Mumbai: The World Gold Council (WGC) has said in its latest Market Update that it expects Indian gold demand to recover from the lows of 2016 and reach levels of between 650-750 tonnes in 2017, before climbing further to about 850-950 t by 2020. The industry body stated that the gold market was one of the sectors of the Indian economy that was rocked last year by “a barrage of policy initiatives aimed at purging India of black money and instilling greater transparency”.

The report listed demonetisation, the re-introduction of excise duty, the restriction on cash transactions over Rs 300,000 and the forthcoming Goods & Service Tax (GST) as being behind the short-term headwinds that have affected the gold industry. But, it adds, “looking ahead, these policies may deliver a stronger economy and a more transparent gold industry, underpinning gold demand”.

On the other hand, the report also lists out some of the tailwinds that will drive growth going forward. These include “a banking system flush with liquidity, the bumper crop after a good monsoon, and central government employees’ and pensioners’ inflation-busting wage hike” which will all support economic growth.

Further it says the “GST will streamline India’s byzantine tax structure which, as well as boosting the economy, promises to make gold’s value chain more transparent”.

The report concludes with the observation that “over time, we anticipate that economic growth and greater transparency within India’s gold market will push demand higher: by 2020 we see Indian consumers buying between 850t and 950t”.