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Mumbai: Gold imports by India, the world's largest consumer, are poised to fall after the central bank restricted overseas purchases by banks to reduce domestic demand and curb a record current-account deficit. Banks will be allowed to import bullion on a consignment basis to meet only genuine needs of exporters of gold jewellery, the RBI said in its annual monetary statement yesterday. The bulk of the imports by banks is on a consignment basis that doesn't require them to fund the purchase, the bank said. At least 36 private and state-owned banks and companies including MMTC and State Trading Corp. (STC) are authorised to directly import bullion, according to the central bank. "The curbs will certainly bring down imports because gold will not be freely available," said Bachhraj Bamalwa, a director and former chairman of the All India Gems & Jewellery Trade Federation. "The banks import gold on consignment basis from a miner without investing anything and it remains the property of the miner until the bullion dealers take delivery. If they are not allowed to buy on a consignment basis, imports will be restricted and chaos will prevail in the market." Buyers flocked to jewellery stores and bank outlets in India to buy ornaments and coins after gold plummeted 9.1 per cent on April 15 in the worst slide since 1983, causing a shortage in supplies. The all-time high current-account shortfall, exacerbated by bullion imports, and consumer-price inflation above 10 per cent are among risks that constrain room for further policy easing, the central bank said yesterday, after cutting interest rates for a third straight meeting to revive growth. Gold passion India has tripled import taxes on gold from as low as two per cent in January last year after the current-account shortfall, the broadest measure of trade, widened and the rupee slumped to a record against the US dollar. Finance Minister Palaniappan Chidambaram has blamed the deficit on a "passion" for gold, saying the gap is a greater concern than the worst budget deficit among the so-called BRIC nations. The deficit widened to $32.6 billion in the last quarter of 2012. "Not much can be done to physically curb demand for gold in india because purchases are mainly on account of tradition," said Madan Sabnavis, chief economist at Credit Analysis & Research. "The government will need to change the mindset of the people by diverting them to other financial instruments to give them better returns." Bridal Trousseau Demand for gold in India was good ahead of the wedding season and the Akshaya Tritiya festival on May 13, Bamalwa said. The festival is considered by the country's more than 900 million Hindus as the traditional day to buy precious metals. Bullion is bought during festivals and marriages as part of the bridal trousseau or gifted in the form of jewellery by relatives. "There is a scarcity of gold in the Indian market," Bamalwa said. Jewellers were paying between $10 an ounce to $12 an ounce over the London cash price to secure supplies, he said. UBS said the appetite for gold continued to be "very strong" in India and an index of physical flows showed demand five times that of a 12-month average. "Appetite is likely to hold up as we get closer to the Akshaya Tritiya festival," it said yesterday. India's central bank will issue detailed guidelines on gold imports by authorised banks by the end of this month, it said in the statement. Banks also import gold on an unfixed price basis and loan basis, according to the central bank. Store of value Gold has rebounded from a two-year low of $1,321.95 on April 16 as physical demand from the US to China and the Middle East increased and Elliott Management Corp. said that bullion remains the best store of value in an uncertain global economy, joining John Paulson in sticking with gold . Bullion for immediate delivery rose as much as 0.8 per cent to $1,479.20 an ounce, and was at $1,476.85 at 3:24pm in Mumbai. India's gold imports dropped 11 per cent last year to 860 tonnes from a record 969 tonnes in 2011, the World Gold Council estimates. Demand for jewellery and investment fell to 864.2 tonnes in 2012, the second straight year of decline, it said. http://www.timesofoman.com/News/Article-14549.aspx | |||
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