India's gold imports in March surged 471% from a year earlier to a record 160 tonnes, a government source told Reuters on Thursday, as a reduction in import taxes and a correction in prices from record highs drew retail buyers and jewellers.
Higher imports by the world's second-biggest bullion consumer could support benchmark gold prices, which have corrected nearly 17% from an all-time high of $2,072 in August 2020.
The surge in imports could increase India's trade deficit and pressure the rupee.
India imported a record 321 tonnes in the March quarter, up from 124 tonnes a year ago, the source said.
The source asked to remain anonymous since he is not authorised to speak to the media.
In value terms, March imports surged to $8.4 billion from $1.23 billion a year ago, he said.
In February, India slashed import duties on gold to 10.75% tax from 12.5% to boost retail demand and curtail smuggling into the South Asian country.
"Many consumers had postponed buying due to higher prices. They rushed to buy after prices corrected sharply," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the city of Kolkata.
In March, local gold futures hit a one-year low of 43,320 rupees per 10 grams.
Jewellers were building inventories after seeing robust retail demand, said a Mumbai-based bullion dealer with a gold importing bank.
"Throughout the month gold was trading at premium because of jewellery demand," the dealer said.
Last month dealers charged premiums of up to $6 an ounce over official domestic prices, inclusive of 10.75% import and 3% sales levies.
India's gold imports in April could fall below 100 tonnes as jewellers fear government could impose lockdown to arrest rising coronavirus infections, the dealer said.
India reported 72,330 new Covid-19 infections overnight, data from the health ministry showed on Thursday, the highest since Oct. 11.