The industry bodies recently released a joint statement that record Gold sales were reported from across the country during the recent festival season. The trade data from the commerce ministry supports this statement as Gold imports increased significantly in the first six months of 2021-22.
According to a joint statement released by the Confederation of All India Traders (CAIT) and its jewellery arm, All India Jewellers’ and Goldsmith Federation (AIJGF), the Indian jewellery market has made a major comeback almost two years after the COVID-19 pandemic-induced economic slowdown. In this article, we explore the trend in gold imports over the last few years to see if the increased demand in 2021 is reflected in the imports.
89% Indian Gold demand met by imports.
Gold impacts the Indian economy in varied ways. Gold is used as one of the major raw materials for jewellery and coins. There are four sources of Gold supply – imports, domestic gold availability through local mining, refining, and recycling, and monetisation. Of the total supply, around 1% comes through local mining, about 10% comes from recycling and the rest 89% from imports, according to a NITI Aayog report.
India is the second-largest consumer of gold in the world, accounting for 25% of the global demand for gold, as per the same NITI Aayog report. About 73.1% of the gold demand in India is for jewellery consumption, 15.9% for bullions, 6.9% for coins, and about 1.4% for industrial use.
To understand the trend in gold imports in India, we looked at the Trade Statistics maintained by the Ministry of Commerce and Industry. Each trade commodity, in its various forms, is allotted a Harmonized System (HS) code, by the Directorate General of Foreign Trade (DGFT). To comprehensively look at the gold imports, we have collated the data for HS codes under five categories – gold bars, coins, jewellery etc.
Gold imports have significantly risen in 2021, after the slowdown in 2020.
The joint statement of the industry body highlights that around 15 tonnes of gold jewellery were sold on the Dhanteras festival. Jewellers around the country saw sales worth Rs. 7,500 crores. This includes an estimated sale of Rs. 1,500 crores in Maharashtra, Rs. 1,000 crores in Delhi, Rs. 600 crores in Uttar Pradesh and Rs. 2,000 crores in South India, besides other states.
The present year i.e., 2021 registered a strong jump in the volume of gold imported, owing to strong economic activity and improved customer demand. The data about the increase in imports corroborates with the industry body estimates of increased demand & sales in the 2021 festival season. The last year i.e., 2020 registered particularly low gold imports, owing to the economic slowdown caused by the COVID-19 pandemic.
Imports grew by 335% in the first half of 2021.
Growth of gold imports registered a bumper growth percentage over last year. The first six months of 2021-22 registered a growth of 335.4% over the first six months of 2020-21, which was characterised by lockdown and a total shutdown of economic activities for several months.
The gold import in the first six months of 2021-22 (first six months) has significantly exceeded the imports of years preceding 2020-21 (first six months).
Gold imports in the first 3 quarters of 2021 are higher than in the preceding years.
Let’s look at the monthly data for the past years.
The quantum of gold imports for the years preceding the COVID-19 pandemic in 2020 show a relatively increasing trend, at least for the first two quarters. In 2020, however, the second quarter took the worst hit due to lockdown and economic closures and registered one of the lowest volumes of gold imports. Towards the last quarter, however, the trend picked up pace as data suggests.
In 2021, the available data for the first three quarters shows a significant increase in the quantum of gold imports in comparison to the last few years. This year, the gold imports are not only back on track but also exceeded the earlier records.
Switzerland accounts for the highest supply of gold to India.
India is dependent on gold imports, either in refined or dore form. India imports dore from approximately 17 countries spread across America, Asia, and Africa.
Switzerland is one of the major countries where India imports its gold from. According to the NITI Aayog Report on Gold Market Ecosystem in India, in 2016, the top 3 countries from which India sources gold imports are Switzerland, UAE, and South Africa.
Domestic sources, as mentioned before, account for only 1% of the gold supply in India. For instance, in 2016, India mined less than 2 tons of gold from the Hutti gold mines in Karnataka. In the same year, refining of a domestic scrap of gold-stock accounted for about 1% of total household gold stock.
Featured Image: Rise in Gold Imports
