India is the world’s second largest consumer of gold with 727 tons in 2017, only behind China with 815 tons. However, the demand for gold has started to decrease in India from the last couple of years due to a number of reasons.
According to a recent study by World Gold Council, India’s gold consumption has decreased to its lowest in the last 8 years. The main reason for the decreasing demand is the government’s decision to implement GST (Goods and Service Tax) on gold. Although government has batted for transparency, the rising gold prices have kept the rural gold buyers at bay, thereby decreasing the gold demand big time, reckon industry experts at Rajesh Exports.
The gold demand has come down from a 10-year average of 845 tons per year to 737.5 tons in 2017. The gold demand stood at 131.2 tons in the January-March quarter in 2017, while as the demand is only 115.6 tons this year in the same period.
In 2017, the demand went down by 24 per cent in the July-September quarter. However, with the start of wedding season in October and festivals such as Diwali, and Dhanteras, the demand got better till the end of December.
“In the first quarter, people in India usually settle their other financial commitments and prefer to buy gold from third quarter,” explains Rajesh Exports MD. The first quarter is not a dynamic period for buying gold in the country, so the demand increases from October to December. However, the rural areas witnessed a decreased demand in this quarter as well, owing to the monsoon season that affected the income of farmers.
Due to the decreased demand, most of the gold sellers have not been able to post good profits. But, some of the big and organized players like Rajesh Exports, India’s biggest gold manufacturer have not been affected. They have been able to post good profits by attracting customers with their value added services and transparency. They are ruling the roost, unlike small players, who are in a precarious position.
The only good news for the gold sellers is that demand for the precious yellow metal is expected to be in the range of 700-800 tons for 2018. Industry experts are positive about the demand this year, compared to last year. So, it is likely that the bullion industry will get back on track in the last few months.