Easing inflation and a revival in stock markets could dent gold imports by India, the world's biggest consumer, pushing shipments down by about 35 percent in value terms in 2012/13, a government panel said on Wednesday. Indians found gold a better investment than stocks and an effective tool to hedge against inflation in the current fiscal year when imports are estimated to reach $58 billion.
The government hopes gold imports will be $38 billion in the full 2012/13 fiscal year. "The stabilisation of basic macroeconomic conditions at home is expected to curtail the demand for imported gold to be held as an asset by Indian households," C. Rangarajan, chairman of Prime Minister Manmohan Singh's economic advisory council said, presenting the panel's report on the Indian economy. India imported 969 tonnes of gold in 2011, almost the same amount as in the previous year, as volatile prices dented demand. Shipments will remain flat this year, the World Gold Council said.
Gold priced in Indian rupees gained about 37 percent in 2011. In comparison, the stock market in Asia's third-largest economy tumbled almost a quarter during the same period. Analysts say heavy gold imports have contributed the most to the spike in India's current account deficit, which is likely to be 3.6 percent of gross domestic product in 2011/12, compared with 2.7 percent in 2010/11. Higher gold imports meant the country spent more US dollars, increasing the total import bill and widening the current account deficit. Gold imports alone contributed nearly 40 basis points in the 130 basis points widening of India's current account deficit between fiscal year 2008 and fiscal year 2011, research house Macquarie said in late November.
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