India's gold imports are expected to decline sharply in February, touching an over two-year low as investors abstain from buying the metal due to a surge in prices recently and expectations over a cut in import taxes in the upcoming general budget.
Gold imports by the country may fall to 25 tonnes in February, Reuters reported, citing estimates made by five industry participants, including bank dealers and traders.
The estimated decline in the metal's imports in February would be nearly 67 percent below the levels recorded in the previous month.
"Banks and trading agencies have scaled down imports. They are being forced to offer heavy discounts (to global prices) to clear inventory," Bachhraj Bamalwa, director at All India Gems and Jewellery Trade Federation, told the agency.
In the overseas markets, gold prices have risen to one-year high of $1,260.60 an ounce this month, as the safe-haven demand for the metal went up sharply amid a sell-off in global equity markets.
Domestically, the yellow metal prices touched a high of Rs 29,650 per 10 gram on 12 February, posting gains by Rs 2,600 in the previous eleven trading sessions.
Even after a discount of $50 an ounce offered by dealers in the country, consumers are not willing to buy the metal, according to industry participants.
Purchase decisions of Jewellers and retail consumers are influenced by expectations over a correction in gold prices and a likely cut in import duty by four percent in the upcoming budget.
"Consumers are not sure about price trends. They are waiting for prices to stabilise before making purchases," said Bamalwa.
Currently, India is the world's second biggest consumer of gold, next only to China. Nearly three-fourths of the gold imported by the country is consumed by retail buyers for jewellery.
A recent report by Kotak Equities said that Indians spent a whopping $267 billion (Rs. 18 lakh crore) on buying gold over the last ten years, even as the prices of the precious metal went up by over 250 percent during the same time.