Gold consumption in India, the world's largest importer, is expected to surge nearly 33 percent in 2005 to 850 tonnes because of higher incomes and good farm output, the World Gold Council said on Thursday.
Consumption, excluding recycled gold, rose 57 percent to 508 tonnes in the first half of the year, from 322 tonnes during the year-ago period.
"Normally the second half is much stronger than the first half. Even if we take the worst case scenario, we are looking at a very high number," said Sanjeev Agarwal, the industry-funded council's managing director for the Indian subcontinent. "Consumption of new gold should easily reach 850 tonnes in 2005."
India's economy, Asia's third-largest, is expected to grow 7 percent in the fiscal year to next March, marginally faster than 6.9 percent growth last year.
Incomes have been rising in the country with rapid economic growth, strong stock market performance and good monsoon rains which impact farm output.
"Income levels are rising in India. This has increased the purchasing power of the middle and lower income people," Agarwal told Reuters in an interview.
India's main stock index hit an all-time high this month, helped by robust foreign fund investment. The performance of India's monsoon rains, which shape the lives of 600 million people who depend on the farm sector for a living, was normal this year.
Demand for gold rises in India during the festival season, which peaks in November with Diwali, the Hindu festival of lights. Indians like to buy gold or give gold jewellery as a gift during religious ceremonies.
India's gold demand during the festival season is expected to be strong if global prices, which have been volatile in the past weeks, settle at lower levels, he said.
Agarwal said investors in India were putting money into gold which rose 89 percent during the six months to June this year compared with the global level of 77 percent.