Gold demand in India was down 39 per cent at 204 tonnes in the June quarter even as the prices fell nine per cent compared to the same period last year.
In value terms, demand dipped 41 per cent to Rs 50,564 crore (Rs 85,534 crore).
Jewellery demand was down 18 per cent at 154.5 tonnes and in value terms, it dropped 20 per cent to Rs 47,716 crore.
Despite declining prices, gold recycling was up at 16.4 tonnes against 9.5 tonnes in the same period last year.
The World Gold Council has revised its annual demand target to 850-950 tonnes in 2014 from 900-1,000 tonnes estimated at the start of the year.
Somasundaram PR, Managing Director, World Gold Council, said the fall in demand was largely to do with base effect and the high inflation leaving little money in the hands of customers to invest in gold.
"Last year was an exceptional year as far gold was concerned for gold. India bought 310 tones of the yellow metal with prices falling sharply after a sustained bull run," he said.