Gold Imports Plunge to $12 billion: What's Behind the 4.23% Drop?

India's gold imports, which impact the country's current account deficit (CAD), decreased by 4.23% to $12.64 billion between April and July 2024-25 due to global economic uncertainties, according to government data.

In the same period in 2023, imports were valued at $13.2 billion. In July 2024 alone, gold imports fell by 10.65% to $3.13 billion, compared to $3.5 billion in July 2023.

Gold imports also showed negative growth in June (-38.66%) and May (-9.76%), though in April, they surged to $3.11 billion from one billion in April 2023.

A jeweller commented that high gold prices are currently discouraging imports but anticipates a rise starting in September due to the beginning of the festive season in India, coupled with the benefit of a recent import duty cut.

The government recently reduced the customs duty on gold and silver from 15% to 6%. On August 14, gold prices in the national capital rose by ₹300 to ₹73,150 per 10 grams, in line with an increase in international precious metal prices.

In the fiscal year 2023-24, India's gold imports increased by 30% to $45.54 billion. Switzerland is the largest supplier, accounting for about 40% of these imports, followed by the UAE (over 16%) and South Africa (around 10%). Gold constitutes more than 5% of the nation's total imports.

Despite the decline in gold imports, India's trade deficit (the gap between imports and exports) expanded to $23.5 billion in July and $85.58 billion in the first four months of the current fiscal year.

India, the world's second-largest consumer of gold after China, imports primarily to meet demand from the jewellery industry. However, gems and jewellery exports contracted by 7.45% to $9.1 billion during April-July 2024.

India achieved a current account surplus of $5.7 billion, or 0.6% of GDP, in the March quarter. For FY24, the current account deficit narrowed to $23.2 billion, or 0.7% of GDP, compared to $67 billion, or 2% of GDP, in FY23.

A current account deficit arises when the value of a country's imports and other payments exceeds its exports and other receipts over a certain period.

Meanwhile, silver imports surged to $648.44 million in April-July 2024, up from $214.92 million in the same period last year, according to government data.