Falling gold prices push up demand in rural India by 10 to 15 pc

KOLKATA: PradipVittalraoShinde, a farmer from Maharashtra's Jalgaon district, has just bought a pair of bangles and a necklace for his sister getting married next month.

A banana farmer, Shinde made quite a handsome profit in the November 2012-January 2013 period. " Gold prices have climbed down to Rs 29,500 per 10 gm from Rs 32,000 per 10 gm in January. It was easier for me to buy gold jewellery now," he said.

Far away in West Bengal's Murshidabad, Pankaj Saha, a paddy farmer, has purchased gold jewellery for his daughter getting married next month. In Punjab, Virendar Singh, a 75-year-old farmer, has bought a pair of gold bangles for his daughter-in-law.

He said: "It is customary for the in-laws to present new clothes and gold jewellery to the new bride during Lohri. But I could not buy gold during Lohri because prices were very high. Now I am happy that I have been able to buy gold bangles for my daughter-in-law."

Jewellers say demand from rural India has gone up by 10 per cent-15 per cent in March this year as against last year.

"Jewellers are restocking in anticipation that demand will go up further in April when the marriage season kicks off," said Bachhraj Bamalwa, chairman, All India Gem and Jewellery Trade Federation.
Rural regions account for nearly 60 per cent-70 per cent of India's gold consumption.
Bamalwa said rural India was worried that prices would go up after the budget because of speculation that the government might increase the import duty on the yellow metal making it costlier.

" Gold is considered as an asset in India for all categories of people. Farmers, big or small, invest in the yellow metal in anticipation that they can fall back on it during bad years when erratic weather imperils farm production."

Soya bean farmers are investing on gold after they got good returns. "They are largely progressive farmers who are investing in gold. Gold is their first preference and land comes next. As prices of the yellow metal have dipped, progressive farmers have gone on a buying spree," said Rajesh Agarwal, spokesperson, for Soyabean Processors Association of India.

Gold prices are expected to go down further by the end of March, say traders. Prithviraj Kothari, director, RiddiSiddhi Bullion, said there is pressure on prices and indications are that they will come down further.

"Internationally, prices have dropped by $18 per ounce on Thursday. From a level of $1598 per ounce Wednesday, it has dropped to $1580 per ounce on Thursday," he said.

A price fall will further give an impetus to rural demand. In fact, World Gold Council has indicated that India will import 11 per cent more gold this year. Last year, India's gold import was at 864 tonne. This year, gold imports may touch 965 tonne, according to the council.

Venkatesh Babu, owner of Karnataka-based Chetna Jewellers & Bullion, said: "Farmers are buying gold according to their purchasing capacity. The demand is rising gradually."