India’s affinity with gold remains intact

Indian government has been high taxing gold, launched gold investment scheme, however Indian consumers affinity with the yellow metal showing no signs of easing.

• According to Indian finance ministry today, India's gold import for the month of April is up 78.3% y/y to $3.13 billion. Lower international gold price has helped Indian consumers to pocket more gold despite higher levy imposed by government.

• Another report from World gold council revealed that while consumption of gold has dwindled in China by 7% y/y in first quarter of 2015, India consumed 15% more gold. Net consumption grew to 191.7 tons in the first quarter. Though China has taken the largest consumer crown from India in recent years, India seem to be ready to take it back.

Indian consumers' affinity with gold puts the central government in a tough position as high imports of gold puts down ward pressure on current account.

India in April registered $10.99 billion deficit among which gold and oil import is constituting about $10.57 billion.

So it can be said Indian economy would move into heavy surplus if it can manage to cut back on gold and oil.

However as of now, with gold it looks unlikely so government need to focus on how to curb its oil need and fast. Oil is unlikely to stay at current level for ever. India still ran about $ 7.44 billion deficit in oil in April.