Gold imports to India rose last month despite local prices trading near the highest in more than five years, as jewelers start to restock for the wedding season. The wedding season starts this month and purchases will jump during the second-biggest gold-buying day of Akshaya Tritiya in early May.
Inbound shipments grew by 64 per cent to 46 tonnes in January 2019 compared to same month last year. However, higher prices kept a lid on supplies, which were lower than the 60 tonnes shipped in December 2018.
The World Gold Council, a London-based promotion body, expects a recovery in demand in India this year on increased spending with elections due by May. “Elections mean expenditure, which means redistribution of income,” Managing Director for India P R Somasundaram said last month.
Steps in this direction have already been seen by the Indian Prime Minister Narendra Modi’s populist push in his final budget on Feb. 1 before the elections. The government will allocate Rs 75,000 crore ($10.6 billion) a year in a cash handout plan for about 120 million farmers and give taxpayers Rs 185 billion of tax relief in the year to March 2020.
Last year wasn’t great for gold imports largely because of depleting rural income and higher prices due to weaker rupee. With direct cash benefits to farmers and elections round the corner, it is expected that increased liquidity among the rural population may drive demand this year.
However, a key risk to demand growth prospects remain the higher domestic prices as Indians are highly price sensitive, he said. Benchmark gold futures in Mumbai rose to Rs 33,646 ($472) per 10 grams on Feb. 4, the highest since September 2013 and just below a record of Rs 35,074 touched the same year.