The value of Indian Gold and Silver imports rose sharply in last fiscal year, as per the latest data provided by Ministry of Finance. As per the World Gold Council, India is the largest consumer of gold in the world followed by China.
In a written reply in India’s upper house of Parliament, Minister of State for Finance Namo Narain Meena said, “Imports of gold and silver have soared to $61.5 billion in 2011-12, from $22.8 billion in 2008-09. According to official figures, value of imports of gold and silver was $22.8 billion in 2008-09, $ 29.6 billion in 2009-10, $42.5 billion in 2010-11 and $61.5 billion in 2011-12.
He continued that, “The current account deficit (CAD), which arises when import of goods and services exceeds export, had touched 4% at the end of December 2011. It was 3.3% during the same period of previous year.”
“As far as gold and silver are concerned, India is a net importer and the prices of these precious metals depend on international prices. The volatility in the prices of gold and silver in India is mainly due to the volatility in the prices of these commodities in the international markets,” he said. In a separate reply, Meena said to lower the impact of gold import on CAD, the government in Budget for 2012-13 has proposed to increase basic customs duty on standard gold bars, gold coins of purity exceeding 99.5% and platinum from 2% to 4%.
India’s April imports of gold and silver fell to $3.1 billion, compared to $4.7 billion in the same month last year- a decline of about 34%. India’s gold imports slowed to 200 tonnes in the first quarter of calendar year 2012. Similar to global trends, the contraction was led by investment demand while jewelry demand contracted 19% during the same period. In addition to portfolio shifts, this could be a result of the government’s recent focus on curbing gold demand (steps include raising import duties on gold from 2% of the value to 4% and restraining loans against gold collateral). All these measures, coupled with sharp depreciation in the rupee, have resulted in lower imports.