India’s gold imports are likely to dip this year as high inflation and global economic uncertainty take a toll on demand, reports said.

The country's gold imports may fall this year, as the current economic condition is not conducive enough for people to take a call on their investment plans, says the World Gold Council (WGC).

The council, in its Gold Demands Trends report for the quarter said the gold jewellery demand in India, competing with China to be the largest importer of gold, dipped 19% on year and investment demand tanked 46% in the first quarter of 2012 on the back of a weak rupee and the three week strike by jewellers protesting the hike in taxes on gold and non-branded gold jewellery.

At the same time, China retained its position as the top consumer of gold for the second consecutive quarter with its gold consumer demand up 10% to 255.2 tonnes, beating India's 207.6 tonnes, which was down 29% on year.

China's physical gold bars and coins demand climbed 13% on year to a quarterly record of 98.6 tonnes, while jewellery demand rose 8% to 156.6 tonnes and accounted for 30% of the world's gold jewellery market, data from the council showed.

China is increasingly buying the precious metal to preserve wealth amidst ongoing concerns over inflation. Gold is considered a hedge against inflation as its value only increases with a rise in inflation.

Apart from the three-week strike in India, Ajay Mitra, Managing Director-India and Middle East, WGC said that the slowdown and inflation made the beginning of 2012 a challenging period for the Indian gold market. Also, jewellers are being asked to collect tax at source on all purchases above Rs 2 lakh which is likely to impact gold demand and imports.  

However, some industry experts believe that there will be a bounce back in demand with the rollback in taxes, the upcoming marriage season and once the rupee recovers.

"It is too early to predict anything for India. The upcoming marriage season, the rollback of duty on jewellery and a better-than-expected monsoon would show good inventories and demand in the second quarter," said Mitra.