Indian government data show gold imports rose 65% year-on-year last month to $3.12 billion. While the government doesn’t publish tonnage data, UBS estimates this to be around 74 metric tons, based on the average gold price for the month. This would be the highest monthly inflow for the year so far.
According to UBS, rising gold Indian imports in the months ahead, pressuring the current account deficit, could result in a change of strategy from the RBI and the government, from one of gold import easing to further import restrictions.
According to HSBC, India’s trade deficit, meanwhile, hit an 11-month high. Indian authorities last year imposed restrictions to combat a large current account deficit, and there had been hopes they might start relaxing the rules.
However, since authorities have often cited bullion imports as a key cause of a ballooning trade deficit, the widening of the deficit in June does not offer a compelling reason for the RBI (Reserve Bank of India) to ease restrictions on the gold trade.
Gold is the second largest import item for India after petroleum. Indian government had taken several measures to curb gold shipments to address the high current account deficit.