The gold market in India is big. However, current times keep the supply limited. The natural presence of gold in India is very limited. Most of its sources are required to be procured by importing. Strict and hefty regulations make importing costly. Once these regulations are loosened, the supply of gold should better meet the demand in the country.
Gold is important to many countries because it is still considered the best protection against economic catastrophe. People still see it as the most liquid form of exchange. The demand from India has to come from outside countries.
India is the world’s second biggest buyer of gold. Currently, they are fighting a smuggling operation that is illegally importing the metal. It maintained first spot until 2013. Now, the biggest buyer is currently China. The idea of foregoing the requirement of paying duties, smugglers are looking at larger profits. There have been incidents of people swallowing the gold and placing the nuggets or bars inside deceased cows. The government is looking at methods of reducing the restrictions on gold. The move will lower the importing duties that came from previous leaders. The current restrictions show that there are a10% import duties. Furthermore, it’s required that all imported gold be used under the 80-20 rule. At least 20% of the import must be exported as a finished good to be sold. The changes in regulations are an attempt to help the gold market survive through times of high demand and low supply.
The government reports have shown that last year they confiscated 2.34 tons of gold trying to be smuggled. The World Gold Council has estimated that there is a total of 150-200 tons entering illegally.
The gold market in India is big. India’s gold makes up 1/3 of the whole world’s demand. India consumers have 37% more demand than China, who is the largest buyer of gold. In 2011, Gold imports were estimated to have a total worth of $34 billion. It was then estimated that by 2015-2016, it should increase to levels of $65 billion.
The gold market in India is interesting. They are the second biggest buyer and still have problems getting enough of the precious metal. Once the flood gates are released, can they take back their first place rankings as the top buyer of gold in the world? If the government does what it says they plan to do, we will know soon enough.
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