Gold demand in India declined by 39 per cent during the first quarter of this year at 116.5 tonnes because of jewellers' strike over re-introduction of excise duty that affected the wedding purchase segment, says a report.
According to the World Gold Council's 'Gold Demand Trends' report, the total gold demand stood at 191.7 tonnes in the January-March quarter of 2015.
In terms of value, the demand fell by 36 per cent to Rs 29,900 crore (Rs 299 billion) in the first quarter of 2016 from Rs 46,730 crore (Rs 467.3 billion) in the year-ago period, it said.
"In first quarter of 2016, gold demand in India was down 39 per cent to 116.5 tonnes compared to January-March period of 2015.
“The jewellers' strike following the re-introduction of an excise duty, which left even wedding shoppers affected, was one major reason impacting demand," WGC Managing Director, India Somasundaram PR told PTI.
The sharp increase in the price of gold since the beginning of the year and an expectation of a cut in the customs duty on gold also led consumers to hold back on purchases, he pointed out.
A new regulation mandating PAN card details for purchases above Rs 200,000, is also reported to have affected buying, he said.
"We believe this has caused a pent-up demand for gold and coupled with this, gold has outperformed all other asset classes since the beginning of the year," he said.
The promised rural thrust in budget spends, favourable monsoon and the jewellery trade resuming after adapting to the new regulations are all favourable factors, which will lead to demand returning to normal levels.
The forecast of India's full year demand is in the range of 850-950 tonnes, he said.
Total jewellery demand in the first quarter of this year was down 41 per cent at 88.4 tonnes, compared to 150.8 tonnes in the same period last year, the report said.
In value terms, demand witnessed a fall of 38.2 per cent at Rs 22,702 crore (Rs 227.02 billion) from Rs 36,761 crore (Rs 367.61 billion) in the same quarter of 2015, it said.
Total investment demand was down 31 per cent at 28 tonnes, compared to 40.9 tonnes in the year-ago period, it said.
In value terms, gold investment demand saw a drop of 27.8 per cent at Rs 7,198 crore (Rs 71.98 billion) from Rs 9,969 crore (Rs 99.69 billion) in the January-March quarter of 2015, it further said.
Somasundaram said the second half, usually the peak time for gold, is likely to make up for the loss in the first two quarters.
"We witnessed a similar trend in 2015 as well, when the demand dropped by 7 per cent in the first half and surged by 14 per cent in the second half," he said.
Recycling in India also fell by 22 per cent to 14 tonnes against 18 tonnes in the corresponding period of 2015, according to the report.
"Recycling will go up subject to what happens to the Gold Monetisation Scheme, which is yet to pick up.
“There is a lot of pent-up demand for coins.
"Instead of discouraging (people from buying coins), the government through positive policy decisions can make the Gold Monetisation Scheme popular, thus, increasing recycling in the country," Somasundaram said.
Talking about imports, he said it was down by 30 per cent in tandem with demand.
"This year, imports are likely to go up by 10-15 per cent at the top end, similar to the demand," he added.
