Commodity Online
MUMBAI: A drastic fall in the import of gold and silver in India is beginning to affect trade in several other commodities in the country. A new report from the Reserve Bank of India (RBI) says that slowing bullion import is pulling down import and trade in several commodities including oil and oil seeds.

RBI data says the share of silver and gold in India's total imports has fallen to 7.2 per cent in April-December 2008-09 from 8.4 per cent in the same period previous year.

The non-oil imports during March dipped by 18.92 per cent to $11.75 billion from $14.49 billion, while in the fiscal 2008-09, the imports grew by 13.2 per cent to $194.58 billion from $171.19 billion.

Commodity analyst Nitin Shah says since gold and silver are the major drivers of Indian market, it is natural that a fall in bullion import is hitting the import and supply of other commodities like oil and oil seeds.

He said the growth in gems and jewellery exports recorded a sharp deceleration to 0.1 per cent during April-December 2008 from 26.8 per cent a year ago.

India did not import any gold and silver in February and March thanks to high prices of bullion. However, bullion imports began to pick up in April as India imported nearly 30 tons of gold and 60 tons of silver.

The Bombay Bullion Association said that gold and silver imports are beginning to pick after the bullion market was hit by virtually zero imports thanks to high gold and silver prices.

India is one of the largest importers of gold and silver in the world. Global market meltdown has been forcing India’s bullion dealers to re-cycle scrap gold and silver materials leading to a big fall in the imports of gold and silver by India.

India used to consume around 3,000-4,000 tonnes silver an year a few years back. India’s biggest demand for silver comes from rural India, where agricultural output is determined largely by the June-to-September monsoon.

But in 2008, silver imports by India plunged to about 2,000-2,500 tonnes. Traders and industry association leaders said that silver imports in the country continued to be dull for the last three months of 2009.

Gold imports by India, one of the largest consumers and importers of the yellow metal in the world, could drastically fall to around 200 tons during 2009 if the current trend continues, a bullion research outlook released by Commodity Online India Limited (COIL) said last week.

“India managed to import only around 32 tons of gold during January, February, March and April, 2009. Dull imports have resulted in exports of scrap gold from India to destinations like Dubai,” said the COIL report. COIL publishes Commodity Online, the largest integrated global commodities portal.

Based on India’s gold import in the last four months, and looking at the probability of imports in the coming seven months, the bullion research analysis from Commodity Online says that India will have the lowest gold import in 2009 in the last eight years.

”We expect gold imports by India to be sluggish in 2009. There will not be much momentum in gold sales and imports in the country thanks to the high gold prices, volatility in markets and global economic conditions,” says Nitin Khanna, bullion research head at Commodity Online.

Khanna predicted that gold imports by India could stand around 200 tons this year if this trend continues. He said gold imports and sales will gain in the months of August, September and November thanks to festivals like Diwali and Onam. “However, current bullion trade scenario suggests that countries like China will import more gold than India,” he said.

Following are the Commodity Online research findings on India gold imports:

**In the last eight years from 2000, gold imports by India every year have been between 400-800 tons. In 2008, India’s gold imports dipped by 45 per cent to touch 450 tons.

**India managed to import only around 32 tons of gold during January, February, March and April, 2009.

**Buying of gold jewellery has fallen sharply in the last four months leading to a slump in the yellow metal’s imports.

**Bombay Bullion Association assessment says gold sales and demand have dropped to negligible levels because of high prices and gold and jewellery sector is reeling under a crisis because of high prices and retrenchments across sectors.

**Current gold prices in India are hovering around Rs 14,000 for10 grams. Bullion traders expect gold prices could zoom to Rs 15,000 per 10 grams in the coming months, leading to a dip in gold imports.

**Fall in gold demand has been thanks to high prices of the yellow metal. Gold prices have moved up as investors found heaven in the yellow metal on fear of deflation. But even though investment in gold looks attractive, many investors have been struggling for survival after they lost money in commodities and equity markets.

**Gold prices could zoom to higher levels because of the dollar-euro movements on weak economic fundamentals.

**One major reason why gold imports by India are plunging is because Indian banks have a lot of carryover gold stocks from last year resulting in lower imports.