Volatility and uncertainties in the stock markets have led to "asset switching" by investors who have found a safe haven in gold that has seen a big import jump in the current fiscal.
The imports shot up particularly in October to $7.2 billion against a monthly average of $4-5 billion, leaving the government puzzled.
"Gold and silver continues to puzzle me. We had huge imports of gold in October. This is pure asset switching," Commerce Secretary Rahul Khullar commented.
Even for the cumulative 7-month period (April- October) gold imports went up by 64% to $38.3 billion.
Besides the domestic consumption, the country imports gold and precious metals for use as raw material in jewellery for exports.
While gems and jewellery exports have also shown a smart growth of 31% during April-October 2011 to $19 billion, bulk of the imports have been used for the domestic consumption.
"Rising prices for last two years is making gold investor-friendly," Gems and Jewellery Export Promotion Council (GJPEC) Chairman Rajiv Jain told PTI.
The rising demand has led to a big rise of over 28% in gold prices between April and October.
On the other hand, stock prices have declined by 9% in the same period.
During Diwali, Jain said, investors had bought more of gold bars than jewellery. "Gold investment will go up. People are pulling out money from the market and investing here."