Why Did India’s Gold Imports Surge In March?

The preliminary data put out in a press release showed:

• Total imports at $40.12 billion.
• Non-oil imports at $37.95 billion.
• Non-oil, non-gold (gold, silver and precious metals) imports at $27.01 billion.

This suggests that gold, silver and precious metals imports for the month of March stood at $10.94 billion. The release says that gold imports alone rose $7.17 billion or 584% over a year ago. In March 2020, gold imports stood at $2.8 billion.

According to Somasundaram PR, managing director for India at the World Gold Council the surge could reflect a number of factors, from base effect to pre-festival impact.

“It is because gold prices have come down. On top of that a month before Akshaya Tritiya we tend to see a surge in gold imports as jewelers begin to stock up and begin manufacturing. However, the figures need to be seen with caution as this is gross import of gold. It remains to be seen how much was for exporting further. For instance, the surge may be as the Dubai market improves with vaccinations underway,” Somasundaram said.

Local MCX gold prices have fallen by about 13% since the start of 2021.

While a part of the increase is base effect led, the domestic market for jewellery is doing extremely well, said Sabyasachi Ray, executive director for the Gems and Jewellery Export Promotion Council. “Gold prices have seen a phenomenal drop and customers and investors see an opportunity as the current prices may not sustain. The markets have also come back with a vengeance and pent-up weddings over the past year are now finally taking place,” Ray said.

According to Ray, in a normal year India imports about 700-800 tonnes of gold but monthly shipments vary based on the season. “The gold duty cut by the government is not much but it has helped bring duty at par with other countries and that may have led to less smuggling and more formal import of the metal,” Ray added.

In the Union Budget, the government cut import duties on gold and silver to 7.5% from 12.5%, but imposed a 2.5% cess.

Still the monthly import data is puzzling. Reuters, quoting an unnamed government source, said that India imported 160 tonnes in gold in March.

“Average gold imports in a month are about 60-70 tonnes and may go up to 90 tonnes during the festive season. As such, the gold imports for last month are indeed puzzling. One possible reason could be stocking in anticipation of a strong season ahead and April imports may normalise again,” said Anantha Padmanabhan, chairman of the Gems and Jewellery Council.