Demand for gold in India, the world's largest consumer, has shrunk this year because of higher prices and lower incomes in the rural heartland after erratic rains hit farm output. Purchases in the western city of Ahmedabad, the country's top market, have dwindled to 800 kg a day from more than 1,000 kg a year ago, while in Mumbai they have dropped to 400-500 kg from about 700 kg, traders said.
Buying could further fall next month when the wedding season - usually the biggest trigger for demand - ends and farmers begin sowing with the onset of four-month monsoon rains, crucial for the poorly irrigated farm-dependent economy.
"Gold demand is good at present but not as good as last year," said a bullion dealer based in the southern city of Madras.
A 12 percent rise in gold prices in the past one year and a drop in farm incomes following lower-than-normal monsoon rains in 2004 have soured appetite for the precious metal, he said.
Demand in Madras, India's fourth-biggest market, has fallen to about 200 kg a day from 275-300 kg a year ago, dealers said.
As more than two-thirds of India's billion-plus population rely on farm-related incomes, good rains generally boost demand after summer harvests in February and March.
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