March quarter gold imports decline 32% as Akshaya Tritya fails to enthuse

Lower jewellery demand, flow of unofficial imports keeps inward shipments muted in first quarter of current calendar

Gold imports fell by a staggering 32 per cent fall in March quarter of 2018, a development traders attribute to lacklustre jewellery demand despite Akshaya Tritya in April and the wedding season.

According to GFMS Thomson Reuters data, during the January–March 2018 quarter, India imported 163.1 tonnes gold including dore gold. This is 32 per cent lower than the quantity in the corresponding quarter a year ago. Fine gold from dore import was 35 per cent of total official import. 

“The drop is clearly a sign of a well-stocked market and the deep reach of unofficial imports, which has kept supplies systematic,” said Sudheesh Nambiath, senior lead analyst with GFMS TR. In FY18 India’s gold import was 830.6 tonnes.

With cash in hand at levels prior to demonetisation, and the difficulties experienced in driving through stricter controls, the cash economy has rebounded strongly. Investment demand by contrast was up 29 per cent to 38 tonnes. In anticipation of higher prices there has been strong demand in the cash market.

The GFMS report attributes the first quarter decline in imports to lacklustre consumer demand with purchases largely occasion-driven and discretionary spending taking a plunge. Rural demand failed to inspire confidence, either due to oversupply or failed crops. With GST burden and high gold prices, exchange of old jewellery for new rose, contributing to at least 45-50 per cent of sales in the plain jewellery market. As a result, GFMS said,  demand for jewellery was steady in the first quarter compared to the same period last year.

Import of dore gold has been on the rise for the past several quarters, and even in the March quarter, the 20 dore gold refineries in the country imported directly. With the Bureau of Indian Standards making it mandatory for all dore gold refineries to register with it and follow its standards from June 2016, dore gold import is likely to remain high in total imports. Refineries not having BIS registration after June 2018 will not get import licenses. 

Meanwhile the market is also awaiting the much talked about gold policy and Unregulated Deposit Ban Act. The Finance Minister had announced while presenting Union Budget, that the government is preparing a gold policy covering mine to market.

But another issue several retailers are worried about is the ban on taking deposits from consumers. Jewellers have been accepting fixed monthly sums of money as deposit for 11 months from customers who buy the jewellery at the end of this period at some incentive offered by jewellers. This is a big cash flow generating route. Jewellers show the money received as advance sales. 

However the Union Cabinet has now cleared a bill to ban unregulated deposits and the money so taken by jewellers from customers fall under the ambit of the new law. This is expected to have far reaching implications, forcing  some retailers to rework their inventory financing model.