are expected to fall to 10 to 11 metric tons in March from 110 metric tons in February. This drop in imports could help limit a rally in global prices, which recently hit a record high earlier this month on expectations that the Federal Reserve will cut interest rates this year. Additionally, the reduced imports could help India narrow its trade deficit and support the rupee.
Two Mumbai-based bullion dealers from leading gold-importing banks confirmed that they imported very little gold in March due to weak demand. One of the dealers noted, “Jewellers weren’t buying even with a discount exceeding $35 per ounce. No reason to import the metal at a record high price and wait for demand.”
Domestic gold prices in India rose to a record 66,943 rupees per 10 grams earlier this month, prompting dealers to offer discounts of about $38 an ounce over official domestic prices, including a 15% import tax and 3% sales levies. This discount is the highest since March 2023.
Typically, gold demand remains strong in March as jewelers stock up for the Indian wedding season, which is already in full swing and where gold plays a significant role. However, due to the high prices, customers are opting to exchange old jewelry for new pieces, leading jewelers to stop buying gold from banks, according to the dealer.
Refiners have also nearly halted imports of gold dore, a semi-pure alloy, due to their inability to offer steep discounts. Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern city of Kolkata, explained that India’s duty on gold dore imports is 0.65% lower than the import tax on refined gold, but with the market discount exceeding 1%, refining has become unviable.
The sharp decline in India’s gold imports in March is a stark contrast to the usual trend, highlighting the significant impact of record-high prices on consumer demand and the bullion market. As the country grapples with this shift in demand, it remains to be seen how the reduced imports will affect the global gold market and India’s economic indicators in the coming months.