Gold imports during March have surged to 160 tonnes on the back of duty cuts to 7.5 per cent, a reduction in gold prices and a rise in demand in India and overseas according to industry body Gem and Jewellery Export Promotion Council (GJEPC).

Total imports during March was 160 tonnes, a growth of 470 per cent compared with the same period last year.

During 2020-21, total gold imports into the country was 632.73 tonnes, a decline of 11.87 per cent compared with the previous fiscal.

The industry body said that the growth of gold imports has been aided by a low base effect as imports in March 2020 was 28 tonnes because of the outbreak of Covid-19.

“In a normal scenario, the average import of gold in a month remains 60 tonnes to 80 tonnes. But, outbreak of Covid-19 in March 2020 resulted in a nosedive in jewellery demand in domestic and international markets and so the import of gold in March 2020 was only 28 tonnes vis-avis 93 tonnes in March 2019,” GJEPC said in a statement.

Gold prices have also declined on an average to Rs 40,179 in March 2021, which is the lowest through the financial year 2020-21.

“Factors such as low base effect, reduction in gold price, reduction in import duty may be attributed to the increased imports in the country in this period. An important observation is that from an average import of approximately 80 tonnes in a year in 2018-19, it is down to 50 tonnes last year,” said GJEPC chairman Colin Shah.

He added that the growth indicates a positive sentiment in both domestic and international markets, with expectations of export growth in the ongoing fiscal as well.

“The import duty reduction has encouraged imports through official channels. While the duty cut by the government is not much, it has helped bring duty on a par with other countries and more formal import of metal through official channels,” said Shah.

The industry, however, does not anticipate any immediate policy intervention amid the spike in imports.

“Going by the RBI data, there has been an improvement in the foreign exchange reserves (from $476475 million as of April 10, 2020 to $581213 million as of April 9, 2021). So, there should not be any immediate concern,” said a senior banker. But there are concerns among jewellers over a slowdown in demand amid the rising Covid concerns across the country.

Global demand

Globally, international gold prices rose on Wednesday, hovering near a seven week high hit earlier this week as a softer dollar and easing of US treasury yields lifted demand for the safe haven metal.

Spot gold prices climbed 0.5 per cent to $1786.06 per ounce earlier in the day after hitting $1789.77 on Monday, the highest since February 25, said Reuters.

“Gold's pain over the last couple of months has been the rising Treasury yields and now that has pretty much been alleviated,” said Edward Moya, senior market analyst at OANDA.