Corona effect: Drastic reduction in demand for gold, relief on trade deficit

There has been a major drop in gold imports during the Corona crisis period. The latest figures show that gold imports declined to $7.914 million in April and May for the first two months of 2020-21. This means that the demand for gold has decreased in the two months to April and May.

Gold imports stood at $8.75 billion in the same period 2019-20. Gems and jewellery exports declined 82.46 percent to $1.1 billion in April-May 2020. Similarly, silver imports declined 30.7 percent to $43.789 million during the first two months of 2020-21.

What is the reason?

The reason for this decline is the drastic reduction in demand in the wake of the Covid-19 epidemic. The decline in gold imports has helped reduce the country’s trade deficit (the gap between imports and exports). The gap between imports and exports declined to $9.91 billion from $30.7 billion the year before.

Due to the low trade deficit, India has left a current account surplus of $0.6 billion or 0.1 percent of gross domestic product (GDP) in the January-March quarter, while a deficit of $4.6 billion or 0.7 percent of GDP was recorded in the same period a year ago, the Reserve Bank of India said.

Imports fall since December

Gold imports have been declining since December last year. The declines in March, April and May were 62.6 percent, 99.93 percent and 98.4 percent respectively. India is the largest importer of gold, which mainly meets the demand of the jewellery industry. The country imports 800-900 tonnes of gold annually.