New Delhi, Feb 12 (IANS): India's gold demand shrunk by 14 percent to 842.7 tonnes in 2014 compared to 974.8 tonnes in 2013 due to import restrictions by government, the World Gold Council (WGC) said here Thursday.

"India's overall gold demand was slightly lower in 2014 which is unsurprising given the crippling restrictions on imports in place for most of the year. This had the biggest impact on investment demand," Somasundaram PR, managing director, India, WGC said.

However, the total jewellery demand in India for 2014 was up by eight percent at 662.1 tonnes as compared to 612.7 tonnes in 2013.

"In contrast, festival buying, bridal demand and a general upswing in economic sentiment led to an 8 percent growth in demand for jewellery - a record high from 2013," he added.

In 2014, the levels of gold smuggling was high as a direct result of supply curbs on the Indian gold market, WGC mentioned.

The value of jewellery demand in 2014 was Rs.208,979.2 crore, a fall of 19 percent from Rs.257,211.4 crore in 2013.

Total investment demand in the yellow metal for 2014 was down by 50 percent at 180.6 tonnes in comparison to 362.1 tonnes in 2013.

"The role of gold in the household economy cannot be underestimated and positive developments at the macro-economic level provide a real opportunity for bold gold policy reforms," Somasundaram said.

Saying that the country's natural affinity with gold as a savings asset should be embedded in the financial sector, he added: "One way of doing this would be to allow the formal financial sector to engage retail gold consumers through a variety of gold products such as; gold savings schemes, gold backed products and buy back options in coins putting the 22,000 tonnes of gold currently held by Indian households to work for the economy."

Total gold recycled in India in 2014 was 77.1 tonnes as compared to 100.8 tonnes in 2013.