MUMBAI: India’s February gold imports surged to 50 tonnes, up more than 82 percent from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed on Wednesday.
The rise in imports by the world’s second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3-1/2 months but could widen the South Asian country’s trade deficit.
“Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February,” said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.
In November, Prime Minister Narendra Modi scrapped 500- and 1,000-rupee banknotes notes that were 86 percent of the value of cash in circulation, as part of a crackdown on corruption, tax evasion and militant financing.
India’s gold imports had fallen to 27.4 tonnes in February 2016 as buyers postponed purchases in anticipation of a reduction in the import duty in the budget at the time.
This February, retail demand improved due to the wedding season and as cash supplies became normal, said Bachhraj Bamalwa, a jeweller based in the eastern Indian city of Kolkata.
But imports in March could fall as a recent rally in prices has started deterring buyers.
“Consumers are struggling to adjust to higher prices. They are postponing purchases expecting a correction in prices,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler based in Kolkata.
In the local market, gold futures were trading at 29,380 rupees ($439) per 10 grams on Wednesday, up more than 9 percent since falling to 26,862 rupees in December 2016, its lowest in 10 months.
India’s gold imports in 2016 had fallen nearly 44 percent versus 2015 to 510.4 tonnes, the lowest level in 13 years.
“Last year was an unusual year. This year consumption and imports will rise as jewellery demand has been recovering,” said Bamalwa.