Gold import might fall in coming months

Marriage season will end in the next two months and import growth is likely to taper off

The country’s gold import bill has seen a surge in the past two months. In September, it was $3.75 billion. October’s official data, that may be released on Monday, is expected to show around $4 billion. In quantity, the import is estimated at 120 tonnes in October.

Sector officials and analysts believe the rise was due to festivals and imports could fall in the coming months. “Imports remained high in the past two months because of festivals and marriage season demand from jewellers. However, the marriage season will end in the next two months and import growth will also taper off,” says Rajesh Mehta, chairman, Rajesh Exports.

Another official said, “Gold import growth should be seen in net figures, as that matters for calculating the current account deficit (CAD).” In September, 106 tonnes was imported, of which nine tonnes was by export-oriented units. Of the rest, 20 per cent or 19 tonnes was to be re-exported under the 80:20 scheme. Hence, 78 tonnes was net import for domestic use.

Rajesh Mehta said, “My estimate for October import on a gross basis is 110 tonnes. Jewellers have imported more gold to be ready with jewellery to meet (marriage) demand.” He said 20 tonnes of this import was by export-oriented units, outside the 80:20 rule's ambit, and 20 per cent of the rest was re-exported under it. For domestic consumption, hardly 70 tonnes remained in October.

Rising import of gold has government officials worried because of the CAD deficit. Finance ministry and RBI officials met on Thursday and will do so again early next week to discuss this and whether to tighten gold import.

Sudheesh Nambiath, precious metals analyst at GFMS Thomson Reuters, said: “If imports are tightened, it will incentivise unofficial imports and also result in higher premium for delivery in the official route. Higher premiums will strain the growth of the organised jewellery industry.”

An official said premiums for physical delivery are $22-25 an ounce; prior to Diwali, these were around $5.

The higher official import had resulted in less of smuggling, said an intelligence official.