MUMBAI (Reuters) - Gold investors in India, the world's largest consumer, are likely to outstrip jewellery buyers in 2-3 years with the economy on the rebound and buyers seeking new ways to protect their investments from pilferage.

"The signs of heavy increase in investment demand are visible and may outperform jewellery demand in 2-3 years" said Anjani Sinha, president of Indian Bullion Market Association (IBMA), which represents about 10,000 jewellers across the country.

"We may see 20-30 percent rise in investment demand driven by the new class of investors. Even during this festive season, demand for coins was more compared to jewellery, strengthening the trend."

India just finished its peak festive season that starts in August and ends in October.

IBMA said it has sold 7,000 coins of 8 grams each since August and hopes to target 100,000 coins within one year.

India has traditionally been a jewellery-devouring country, with the important part gold jewellery plays in marriages and other family celebrations.

But the trend started to change in 2003, when gold coins and bars were allowed to be sold by licensed banks and some traders. In 2007, investment demand jumped 11 percent to 215.4 tonnes.

Even in 2008, when Indian imports fell 7 percent to 712.6 tonnes at the onset of a global economic slowdown and high prices, investment stayed steady at 2007 levels.

In 2008, jewellery consumption was 501.6 tonnes, while investment demand was 211 tonnes. In the first-half of 2009, when the economic downturn peaked, demand fell 55 percent to 126.7 tonnes, the worst since 1997, World Gold Council data showed.

Currently, gold jewellery accounts for 70 percent of India's total annual consumption.

SURGE IN THE OFFING

Industry players say the consumption in the form of investments is likely to surge from here on as the economic recovery gathers strength.

Former central bank governor C. Rangarajan, who heads the government panel that advises the prime minister, said growth in the fiscal year that ends in March 2011 would accelerate to 7 to 8 percent after growing by about 6.5 percent in 2009/10.

Gold coins and bars are an attractive investment option, unlike jewellery, which involves making charges and wastage.

"Gold coins and bars have more convenient usage, may be in the form of investment, or deferred consumption or for gifts," said Nayan Pansare, an independent consultant to jewellers.

"Definitely, investment demand is likely to surge as more and more people are looking to gold as an investment rather than as a fashion statement," said Rajesh Khosla, managing director, MMTC PAMP Pvt Ltd, a gold coins refiner.

MMTC PAMP, a joint venture between the state-owned MMTC and Swiss-based gold refiner, hopes to start its refinery in the northern Indian state of Haryana in the second-half of 2010 and expects to produce 100 tonnes of gold coins in 2010.