Centre's demonetisation drive is seemed to have a significant impact on the gold demand in the country as imports of the metal dropped sharply in December and January.
Gold imports reduced to 54.1 tonnes in December and 53.2 tonnes in January from a high of 119.2 tonnes in November, the month during which the government scrapped the old Rs 500/1,000 notes.
The decline in January is 43 per cent from the gold imported in the corresponding month in 2016.
The sudden decision to demonetise the old high value notes led to a massive cash crunch in the country impacting demand for various commodities, including precious metals.
According to an RBI assessment paper, after demonetisation, the domestic demand for gold (or gold items) spiked suddenly, with "buyers reportedly willing" to pay huge premiums to dispose of old currency notes with jewellers.
"Reflecting this development as well as the seasonal jump, the volume of gold imports surged in November, even above the elevated October level. Gold imports, however, declined sharply in December 2016 and January 2017," the paper said.
The RBI said that around 80 per cent of the gems and jewellery purchases in India are made in cash and consumer demand was reported to have been impacted due to the cash shortage.
India is one of the largest gold importers in the world, and the imports mainly take care of demand from the jewellery industry.
In volume terms, the country's total gold imports declined to 546 tonnes in April-January of this fiscal, much lower than 892.9 tonnes in the year-ago period. Total gold imports had totalled 968 tonnes in 2015-16.