Gold demand in India declined by 26% to 190.3 tonne during the January-March quarter due to higher import duties and supply curbs imposed by the government, the World Gold Council on Tuesday said.
In the first quarter (Q1) of 2013, the gold demand in the country had logged in 257.5 tonne, according to WGC Gold Demand Trends report.
In value terms, gold demand witnessed a fall of 33% to Rs 48,853 crore during the first quarter of 2014, compared to Rs 73,183.6 crore in Q1, 2013.
"During Q1, 2014 the demand went down by 26% illustrating the continued impact of higher import duties and supply curbs imposed by the Centre to reduce the Current Account Deficit due to which gold prices were higher in the spot markets," WGC managing director, India, Somasundaram PR said in Mumbai.
He said however that gold continued to enter India through unofficial channels although the estimates of the grey market vary, and there is now a far greater understanding of the adverse impact it is having on the gold industry.
"Gold demand in UAE went up by 13%, which shows that many Indians are buying there and bringing it to the country," he pointed out.
The total jewellery demand was down 9% at 145.6 tonne compared to 159.5 tonne Q1 of 2013.
In value terms, jewellery demand saw a fall of 18% at Rs 37,377.8 crore, from Rs 45,331.2 crore in Q1 2013.
Total gold recycled went up marginally in Q1 2014 at 21.3 tonne, from 21 tonne in Q1 2013.
Total investment demand for Q1 2014 was down by 54% at 44.7 tonne from 98 tonne in the same quarter last year.
In value terms, gold investment demand dropped by 59% to Rs 11,475.2 crore, from Rs 27,852.4 crore in the same quarter last year.
"With the election of the BJP and its declared pro-business approach, there is an expectation that the short term curbs will be removed creating a favourable system that deals with gold as a fungible asset category, reflecting its importance in culture," Somasundaram said.
In 2014, gold demand is expected to be around 900-1,000 tonne, he added.