Gold imports to India have been on the increase in the past few months reaching an estimated 120 tonnes in October. That 120 tonnes equates to a spend of close to $4 billion. In September, figures  were just shy of this amount, reaching $3.75 billion. Analysts have, in part, attributed this surge to festivals that have recently occurred in India during which people give gold as gifts. They have also speculated that it is a popular time for weddings to take place where gold is also bought in celebration and for making jewellery. It remains to be seen whether this trend will continue in the coming months as the marriage season ends and festivities come to a temporary end.  

When considering this data, it is important to note the closer statistics to consider if the surge really is as dramatic as it sounds. For example, 106 tonnes of gold was imported to India during September. However, 19 tonnes of this was then exported to other countries. Therefore the actual net import for domestic use of gold during September was 78 tonnes. The same was true of October where the net import amount for domestic use fell around the 70 tonne mark.

Even with export amounts considered, officials are still scheduled to meet next week to decide whether import amounts should be restricted to prevent any kind of deficit from occuring. However, the downside to imposing such sanctions is that it encourages unofficial imports to take place which are of course illegal. Another downside is that premiums tend to go up on official imports when they begin to be regulated. Higher premiums place strains at many points of the import – export process and are generally considered a bad thing for the industry as a whole.

Previous recent meetings failed to draw conclusions as to whether imports should be sanctioned and private trading firms who would be worst affected have been keen to have their voices heard. Buying and selling gold in India has always been a big business due to the nature of gold consumption in the country, but these recent figures are seen to be cause for concern in regards to Indian trade agreements.

India is the second largest consumer of gold after China, however, this has only been true as of 2013 when Chinese demand increased 32% on the previous year. This leap happened at the same price as the cost of gold fell 28% and savvy investors took advantage of low prices.