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HONG KONG (Reuters) - India's gold demand is expected to recover next year, largely due to an expected increase in jewellery purchases after a difficult 2012 during which sales dropped due to higher import taxes and a weak rupee, industry officials said on Tuesday.
An increase in auspicious days for weddings in 2013 - a key factor driving gold jewellery purchases in the world's top gold consumer - will help boost demand by 25 percent on the year, said Shekhar Bhandari, executive vice president of treasury at Mumbai-based Kotak Mahindra Bank.
This year, jewellery demand fell by 35 percent compared to 2011, he said on the sidelines of a metals conference in Hong Kong.
"In 2013 there will be 23 percent more wedding days than this year," Bhandari added.
China is on its way to overtaking India as the world's top gold consumer this year, as a weak rupee and higher import tax weigh on buying interest from India while China's gold consumption remains resilient.
India's government raised duties on gold imports to curb imports to $38 billion in the current fiscal year from $58 billion in 2011/12 as it seeks to rein in its current account deficit and encourage money tied up in gold back into the economy.
Some bankers said they expected the rupee to strengthen against the U.S. dollar next year, which would make gold more attractive.
"We should see recovery next year. We expect rupee to strengthen which would make domestic prices lower," said Kamal Naqvi, managing director of commodities at Credit Suisse.
Bhandari said he saw the rupee trading at an average of 52.75 against the dollar in 2013, compared to 54.9 rupees now.
Last week, the head of the Bombay Bullion Association, a leading trade body, said he did not expect the government to further increase import duties for gold in the next budget, likely in February.
Association head Mohit Kamboj also said India's gold imports may fall to 550 tonnes next year from a peak of 967 tonnes in 2011, after a drop that could be as steep as 45 percent this year.
Editing by Miral Fahmy