India's gold demand up 15% in Q1 post note ban
New Delhi-India (May 5) Coming from the demonetisation shock in the last quarter of calendar year 2016 (CY16), the demand for gold jewellery rose 16 per cent to 92.3 tonnes in the first quarter of calendar year 2017 (Q1CY17), says the latest World Gold Council (WGC) report titled Gold Demand Trends Q1 2017.
It was the third such instance in a decade where the total demand was less than 100 tonnes.
The rise also pushed the world gold jewellery demand higher in the recently concluded quarter, which was up by 1 per cent at 480.9 tonnes.
The overall consumer demand for gold in Indian during the March 2017 quarter stood at 123.5 tonnes, a 15 per cent rise as compared to the previous corresponding period.
WGC attributes spurt to the government's remonetisation efforts. By March-end, nearly 85% of the value of currency removed from circulation under demonetisation had been returned.
That apart, the Reserve Bank of India (RBI) also eased temporary restrictions on withdrawal from bank accounts, aiding cash dependent rural demand in particular. Although the effects of the policy lingered, rural spending partially recovered as cash was injected back into the system.
Going ahead, the likely implementation of the goods and services tax bill in July and how the monsoons play out will have a bearing on India's demand for gold and gold jewellery, WGC feels.
"Given the likely GST implementation, we have maintained the full year forecast at 650 - 750 tonnes. We see the 15 per cent growth in the first quarter as a signal more than a milestone.
We feel that the demand factors are robust and will come back over the longer period. The second half of CY17 will see the biggest tax reform in terms of GST. We also need to monitor the progress of monsoon. That apart, price is another factor that needs to be watched," says Somasundaram PR, managing director, India at the World Gold Council.
"The Indian demand, typically is around 800 - 900 tonnes per annum. The shortfall, if any in the next one - two years on account of GST implementation, is likely to be made up in the subsequent years," he adds.
Source: RediffBusiness
