Gold demand in rural India is expected to be lower this year with weak monsoon affecting household savings, according to the World Gold Council (WGC).
However, gold demand during the auspicious Diwali festival is expected to be better, it said, adding that the long-term demand for gold remains "intact" in India despite government restrictions.
"Rural demand is not looking absolutely great now because rural household savings are coming down even though it is being expected that monsoon will be back to normal," WGC India Managing Director Somasundaram P R told reporters on the sidelines of an Assocham event.
About 7-8 per cent of rural household savings goes into gold buying in India, he said.
Much of Indian gold demand comes from rural households, especially farmers. Good crop production raises income levels and translates into greater bullion demand.
According to the WGC, India's overall gold demand in the 2014 calendar year is estimated to decline to 850-950 tonnes from 974 tonnes in the last year.
Stating that government curbs have encouraged smuggling of gold into the country, Somasundaram said that out of the total demand of 850-950 tonnes projected for 2014 calendar year, about 200 tonnes would be served through grey market.
However with easing of import norms since May, gold shipments have rise, he said adding that the government should review these norms and reverse them soon.
The country would continue to depend on imports as recycled gold is only 10 per cent, he added.
Since the gold demand would remain strong for India in the long term, the WGC India chief emphasised the need to find ways to mobilise and monetise 22,000 tonnes of gold stock worth USD 1 trillion held in private hands via formal financial sector, he added.
Gold is the second largest import item for India after petroleum. To bring down current account deficit, government has imposed several curbs on gold imports.
These curbs include raising the import duty on the metal to 10 per cent and also making it mandatory for traders to export 20 percent of the imported gold.
Emphasising on the quality of gold jewellery, Bureau of Indian Standards (BIS) Director General Sunil Soni said there has been an healthy growth of 25 per cent in hallmarked jewellery in the past one year.
"However, efforts are being made to make jewellery hallmarking system in India more reliable to improve the competitiveness of Indian