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Mumbai: Gold imports by India, the world’s second-biggest consumer, may rebound in 2020 from a three-year low as consumers step up purchases after holding off last year, according to the All India Gem & Jewellery Domestic Council.

Inbound shipments may climb to 750 tons from an estimated 690 tons last year, according to N. Anantha Padmanaban, chairman of the trade body that represents more than 300,000 jewelers across the country. Imports slumped to the lowest since 2016 last year as economic growth slowed and domestic prices surged.

“How long will people wait for the price to correct? They have to buy,” Padmanaban said in an interview, adding that a higher number of marriages from October 2019 to June will also lift purchases. “The only investment for the middle and lower middle class is gold, so they have to come back, whatever the prices.”

Gold prices in India rose nearly 25% last year, the biggest increase since 2011, and touched a record earlier this year. Overseas gold is still building on the largest annual expansion since 2010, which was driven by the U.S.-China trade war’s drag on global growth, easier monetary policies and sustained buying by exchange-traded funds and central banks.

“The increase in prices happened too fast and that’s why people were not able to adjust,” Padmanaban said in Mumbai. With the Indian economy expected to grow at the slowest pace in more than a decade, the jewelry industry may spend about Rs 3 billion ($42 million) on promotions this year to boost flagging sales, including a shopping festival on the lines of the Dubai Shopping Festival, he said.

“Imports may recover, there is no doubt about that, but whether there is a significant increase is something that needs to be seen,” said Chirag Sheth, a consultant at London-based Metals Focus Ltd. “This year, demand may grow 4% to 5%, which is not a big jump considering we had a bad year last year.”

While buyers will adjust to the higher prices, a prolonged slowdown in the economy will keep a lid on consumption, he said. “All estimates are based on the economy recovering in three months time.”

With the annual federal budget due on Feb. 1, the association has asked the government to rollback the 2.5 percentage point increase in the import tax last year as it has boosted smuggling, Padmanaban said.

“Everybody is hoping for a good budget, not only for the industry but overall for the economy,” he said. “Because that will improve the sentiment and business across the board for all other industries, and once that happens more money will come in our industry.” – Bloomberg

Also read: Gold’s impressive run this year is set to continue in 2020


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