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[MUMBAI] Weak oil and commodity prices are offsetting concerns at India's central bank over the impact of a spike in gold imports on the broader economy, officials say, even as the industry forecasts another three months of strong buying.
A more sustained increase in bullion imports after June, however, could cause concern, a policymaker said.
"(While) we have the comfort from low oil prices, there is a large cushion and we don't need to be very concerned about the gold imports numbers," said one senior official involved in policy decisions, who declined to be named.
Concern would kick in if imports stay at or over 100 tonnes a month after June, he said.
Gold imports more than doubled in March to 125 tonnes from a year ago around the festival of Akshaya Tritiya - considered by many in India to be an auspicious time to invest.
Industry players expect imports to average 60 tonnes from April onwards, rising 30 per cent until June.
Indians are the world's biggest consumers of bullion, and typically imports rise during the festive or marriage seasons, when gold is popular as a gift. Imports have been driven by such seasonal demand and lower bullion prices: on Wednesday, spot gold prices were down over 6 per cent from a year ago.
"Gold imports are going to be higher in the April-June quarter as now there is more clarity on import rules and demand is good at lower prices," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation.
Most of the March imports were by banks, while the star trading houses - leading private firms - contributed to only 30 per cent of the purchase, reversing an earlier trend, the policymaker said.
"Banks are more disciplined and organised than the star trading houses, so that's not a worry for us," said the policymaker, pointing to the RBI decision to make it mandatory for importers to pay upfront to limit hoarding.
However, even if gold imports do not come down to the extent expected, India is unlikely to go back to the curbs imposed in 2013 during the currency crisis, like the unpopular 80-20 rule that forced importers to export 20 per cent of all gold imports.
India's gold imports were 769 tonnes in 2014, compared with 825.4 tonnes a year ago, according to the World Gold Council.
Gold is the second-highest imported item by value in India and a jump in imports led to a wide current account deficit which in 2013 sparked the worst currency turmoil since a 1991 balance of payments crisis.