India's gold demand dips 29% to 207.6 tonne

Gold demand in India declined 29 per cent at 207.6 tonne during the first quarter of this year because of new tax on gold jewellery, increased import duty and weakening rupee, a World Gold Council report on Thursday said.

India's first quarter gold demand decreased by 29 per cent in volume at 207.6 tonne, year-on-year, while it dipped by 3 per cent at Rs 56,650 crore (Rs 566.5 billion) in terms of value.

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"The beginning of 2012 has been a challenging period for the Indian gold market. Despite all the challenges -- price rises, economic slowdowns, rapid social change, gold retains its lustre for consumers," WGC managing director, India and Middle East, Ajay Mitra said.

"We are optimistic that demand levels will normalise in the upcoming months as Indian consumers adjust to the new gold landscape," he said.

There was a 21-day nation-wide strike by retailers after the government proposed one per cent excise duty, and increased the custom duty from two per cent to four per cent.

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The government later rolled back the decision of imposing excise on jewellery.

Gold has been a strong performing asset and as Indians have always had a very deep emotional affinity towards the yellow metal, this will continue to fuel demand, Mitra said.

"We believe that the encouraging levels of demand seen during Akshaya Tritiya and the recent wedding season will flow through into the second quarter, as more consumers build gold purchases into their budgets," he added.

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The jewellery demand in volume terms also fell by 19 per cent to 152 tonne from Q1 2011.      

However, in value it increased by 10 per cent year-on- year to a record high of Rs 41,480 crore (Rs 414.8 billion).

Gold investment demand stood at Rs 15,170 crore (Rs 151.7 billion), 27 per cent year-on-year decline, in value terms.

Investment demand tonnage was down 46 per cent from the previous year at 55.6 tonne, it added.