Gold demand in India in the January-March quarter declined 39%, year-on-year to 116.5 tonnes versus 191.7 tonnes on the back of a jewellers strike that lasted almost 45 days and hit sales, data from World Gold Council showed.
"The jewellers strike following the re-introduction of an excise duty, which left even wedding Shoppers affected, was one major reason impacting the demand, " said Somasundaram PR, MD, India, World Gold Council.
The sharp rise in gold price, since the beginning of the Year and an expectations of a cut in customs duty on gold also led to customers holding back purchases, he added.
In value terms, gold demand in India fell 36% to Rs 29,900 crore versus Rs 46,730 crore a year ago.
Overall, jewellery demand in the first quarter in India was down 41% to 88.4 tonnes, while investment demand fell 31% to 28 tonnes.
For the full calendar year 2016, World Gold Council expects demand for the yellow metal to be in the 850-950 tonnes range in India.
"The promised rural thrust in budget spends, favourable monsoons and the jewellery trade back to work, adapting to the new regulations, are all favourable factors, which will lead to demand returning to normal levels, " said Somasundaram.
Globally, gold demand in the first quarter of 2016 rose 21% to 1,290 tonnes, driven by huge inflows in gold exchange traded funds, fuelled by investor concern over the global economic uncertainties.
Global investment demand for gold surged 122% to 618 tonnes, while jewellery demand was still down 19% to 482 tonnes.