The reduction in the import duty from 15% to 6% has led to huge buying of gold jewellery and encouraged investment during the third quarter of the calendar year 2024, according to the Gold Demand Trends Q3 2024 report, released on Wednesday by the World Gold Council.
Sachin Jain, regional CEO, India, World Gold Council, said: “India’s gold demand in Q3 ended September 2024 witnessed an 18% year-on-year increase, touching 248.3 tonne. A sharp cut in gold import duties in July sparked a revival in the jewellery demand, which posted its strongest third quarter since 2015 with a 10% increase to 171.6 tonne, compared with 155.7 tonne in the year-ago period.”
The investment demand for gold also witnessed a sharp increase of 41% to 76.7 tonne, against 54.5 tonne in Q32023. Bar and coin demand in India jumped to its highest quarter since 2012, said the report.
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Part of the demand which was slated for forthcoming quarters seems to have been preponed following cut in the import duty. Festival and wedding-related demand is usually witnessed in the December quarter, but consumers had bought gold bars to lock in the prices, intending to exchange them for jewellery at a later date. Good monsoons also acted as a tailwind for the robust growth in lower-tier cities and rural areas.
One of the intentions behind the reduction in the import duty was to curtail gold smuggling. The WGC report said “flows of smuggled gold into India all but disappeared thanks to the duty cut and narrowed discounts during the quarter as trade imports jumped to benefit from lower domestic prices”.
In 2023, 150 tonne gold was estimated to have entered the country via unofficial or illegal channels. But the duty cut has resulted in a sharp jump in official imports. Total gold imports in India in Q32024 stood at 360.2 tonne, up by 87% compared to 193 tonne in Q32023, said the report. The gold which otherwise would have been imported via an unofficial route seems to have entered via official channels.
“Another consequence of the duty cut was selling by gold loan companies, which auctioned some holdings following the rupee-denominated fall in gold in order to limit losses from non-performing loans,” the report said.
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