July 16 (Bloomberg) -- Gold imports by India, the world’s second-largest user, jumped 65 percent in June after the central bank allowed more banks and traders to buy bullion overseas, widening the nation’s trade deficit to an 11-month high.
Shipments surged to $3.12 billion last month from $1.89 billion a year earlier, while silver imports dropped 53 percent to $212.8 million, the Commerce Ministry said in an e-mailed statement today. The trade deficit widened to $11.8 billion, the highest since July last year, it said.
The Reserve Bank of India allowed more companies to import gold in May after curbs on purchases imposed in 2013 helped narrow a current-account deficit that had pushed the rupee to a record low against the U.S. dollar. The government raised the import taxes three times last year and linked purchases to re- exports to contain demand.
The increase in gold imports “can perhaps be explained by partial easing in import restrictions in the middle of the first quarter,” Yes Bank Ltd. said in a report today. “We believe that this led to a one-off distortion in the month of June with gold imports moving up.”
Finance Minister Arun Jaitley on July 10 left the import tax on gold unchanged at 10 percent in the annual budget, defying industry expectation that the levy may be cut to boost supply ahead of the festival season starting in August and sending futures in Mumbai as much as 3.5 percent higher, the most in 10 months.
“While the government has relaxed some of the restrictions on gold imports, it has not done so in the wholesale manner at the recent Union budget announcement,” Santitarn Sathirathai, a Singapore-based economist for Credit Suisse, said in a report. “This means that the significant surge in gold imports that we had been anticipating will likely happen later than previously assumed.”
India represented about 25 percent of global demand in 2013, according to the World Gold Council. The restrictions on overseas purchases helped narrow the deficit to $32.4 billion in the financial year ended March 31, from $87.8 billion a year earlier, the central bank said May 26.