InvestorQ : Why have Indian gold imports fallen so sharply in the first half of the year?
Rutuja Nigam made post

Why have Indian gold imports fallen so sharply in the first half of the year?

3 years ago

You must have known it intuitively but now there is data to back up the view that gold imports are falling and they are falling sharply. For example, in the first seven months of the fiscal year FY21, total gold imports fell by 47.4% to $9.28 billion.

It is not just about gold imports but it extends to other precious metals too. Even silver imports fell by 64.7% in the period to $742 million, despite a boost to festival demand in the September / October period. Clearly, people are getting wary at higher prices of the metal.

This is economically very significant for India. You would be perhaps surprised to k now that India currently imports around 900 tons of gold on an average each year and is the world’s largest importer of gold on an annual basis; even larger than China and the US.

The RBI and the policy makers are surely happy with the fall in gold imports. There is a reason why fall in gold imports is viewed as positive by the Finance Ministry and the RBI because it saves foreign exchange from being utilized for unproductive imports.

However, this has had a downstream impact too. India imports a lot of gold to export as jewellery after processing and shining the metal. This also meant that total exports of gems & jewelry from India also declined by 49% in the 7 months and that is the bad news.

In short gold imports have fallen largely because of the high prices keeping buyers away. Also globally, the demand for jewellery has gone down and investors are looking at gold more as an investment alternative rather than as a piece of ornament. Things are changing.