World Gold Council Report: IMF Forecasts 23% Per Capita GDP Growth by 2026

Listen to our Podcast: Grow your wealth and keep it secure.

0:00 / 0:00


The 2023 update of the World Gold Council’s report on India’s gold market explores shifts since 2017, examining drivers of demand, consumer perceptions, and the evolving investment landscape. Despite societal and geopolitical disruptions, India’s adaptability is highlighted. The IMF forecasts a 23% per capita GDP growth, presenting both opportunities and challenges for gold amid changing investment patterns. Gold remains resilient, and deeply embedded in Indian culture, especially during weddings and festivals. The report envisions a future where gold enhances its relevance to India’s economy, serving as adornment, a portfolio diversifier, and a hedge against inflation.

Indian Gold Demand: Culture, Economics, and Surprising Trends

Gold demand in India stems from a variety of factors, encompassing cultural ties, traditional practices, and festive exchanges. These qualitative aspects are complemented by quantitative elements, providing additional insights. The initial report, part of a series on the Indian gold market, examines demand through both quantitative analysis and qualitative exploration.

To understand gold demand comprehensively, the world gold council employs a thorough econometric analysis of long- and short-term determinants. Additionally, they scrutinise demographic, socio-economic trends, and related developments influencing present and future demand. By delving into Indian demographics and economic progress, they aim to grasp current gold demand dynamics and anticipate future trends.

Quantitatively, they utilise an econometric model, analysing three decades of annual data (1990-2020) to identify key influencers of gold demand in India. Our research unveils three primary long-term drivers: income, where a 1% rise in gross national income per capita results in a 0.9% increase in gold demand; gold price level, causing a 0.4% demand decrease for every 1% rise in the rupee-based gold price; and government levies, which affect demand differently based on whether gold is purchased as jewellery or bars/coins.

Contrary to expectations, the world gold council’s findings reveal that income has a more significant impact on demand than price. This was evident in the 2000-2010 period when demand surged by over 40%, reaching 1,000 tonnes annually, despite a 137% increase in the rupee gold price. The 77% rise in per capita income during the same period effectively countered the escalating prices.

Factors Shaping Indian Gold Demand: Long-Term and Short-Term Dynamics

Long-term factors

1. Increasing Working Age Population

  • The Indian working age population is poised to grow by an average of 7 million over the next 20 years.
  • Projections indicate a population of 890 million by 2041.

2. Rising Incomes

  • Positive correlation between rising incomes and Indian gold demand.
  • A 1% increase in income leads to a 0.9% rise in gold demand.
  • Conversely, a 1% increase in gold prices results in a 0.4% decline in gold demand.
  • The expanding working age population and increased labour force participation are anticipated to drive heightened gold demand.
  • Cultural affinity for gold spans religions, and as urbanisation progresses, earning power rises, subsequently boosting household incomes and gold demand.

Short-term Factors:

1. Inflation

  • A 1% increase in inflation triggers a 2.6% rise in gold demand.
  • Globally, investors turn to gold as a hedge against inflation, and India follows suit.

2. Gold Price Changes

  • A 1% increase in the gold price leads to a 1.2% decrease in gold demand.
  • Notably, in the first half of 2013, despite a 20% fall in the rupee gold price, consumer demand surged by 37% year-on-year.

3. Excess Rainfall

  • A 1% increase in monsoon rainfall above the long-run average results in a 0.2% boost in gold demand.
  • Favourable monsoons enhance crop yields, infuse money into the rural economy, and consequently, elevate gold demand.

Government Policies and the Impact on Gold in India

India, a significant global hub for gold demand, stands out with an absence of domestic production. The correlation between rising demand and increased imports has profound implications, notably on India’s trade balance and current account. This impact was starkly evident post the Global Financial Crisis when gold imports surged, reaching Rs 2,922bn by FY 2012-13, constituting nearly 20% of total imports.

Facing a widening fiscal gap, the government implemented stringent measures, including a five-fold increase in duties on gold imports, reaching 10% in August 2013. The ’80:20′ rule, obliging gold importers to export 20% of their gold as jewellery, was introduced but later scrapped in November 2014. Import duties persisted at elevated levels, further raised to 12.5% in July 2019 as part of fiscal reforms.

Despite a reduction in Basic Customs Duty (BCD) to 7.5% in the Union Budget of 2021-22, total import duties on gold stand at 10.75%, posing implications for the gold market. Government policies have not only influenced prices but also led to consequences such as driving parts of the gold supply chain underground, with significant amounts being smuggled into the country.

Import restrictions have far-reaching effects, impacting the mainstream gold market and hindering its development. A reduction in tax rates is posited as a solution, potentially boosting overall demand for gold and creating opportunities for compliant sections of the market while squeezing out the unofficial or ‘grey’ market.

The implications extend beyond economics. High import duties have diminished India’s influence in the global gold stage, limiting the appeal of handcrafted jewellery overseas and constraining India’s role in the gold trading market. As gold imports account for a mere 7% of total imports over the past eight years, the intricate balance of policies and their consequences demands careful consideration for India’s position on the global economic stage.

India’s Jewellery Landscape: Trends, Challenges, and a Path to Modernisations

The Indian retail jewellery sector, contributing 1.3% to the GDP, is experiencing a transformative shift driven by consumer behaviour and regulatory changes. Chain stores gain momentum, securing a 35% market share by 2021, fostering competition and innovation. Financing proves challenging post-scams, impacting smaller jewellers. The manufacturing landscape, primarily handmade, sustains India’s unique market position. Mandatory hallmarking aims to level the playing field and boost demand among young consumers.


Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.This content is for educational purposes only.

Share this article: 

Read More Blogs

Our Secure Trading Platforms

Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading

Bajaj Broking App Download

7.5 Lacs+ Users


4.3+ App Rating


4 Languages


₹4300 Cr MTF Book