NEW DELHI: As gold imports fell in April- May of the current financial year by nearly 40%, commerce ministry officials have turned vigilant of the situation, according to government sources. A top government official told this newspaper they are keeping an eye on the situation as the continuity of fall in demand could cause distress in the sector, which employs lakhs of people. Gold imports declined by more than 39% in April-May on a year-on-year basis due to high import duty, the government said while releasing the monthly trade data last week.
Gold prices since March are hovering around 60,000-62,000 per 10 grams. “We are monitoring the situation. The big fall in imports of yellow metal is a concern as it may cause distress in the sector which employs millions of people,” a top official told this newspaper.
According to experts, skyrocketing gold prices, preference for ETFs over physical metal and attractive sovereign gold bond schemes are major contributory factors for the massive decline in gold imports. Though there is no distress as of now in the sector, if the situation persists for long then it will become a serious concern for the sector and the economy as a whole, say experts.
“Gold prices are high because of global uncertainties, high import duty and economic slowdown. There is a decline in imports because of soaring prices,” Suvankar Sen, managing director and CEO of Senco Gold, said. However, he added that there is no distress in the sector and a lot of old gold exchange is happening amongst customers as recycled gold is coming back due to mandatory hallmarking. Meanwhile, Jigar Trivedi, an Analyst with Reliance Money said, "People are preferring sovereign gold bond schemes over physical gold. Also, gold ETFs and investment in equities are giving better returns, so people are sceptical about gold buying.” Ajay Kedia, the founder of Kedia Advisory, echoed the same views.
Kedia said that the gold demand has been getting impacted because of the various government investment schemes like gold ETF, and sovereign gold bonds. In addition, CA Jai Prakash Kabra, founder of Reshamm Group its division of lightweight gold jewellery said, there is a liquidity crunch in the market which is indirectly impacting the demand for gold. “Majorly housewives save some money to buy gold but now there is not enough cash in circulation which is impacting the demand. Though the revenues haven’t fallen definitely there is a decline in the overall footfall in the market,” Kabra said