MUMBAI - India's gold imports in January dropped to their lowest in 17 months as prices rebounded and buyers postponed purchases in expectation of cuts in the import tax, provisional data from precious metals consultancy GFMS and bank dealers showed.
The drop in purchases by India, the world's second-biggest consumer of gold after China, could weigh on global prices, which have risen over 7 percent in eight weeks.
Lower gold imports could help the South Asian country to reduce its trade deficit that surged to the highest in more than three years in December.
The country's imports were 30 tonnes in January, down 37 percent from 47.9 tonnes a year ago, Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, said on Monday.
"Last month the industry was expecting the duty cut in the budget. People were not willing to build inventory," Nambiath said.
The expectation of the duty cut in January prompted traders to offer the highest discount in four months over official domestic prices.
However, Finance Minister Arun Jaitley kept the import tax unchanged in the annual budget presented on Feb. 1.
The rebound in overseas prices also kept buyers on the sidelines, said a Mumbai-based dealer with a private bank.
"Jewellers were not comfortable with the spike in prices. They were expecting a correction," he said.
After falling to the lowest level in five months in December, gold prices surged to the highest level in 17 months in January.
Indian banks aggressively imported gold in December taking advantage of lower prices and a lot of the unsold bullion was available to fulfil January demand, said a Chennai-based bullion dealer.
The country's overseas gold purchases in December stood at 80.4 tonnes, up 61 percent from a year ago, GFMS data showed.
India's gold imports surged 69 percent in 2017 from the previous year to 863.2 tonnes.
In February, imports could rise above 50 tonnes as jewellers have been replenishing inventory, the private bank dealer said.