* "Black money" accounts for about 10-30 pct of gold
* Indians disclose $10 bln in hidden wealth in tax evasion
* Higher returns from equities, bond dent gold's appeal
* India's 2016/17 H2 imports seen up 25-50 pct vs H1
By Manolo Serapio Jr and Koustav Samanta
SINGAPORE, Oct 18 India's crackdown on
undisclosed foreign assets and income is curbing demand for gold
in the world's second-biggest consumer, while rising real
interest rates and better returns from other financial markets
are also hurting purchases, a banker said.
Although consumption should pick up from now until the end
of the financial year, when India buys more for gifting during
festivals and weddings, weak demand so far has dragged on the
global gold price that has shed nearly 9 percent from a
two-year high in July to $1,258 an ounce on Tuesday.
"There is a crackdown on black money in India and many
people who were looking at gold as an investment for unaccounted
income are no longer investing in gold at all," Shekhar
Bhandari, executive vice-president of Kotak Mahindra Bank
, told Reuters on the fringes of an industry meet.
Unofficial estimates suggest funds illegally deposited in
banks outside the country to avoid tax, known as "black money"
in India, account for about 10-30 percent of the country's gold
demand, said Bhandari.
A tax evasion amnesty scheme, led by the government of Prime
Minister Narendra Modi, that closed in September disclosed
nearly $10 billion in undeclared income.
India's gold demand has also been hit by higher returns from
other asset classes, Bhandari said, with returns on equities and
bonds at 12-13 percent dwarfing gold's 0.9 percent in terms of
rupees since 2013. Rising real interest rate due to declining
inflation is dimming gold's draw as well.
"The returns on gold in rupees is pathetic," Bhandari said.
"I think it won't be advisable to invest in gold given
current levels where investment returns are likely to be
negative in Indian rupees."
India's gold imports fell for a ninth month in September as
weak retail demand and higher discounts prompted banks and
refineries to cut overseas purchases.
But imports in the second half of India's financial year to
March will probably be 25-50 percent more than the first half,
said Sunil Kashyap, managing director for global banking and
markets at Scotiabank.
"With Diwali just about two weeks away from now, demand so
far looks good. Expectation is that it'll sustain until the end
of the year," Kashyap said.
Gold discounts dropped to the smallest in nearly nine months
last week as the festive season began.
"If stability of the rupee continues and gold prices are
stable, then we can expect positive trends. But any kind of
volatility could hamper gold," said Scotiabank's Kashyap.
(Reporting by Manolo Serapio Jr. and Koustav Samanta; Editing
by Himani Sarkar)