Imports made up 86 per cent of India’s gold supply between 2016-2020, and inbound shipments continue to grow despite high import duty, as per a report by the World Gold Council (WGC).
Since the first duty hike in 2012, India has imported some 6,581 tonnes of gold, averaging 730 tonnes per annum, according to WGC’s ‘Bullion Trade in India’ report.
In 2020, India imported 377 tonnes of gold bars and dore from over 30 countries, of which 55 per cent came from just two countries — Switzerland (44 per cent) and the UAE (11 per cent).
Duty benefits led to a massive expansion of refining capacity in the country as the number of refineries grew from three in 2012 to 32 in 2020. Currently, some 25-26 refineries are active, with a combined refining capacity of 1,200- 1,400 tonnes, it said.
With lower duty on gold dore, its share of gold imports has increased from 11 per cent in 2014 to 29 per cent in 2020. “As the second largest global market, Indian gold demand is heavily dependent on bullion and dore imports. And looking at the current market trends we expect gold imports to be stronger in 2022, as compared to this year,” WGC Regional CEO, India, Somasundaram P R said.
However, he said, challenges remain on dore sourcing and organised trading which act as barriers to a more active role for banks and bullion trade. “High taxes on bullion continue to be a strong incentive for the grey markets that constantly undermine all reforms to make gold liquid and mainstream.”
“There are significant opportunities to emerge as a global bullion trading hub through the international gold spot exchange (IIBX) with a thriving domestic bullion eco-system underpinned by globally recognised standards and infrastructure,” he pointed out. Bullion banking is a catalyst for change in India’s gold market landscape, the report said.