India’s gold imports in terms of quantity have seen an exponential rise since February this year with an average growth of over 200% compared to the same period in the last fiscal year, according to data available with the Ministry of Commerce.

In January this year, the bullion market witnessed a negative growth of (-) 29% compared to the same period last year. While the gold import bill in 2016 was Rs 1,958,577.45 lakh, it went down to Rs 1,389,079.03 lakh in 2017. 

However, this changed drastically in February when a steep rise in bullion demand and its import was recorded.

In February this year, India had a gold import bill of Rs 2,334,287.02 lakh as against Rs 959,075.69 lakh in the same period last year, showing a growth of 143%.

While March saw a 322% growth in gold imports, in April it was 201.85% and in May, gold imports grew by 223.97% compared to the same period last year, as per data with the Ministry of Commerce.

Industry experts believe that such a steep rise in gold imports in the first quarter could be due to the after effects of demonetisation when people found gold to be a safe investment haven rather than hoarding cash at home.

Official sources said that many black money hoarders, after the demonetisation announcement, gave their black money to gold merchants with an understanding that when things eased (after demonetisation), they would get back their money by way of gold as per mutual agreement.

Praveen Khandelwal, general secretary of The Confederation of All India Traders, told The Sunday Guardian, “Post demonetisation, people have understood that gold turns out to be a safe investment asset; therefore, people from all sections and classes have started investing their money in gold. Even the rural population has started investing a large chunk of their savings in gold. Rumours that Rs 2,000 notes will be banned or that another demonetisation was being planned and that the government could target the real estate sector, have also led to such demand.”

The Centre and the Income Tax department had carried out 1,500 searches and surveys at several jewellers across the country following the demonetisation announcement and had issued over 5,000 notices to them that were able to detect undisclosed income worth Rs 5,000 crore. 

The Enforcement Directorate (ED) and the Central Board of Direct Taxes (CBDT) took action and the ED has registered 13 cases against jewellers for money laundering post demonetisation, while the CBDT has booked 81 jewellers for evading tax. 

“People’s loss of faith in currency has led to demand for jewellery per se in the country and we have seen a decrease in the number of investments in gold in the form of bars or coins. Retail jewellery— ranging between Rs 50,000 to Rs 1.5 lakh—has picked up post demonetisation, and we have also been experiencing a growth in gold consumption in rural areas. This could be a reason why the first quarter of this year has seen a growth in gold imports,” D.D. Karel, spokesperson of the All India Gems and Jewellery Trade Federation, told The Sunday Guardian.

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