What is the reason that gold imports have gone up sharply in the latest financial year FY21?

Gold imports in FY21 were up by 22.58% at $34.6 billion due to increased domestic demand. This data was disclosed by the Commerce Ministry. However, the good news was that in spite of the spike in gold imports, trade deficit narrowed to $98 billion for FY21.

According to the Gems & Jewellery Export Promotion Council or GJEPC, spike in gold imports was due to a surge in gold demand in the second half of the year on account of festive buying. Normally, gold imports are not favoured by the RBI or the Finance Ministry as it widens the trade deficit without any proportionate productivity benefits.