As we reported last week, India’s gold imports for the month of September were FIVE TIMES what they were for 2013, causing a massive spike in the trade deficit for the country.
This dramatic increase in gold demand has led the Finance Ministry to request increased restrictions on imports of the precious metal in order to even out the ratio of imports to exports, Reuters reported today.
In 2013, the country increased tariffs on gold to 10%, which led to a massive spike in illegal gold smuggling. Many experts believed the high duties would inhibit the official imports of gold, but the annual festival and wedding season always leads to an increase in gold demand for the country. Few expected the demand to be 5X what it was for the previous year, however.
Trade Minister Nirmala Sitharaman announced in September that there were no immediate plans to reduce the tariffs on gold imports.
India is the world’s leading importer of gold behind China and both countries account for nearly 70% of global demand.
On Thursday, India will celebrate Diwali, the Hindu Festival of Lights, a celebration where gold is typically given as gifts and religious offerings. Each fall, gold demand in India increases in advance of religious festivals and wedding season.