(Updates price in fifth paragraph.)
Feb. 18 (Bloomberg) -- Curbs on gold shipments by India spurred a near-doubling of bullion coming into the country through unofficial channels, according to the World Gold Council, which forecast that the restrictions may be relaxed.
Unofficial flows were close to the top end of a range from 150 metric tons to 200 tons in 2013, the council said in a quarterly report, without giving a precise figure. Official imports were 825 tons last year, it said in the report. That’s 4.1 percent less than the council’s estimate for 2012 imports in an earlier report.
India’s trade restrictions restrained growth in official consumption, helping China to surpass the country as the largest consumer last year. A relaxation may help to buoy prices that advanced to a three-month high today on increased haven demand. The government can review rules by the end of March if Asia’s third-largest economy controls the current-account deficit, Finance Minister Palaniappan Chidambaram said on Jan. 27.
“There could be an easing of the curbs by March end because that is the indication that has been given,” P.R. Somasundaram, managing director for India, said in an interview from Mumbai. “The official supplies have come down to a trickle now and the grey market would have grown significantly.”
Bullion for immediate delivery fell 1.1 percent to $1,314.90 an ounce at 3:58 p.m. in Mumbai, after rising to $1,332.45, the highest level since Oct. 31, amid concern that the U.S. recovery may be faltering.
India’s government raised the import tax on gold three times and tightened financing norms last year to reduce demand and narrow the record current-account deficit, which sent the rupee to an all-time low. Between 1 tons and 3 tons of gold is brought in illegally every month, Chidambaram said on Jan. 27.
India’s bullion demand gained 13 percent to 974.8 tons in 2013, with consumption of bars and coins rising 16 percent to 362.1 tons and sales of jewelry advancing 11 percent to 612.7 tons, the London-based council said. Consumption in India, which imports almost all the bullion it needs, accounted for about 25 percent of global demand in 2013, the council estimated.
“The futility of continuing with these controls and the social cost it will have is known to the government,” said Somasundaram by phone. “They have now achieved what they had to achieve in the short run.”
The deficit, the broadest measure of trade, tracking goods, services and investment income, will narrow to $45 billion this fiscal year from a record $88 billion in 2012-2013, Chidambaram said yesterday.
--Editors: Jake Lloyd-Smith, Thomas Kutty Abraham