Despite the massive increase in customs duty and many restrictions that the Centre put on jewellery imports, India consumed more gold than 2012, when it stood at 864 tonnes.
For the first time India lost its tag of the world's largest gold consumer to China, which lapped up 1,065.8 tonnes of the precious metal in 2013, says a World Gold Council report. India's demand came down to 974.8 tonnes following wide- scale curbs imposed by the government to tame hunger for the precious metal, according to WGC's 'Gold Demand Trend 2013'.
Despite the massive increase in customs duty and many restrictions that the Centre put on jewellery imports, India consumed more gold than 2012, when it stood at 864 tonnes. In China, the total demand stood at 806.8 tonnes in 2012. "While China has put in infrastructure that was in favour of gold, India has turned away from it. In 2014, we are not seeing any role reversal," WGC Managing Director, India, Somasundaram P R told PTI here.
He said, in 2014 the demand in China is estimated at 1,000-1,100 tonnes while in India it is estimated at 900-1,000 tonnes. The demand for the precious metal picked up throughout the fourth quarter as attention turned to the Chinese New Year, a traditional occasion for gift-giving, the report said.
Indications are that demand for consumer gold items has been healthy during the January Chinese New Year celebrations, it said. However, the report pointed out that price expectations have stabilised, with the result that Chinese demand will establish a steadier pace in the short term at least. Meanwhile in India, jewellery demand in Q4 2013 was little changed from Q4 2012, the slight contraction being a function of supply disruptions.
Indian consumers expressed their strong affinity with gold in 2013, in spite of the government introducing a range of measures to limit demand. Higher import duties, strict import quotas and restrictions on gold-related lending and coin sales led to a contraction of supply to the domestic market as the government attempted to reduce the current account deficit, it said. As supply restrictions took hold, premiums were pushed up, thereby inflating already high local prices compared to the international price.
Indian consumers, therefore, missed the opportunity to buy gold at lower levels during the second half of the year, unlike consumers in many other global markets, it said. Official data show a 63 percent year-on-year decline in imports between July and October, following the introduction of the government's measures to limit gold imports.
However, the Indian gold market is fed by a number of alternative sources, including recycled gold, domestic production and unofficial imports. "As the underlying level of demand among Indian consumers remained robust, the sharp decline in the official import of gold led to an increasing amount of this demand being met by gold imported through unofficial channels," the report said.