India’s Gold Imports In 2021 To Be Highest In Six Years

Gold in India has a dominant and unmatched cultural importance. Gold is instrumental in Indian ceremonies, and weddings are at the top of the hierarchy. People from all social classes and strata offer gold in an Indian wedding. It is considered an auspicious and protective move in a wedding arrangement. The demand for gold has always been high, it has turned into an investment for all who can invest.

The last two years have proved how unpredictable life is, and how important it is to have a sound saving. Not only in the form of bank savings, but easy accessible cash and gold too.

India is currently seeing a wedding rush; the purchase of gold is so steep and the graph so vertical that the gold imports have surged the highest in the past six years. With the pandemic curbs being relaxed and lifted, and gathering allowed with stipulated numbers. Marriage is the buzz of the town and purchase and gifting of gold jewellery it’s auspicious by product. India estimates around 25 million weddings to take place this season.

This is a lush turnaround for India's jewellers, who saw demand hammered for the last two years. The wedding season is now a bumper ride which will push India's gold imports to as much as 900 tonnes to 1000 tonnes this year, the highest in six years. This number is 350 tonnes that of last year.

What the world saw this past two years has restored our faith once again in gold and how this metal is a safest mode of investment and saving, throughout economical turnaround. India stands second in the world as gold imported and imports almost all the gold it consumes. The World Gold Council expects gold to peak this quarter October to December and the estimated sales is expected to be best in at least a decade.

The last two years had many weddings which were postponed. This being the present, the future is still unseen. Keeping this in mind the current trend is customers are now buying gold heavy ornaments minus the stones and diamonds. This could be kept in context if ever this gold is required to be sold or mortgaged, it can be done so. Gold ornaments which are 100 percent or 95 percent gold only are accepted for resale, sale or mortgage, and ornaments which have diamond or other stone studs are not entertained or treated secondary during these transactions. Gold has regained its investment value, as it was earlier. There is a recovery in consumer confidence and to add to it the retreat in gold prices will further hold the current demand. The long term cannot be ascertained, for now the gold prices are normalised and have come down.

Wedding, ceremony, celebration and investment at a personal level are all the perks of buying and gifting gold. However, here we also need to understand how import of gold contributes to India’s trade deficit. India’s current account deficit is largely high by imports of oil, coal and gold.

There was a decline in the value of gold in the recent past years; however that is the holistic Indian economy’s picture, this being different from individual investment in gold.

The bottom line being India’s lust for gold continues. Gold imports directly affect the current account deficit (CAD) of India. As a thumb rule, the larger the CAD with respect to GDP, the riskier it is for the overall economy. India consumes one-third of the planet’s gold on an annual basis making it the largest gold importer in the world. Gold is the second-most purchased overseas commodity after oil.

The NDA government led by Prime Minister Narender Modi has been able to control the current account deficit; the question which still remains is whether or not sufficient funds are flowing into the economy to compromise for the difference.

Gold has always been treated highest as an investment instrument. The number says it all; 1.24 billion of India’s invested or purchased gold. This gold is to stay idle until needed in the form of cash or transaction; this means personal investment of gold (gold at home or gold in bank lockers) does not flow in the Indian economy and hence does not contribute towards it.