Indian gold imports through the western city of Ahmedabad dropped to 2.66 tonnes in October from 12.19 tonnes in the previous month, according to figures provided by Chokshi Mahajan, bullion merchants' association.

India imported 13.33 tonnes through Ahmedabad in October1998. "There were hardly any buyers because the rates were swinging from $270 an ounce to $340 an ounce," said Girish Kumar, director of Chokshi Mahajan.

"Imports have been at less than 50 per cent our usual volumes in the last one month," said a bullion dealer at a state-run bank, which has been importing sizeable volumes, in the southern city of Madras. Besides the price volatility, he said the secondary market, where visiting non-resident Indians and smugglers were offering gold at a discounted price, also depressed themain market. About 30 to 40 per cent of India's gold imports come through Ahmedabad, the main city of Gujarat state.

Festival demand depressed: Gold demand in the country, which is normally at its peak in the three-month festival and wedding season starting from September, has been severely hit by a spike in domestic retail prices.

"We have never had such a bad Diwali. There were hardly any customers this time ," said Kishore Zaveri, a leading Ahmedabad-based jewellery manufacturer and gold importer. Traditionally, demand is at its highest during Diwali, the Hindu festival of lights which ended in the first week of November. India imported 614 tonnes of gold in 1998, the World Gold Council said, with imports through unofficial channels adding about another 10 percent to the total. Traders however said a stabilisation in international gold prices at around $292 an ounce had helped improve demand.

"The exact impact will be known after a few days because the market was shut for the last one week forDiwali," Zaveri said. Jewellers in the southern city of Madras, a major centre for gold ornament sales, said.