CORRECTED-UPDATE 1-India's May gold imports jump, more curbs possible

Tue Jun 4, 2013 11:23am IST

(Corrects source of information in paragraph 12 to 'a finance ministry official', not the finance minister)

By Manoj Kumar

NEW DELHI, June 3 (Reuters) - India imported around 162 tonnes of gold in May, a finance ministry spokesman said on Monday, much more than expected and making further measures from the government to curb demand in the world's biggest bullion buyer almost certain.

The figure is sharply higher than April, even though it is below an estimate of 262 tonnes earlier in the day from Finance Minister P. Chidambaram which had stunned experts, including the World Gold Council and the Bombay Bullion Association.

"The correct figure for May gold import is around 162 tonnes, and not 262 tonnes," D.S. Malik, spokesman of the ministry of finance, told Reuters.

Indians have continued a buying spree that started in April, as consumers took advantage of a slide in global prices which coincided with regional festivals when gold is bought for gifts.

April's imports were 142.5 tonnes, according to an official in the customs department at the ministry of finance, who handles gold data. In value terms, April imports shot up 138 percent from a year earlier to $7.5 billion, including small amounts of silver.

CURBS NEEDED?

With May imports soaring even higher, the government is under pressure to look at more measures to rein them in. Such hefty imports threaten to widen a current account gap which already hit a record 6.7 percent of GDP in the December quarter.

"Necessarily, we will have to check (gold imports)," Chidambaram said, after quoting the incorrect import figure.

India hiked gold import duty by half to 6 percent in January and the central bank has also stepped in to restrict purchases. The measures helped reduce first quarter imports to 215 tonnes from 228 tonnes a year earlier, according to figures from the World Gold Council.

But since then, domestic prices have dropped sharply, tracking global trends, and undermined further by a stronger rupee. Gold futures on Mumbai's Multi Commodity Exchange hit a year low of 25,720 rupees per 10 grams on April 16.

They were trading around 27,110 rupees on Monday - roughly equivalent to $1,351 per ounce - as global spot gold prices were quoted around $1,403 per ounce.

The government is cautious about raising import duty further because it is concerned that this could encourage smuggling.

A finance ministry official said on Monday the Reserve Bank of India could consider banning all purchases by jewellers on a deposit basis with full payment on delivery. On May 13, the central bank banned such purchases from banks.

The WGC forecasts imports of about 615 tonnes in the first half of 2013 - implying June imports would have to retreat to more normal levels of about 80 tonnes. It expects second half demand to match 2012's 485 tonnes - putting it on track for a record year.

But some in the industry remain sceptical that Indian consumers will have bought so much in May.

"After Akshaya Tritiya (festival on May 13), demand was not there. Across India consumers were not into the market as there was a lot of volatility," said Haresh Soni, chairman of All India Gems and Jewellery Trade Federation.

"From the market point of view, we are not expecting May figures should be more than April," he added.($1 = 56.4850 Indian rupees) (Additional reporting by Siddesh Mayenkar in MUMBAI; Writing by Jo Winterbottom; Editing by Anthony Barker and William Hardy)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Earnings Season

Earnings Season

Reliance Q4 sales rise, refining margin narrows.  Read 

Innovative Solution

Innovative Solution

Turning smog into jewels - a Dutch designer's solution to Beijing's pollution.  Video 

Insider Trading

Insider Trading

Rajaratnam's brother loses bid to dismiss insider trading charges.  Full Article 

Literary Giant Dies

Literary Giant Dies

Mourning and memories in Gabriel Garcia Marquez's languid hometown.  Full Article 

S&P on India

S&P on India

S&P: India's ratings to depend on next govt econ, fiscal policies.  Full Article 

Ambitious Aim

Ambitious Aim

In green car race, Toyota adds muscle with fuel-cell launch.  Full Article 

Bond Market

Bond Market

A star abroad, RBI boss riles bond traders at home  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage