MUMBAI: After importing about 500 tonnes of gold in the first half of this calendar year ahead of the implementation of goods and services tax (GST), the total imports during the second half is likely to drop 50 per cent due to the new tax regime. With imports in the first half already near the whole of 2016 volumes, a Thomson Reuters GFMS Gold Survey report said it is less likely that it will cross 250 tonnes in the second half.
According to it, the gold demand surged 126 per cent to 271.9 tonnes during the April-June quarter, the highest in six quarters. “Demand was led by wary consumers who wanted to override the traceability that the GST would bring and the anticipation that a GST could escalate the price were seen as the main motives behind the surge in consumption demand,” it said.
During the January-March period, India imported 236.1 tonnes of gold. The Q2 2017 average gold price in rupee terms was down by 3 per cent compared to the same period last year, also similar was the decline in comparison to the annual average price of 2016, thereby motivating consumers to consider advancing their purchases that were planned for later this year.
In 2016-17, the survey noted that the near normal monsoon greatly benefited field crops and resulted in record high production. Taking a look at farm income calculated from the minimum support price, which is decided by the government for procurement purposes, shows that income could have increased by 25 per cent (excluding sugar cane where income may have declined by 12 per cent due to a decline in production).
As approximately one-third of Indian gold demand is driven from agricultural households, the rise in income significantly contributed to the rise in demand. The large scale buying was anticipated by retailers as demand from this segment in the previous two crop years posted negative growth, as the crop yields had fallen due to a below normal monsoon.
