MUMBAI/NEW DELHI- India's gold imports plunged more than 73% year-on-year in March to their lowest in 6-1/2 years as record domestic prices and a lockdown to curb the spread of coronavirus squeezed retail demand, a government source said on Monday.
Lower imports by the world's second biggest consumer of the precious metal could limit a rally in global prices, but also help New Delhi bring down its trade deficit and support the rupee.
India imported 25 tonnes of gold in March, down from 93.24 tonnes a year ago, said the source, who is not authorised to speak to the media. In value terms, March imports dropped nearly 63% to $1.22 billion, he added.
"Until the second week demand was modest but then suddenly prices spiked and demand was squeezed," the bullion division head of a Mumbai-based private bank said in a note.
Gold futures MAUc1 in India hit a record high of 44,961 rupees per 10 grams in March after rising nearly a quarter in 2019.
Gold purchases stopped after Prime Minister Narendra Modi ordered a three-week lockdown on March 24 to avert a massive outbreak of coronavirus infections, said the dealer, adding, "All jewellery showrooms have been closed due to the lockdown."
The weak demand forced dealers to offer as much as a $48 an ounce discount over official domestic prices in March, the highest since mid-September. The domestic price includes a 12.5% import tax and 3% sales tax.
"Demand is unlikely to revive immediately after the lockdown. People would first focus on buying essentials," Mukesh Kothari, director at dealer RiddiSiddhi Bullions in Mumbai, said.
India's gold imports could fall below 5 tonnes in April even if the current three-week lockdown is lifted in mid-month, said another Mumbai-based dealer with a gold importing bank. This would mark a drop from last year's 110.18 tonnes.
(Reporting by Aftab Ahmed and Rajendra Jadhav; Editing by Shri Navaratnam/Mark Heinrich) ((email@example.com; +91-22-68414378 ; Reuters Messaging: firstname.lastname@example.org))