Somasundaram PR, the India managing director for the World Gold Council, talks about the country's efforts to curb demand for the precious metal.
What are your thoughts on India's move to lift the import duty on gold?
The hike in customs duty on gold from 8 per cent to 10 per cent, coming on the heels of several other policy and regulatory measures in recent months, is yet another step to limit supply of gold by making it more expensive.
Almost all of India's gold demand is met through imports and this hike will further increase the cost of gold for retail customers.
We understand the short-term imperatives and acknowledge that a large current account deficit is unsustainable and needs to be checked. However, there are a number of factors which influence the current account deficit in India of which gold is one.
Is it likely to affect how much gold Indians buy?
Demand for gold, whether in the form of jewellery or investment [bars and coins], is driven by millions of individuals investing as part of their household savings and is not discretionary spending for consumption. People buy gold as a long-term investment to protect their wealth and gold also has huge significance socially, emotionally and economically in India.
We believe that policy development should view gold as a strategic investment asset for India and the long-term objective should be to monetise the nation's gold stock to support economic growth.
With the wedding and festive season in the fourth quarter of 2013, we believe that the demand outlook remains strong in India and the long-term fundamentals of the gold market remain intact.
What other factors are influencing the country's trends for demand for gold?
India is a significant stakeholder in the gold market with over 20,000 tonnes in the hands of millions of people, and the nation's affinity to gold runs deep within its culture and religion. Research by the World Gold Council has found that Indians have positive expectations for gold in the long term, we therefore expect that India will continue to be a long-term consumer of gold.
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