You can stop worrying about ETF outflows now. Indian gold imports have surged 41%

A steep hike in gold import duties did nothing to curb demand and Indians bought 51% more bars and coins and 35% more gold jewelry in the quarter ended December than a year before.

India's finance ministry raised import duties from 2% to 6% to curb a crippling current account deficit, but overall consumption in India nevertheless surged 41% to 262 tonnes in the fourth quarter.

While market watchers in the West have been focusing on record-setting outflows from gold-backed ETFs (and India has not been immune to the phenomenon) the subcontinent's appetite for physical gold were not even diminished by record high prices above R32,000 for the precious metal inside the country.

Bloomberg quotes Somasundaram P.R., managing director of the World Gold Council for India, as saying demand for the whole of 2013 could also improve on the 864 tonnes last year and could reach as much as 960 tonnes:

“Imports should be higher this year according to initial estimates based on the trend in the fourth quarter of last year and as the economy grows,” Somasundaram said. “There is a sense of optimism in the economy and we can feel it.”

It is difficult to underestimate the importance of gold in Indian culture.

Gold is the number two import after oil and Indian households are hoarding more than 18,000 tonnes of gold worth over $900 billion, representing 50% of the country's GDP.

This is only set to increase:

Around 50 percent of the country’s population is under 25, with 15 million weddings estimated every year till 2020, equivalent to about 500 tons of fresh gold demand, according to [private bank] ICICI’s investment strategist [Nilesh] Mundra. Gold forms 30 percent to 50 percent of total marriage expenses, he said.

Gold is coming off a 12-year winning streak and on Thursday was trading at $1,613 an ounce, slightly down year to date and 15% below record highs reached in August 2011.