A remarkable increase in official gold import in March, according to numbers published by India’s customs department DGCIS this week. In March official gross gold import accounted for 60 metric tonnes, up 88 % from 32 tonnes in February. The DGCIS does not disclose export figures of gold and silver, though (in March 2014) Indian law dictated 20 % of all gross gold import was required to be re-exported. That makes official net gold impor 48 tonnes in March – calculated by the 80/20 rule.
The jump in official gross import is significant because the Indian government tries to hold down gold import since it sky rocketed in April and May 2013, after the price of gold had crashed. The import duty on the yellow metal was raised from 6 % to 8 % in June 2013 and to 10 % August, when the 80/20 rule (20 % of all import needs to be re-exported) was also implemented. As a result of these measures gross import fell 73 % to 44 tonnes in June, from 165 in May 2013.
Demand for gold in India has little impact from the government measures, according to institutional consultant Jayant Bhandari. Supply simply circumvents the official channels and is smuggled into the country. How much is exactly smuggled in is very hard to tell. However, official import can be an indicator for total import. Jayant wrote me it’s likely that at this moment Indians are pending their gold purchases as India choose a new government in May, which is expected to lower the import duty this year. If the import duty is lowered demand is expected to increase.
The premium on gold in India over the international price hovered around 15 % in March, that’s including the 10 % import duty. The next chart is complied by Nick Laird from sharelynx.com.
Demand for silver in India has risen since the import restrictions on gold were introduced. In 2013 gross import was a staggering 6125 tonnes, up 190 % from 2115 tonnes in 2012. Year to date gross import is 1208 tonnes, up 59 % from 760 tonnes in the same period in 2013. March 2014 gross import was 287 tonnes, down 37 % from February. I do not yet have any export numbers on silver in March.