Gold imports declined significantly due to record gold prices and a decrease in demand due to the Corona epidemic, but the trade deficit also declined.
In the last year i.e. 2020, gold import in India was the lowest after 11 years. The lockdown caused by the Corona epidemic significantly affected demand. Apart from this, gold remained out of the reach of common buyers due to record gold prices.
Let me tell you, India is second in terms of gold consumption and first in terms of imports. Last year, foreign purchases of gold dropped to 275.5 tonnes. It is the lowest since 2009 according to World Gold Council (WGC) data.
According to the news published in the Economic Times, gold imports increased by 18 percent to 55.4 tonnes in December 2020 as compared to December 2019. However, consumption decreased for the second consecutive year. Record prices of gold were also responsible for the decrease in demand. In addition, the lockdown imposed to prevent the outbreak of the Corona epidemic caused considerable damage to the economy. Also, the movement of people was also limited. During the lockdown, flights from other countries were also reduced in India. Which had an impact on imports, as India is dependent on imports to meet most of the gold requirements.
Work done with scrap gold
It was seen that after the lockdown the wedding season started and demand for festive season increased, shopping in local markets increased but most of the people were seen changing the old gold to buy new gold. Although consumer demand declined in the retail market, gold remained a better option for investors. Gold in the domestic futures market which reached a record high in August. In the year 2020, gold recorded a record increase of about 30 percent. This was the biggest jump in the last 9 years.
Demand expected to increase after vaccination
It is believed that the demand for gold will increase when the economy improves. But, it is being expected that the industry will return to normalcy again, as people will get confidence only after successful vaccination campaign. By June-July, people will get the vaccine and they will gain more confidence. Therefore, during the next festive season, better activities can be seen in only three to four months.
According to data released by the Commerce Ministry last month, gold imports in the current financial year fell 40 per cent to $ 12.3 billion during the 8-month period from April to November. Such a steep decline in gold imports came due to a decrease in demand amid the Corona epidemic and gold prices reaching a record level. Last year, gold imports in India stood at $ 20.6 billion.
Trade deficit reduced due to decrease in gold imports
The country’s trade deficit declined due to a decrease in gold and silver imports. By November, the trade deficit (the difference between imports and exports) was reduced to $ 42 billion, up from $ 113.42 billion in 2019. During the first eight months of the current financial year, gems and jewelery exports fell by 44 per cent to $ 14.30 billion. By October, the decline in gold imports was 47 percent. Gold imports in India declined by 47.42 percent during April-October 2020. Gold imports fell 57 percent to $ 6.8 billion in the first 6 months (April-September).