Author: Paul Ploumis11 May 2015 Last updated at 08:33:56 GMT
MUMBAI (Scrap Monster): According to commodity analysts at HSBC, India is most likely to relax the restrictions on gold imports towards the end of this year. The firm forecasts the country’s Current Account Deficit (CAD) for FY ’16 to be half of that in FY ’15. The sharp cut in CAD may prompt Reserve Bank of India (RBI) to come up with relaxations on gold import curbs, including cut in gold import duties.
According to HSBC, the gold demand continues to remain strong in the country, despite the volatility in gold prices and the unfavorable currency movements. As per World Gold Council estimates, nearly three-fourth of the country’s gold demand in from gold jewelry sector. Rural population accounts for almost two-thirds of the gold jewelry demand. The rising rural middle class population in the country will provide long term support to gold demand in the country. As per the recent report published by the National Council for Applied Economic Research (NCAER), the number of middle class households in the country is likely to grow three-fold from current levels to almost 547 million by 2025-’26.
After tepid imports during the initial two months of the year, the gold imports in March ’15 surged higher to almost $5 billion. Also, RBI data indicates that bullion imports by the country climbed higher by almost 20% during FY ’15 to $34.32 billion when matched with the imports of $28.70 billion during the previous fiscal.
The sudden rise in gold imports is mainly on account of easing of imports norms by the government recently. However, anticipated cut in CAD will lead to further relaxations on gold import rules, HSBC noted. This would turn out to be highly positive for gold, as it may partially offset the negative impact on gold prices on account of sluggish Chinese demand, strengthening US economy and worldwide stock markets.