 "Import duty hike to relinquish gold investment demand")
The latest round of import duty rise is set to bring down investment demand for gold to “negligible” levels, thereby reducing at least 38 per cent of its overall annual demand in India.
“Investment demand has already declined 50 per cent so far this financial year. Yesterday’s duty increase would reduce it further, probably to negligible,” said Mehul Choksi, managing director of Gitanjali Gems, one of India’s largest branded jewellery manufacturers and retailers.
Data compiled by the World Gold Council showed gold investment demand in the January-March 2013 period stood at 97 tonnes, consisting of 38 per cent of India’s total demand of 256.5 tonnes in that period. Meanwhile, faced with frequent import duty rises in gold, squeezing supply for jewellery making, ornaments retailers are planning to protest the government’s latest such move. The industry is looking at all options, including an “indefinite strike”, demanding a rollback.
In the fifth such instance in 20 months, the government raised import duty on gold and silver on Tuesday to curb burgeoning current account deficit (CAD). While the import duty on gold was raised by two per cent to 10 per cent, that on silver revised upwards by four per cent to 10 per cent. Simultaneously, the excise duty on conversion of gold from the dore bar (gold concentrate) was raised to nine per cent from the existing seven per cent. This was the fifth such hike since January 2012 from the level of Rs 300 per 10g and Rs 1,000 a kg ad valorem in gold and silver, respectively.
“We were working with the government to control CAD. We appealed voluntarily to our jewellery retailers to stop selling gold coins and bars, which brought the bullion’s sales almost to zero. But every time we tried to help the government, we got strict norms through increase in import duty,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation (GJF), the apex body of 600,000 jewellery retailers. “We are not going to bear the brunt now. We will protest the move and call on an indefinite strike, if need be, to raise our voice.”
Consumers generally remain absent from fresh purchases during the April-August period, due to the lack of festival and wedding seasons. But seasonal demand begins in the second fortnight of September for which jewellers require gold holding now. Since gold availability is squeezed because of frequent tightening of its imports, jewellers are suffocating. “Over 10 million jewellery artisans’ livelihood is currently at stake due to the government’s gold import tightening measures. The whole industry is paralysed. But we are going to take it head on,” said Bachharaj Bamalwa, ex-chairman of GJF.
RBI also attached certain restrictions on import of gold in various forms earlier, too. Those were applicable on nominated banks, agencies, premier, star trading houses, units in special economic zones and export-oriented units, which were permitted to import gold for use in the domestic sector.
“Why only gold jewellery players have been made victim of CAD? In fact, gold is adding assets to the country while other consumer products including luxury goods are liabilities. Why the government is silent on those luxury goods?” asked Soni.
The government has taken several measures to contain CAD, which yielded no result. Hence, it should look at other sectors as well including luxury items, he added.
“Investment demand has already declined 50 per cent so far this financial year. Yesterday’s duty increase would reduce it further, probably to negligible,” said Mehul Choksi, managing director of Gitanjali Gems, one of India’s largest branded jewellery manufacturers and retailers.
Data compiled by the World Gold Council showed gold investment demand in the January-March 2013 period stood at 97 tonnes, consisting of 38 per cent of India’s total demand of 256.5 tonnes in that period. Meanwhile, faced with frequent import duty rises in gold, squeezing supply for jewellery making, ornaments retailers are planning to protest the government’s latest such move. The industry is looking at all options, including an “indefinite strike”, demanding a rollback.
In the fifth such instance in 20 months, the government raised import duty on gold and silver on Tuesday to curb burgeoning current account deficit (CAD). While the import duty on gold was raised by two per cent to 10 per cent, that on silver revised upwards by four per cent to 10 per cent. Simultaneously, the excise duty on conversion of gold from the dore bar (gold concentrate) was raised to nine per cent from the existing seven per cent. This was the fifth such hike since January 2012 from the level of Rs 300 per 10g and Rs 1,000 a kg ad valorem in gold and silver, respectively.
“We were working with the government to control CAD. We appealed voluntarily to our jewellery retailers to stop selling gold coins and bars, which brought the bullion’s sales almost to zero. But every time we tried to help the government, we got strict norms through increase in import duty,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation (GJF), the apex body of 600,000 jewellery retailers. “We are not going to bear the brunt now. We will protest the move and call on an indefinite strike, if need be, to raise our voice.”
Consumers generally remain absent from fresh purchases during the April-August period, due to the lack of festival and wedding seasons. But seasonal demand begins in the second fortnight of September for which jewellers require gold holding now. Since gold availability is squeezed because of frequent tightening of its imports, jewellers are suffocating. “Over 10 million jewellery artisans’ livelihood is currently at stake due to the government’s gold import tightening measures. The whole industry is paralysed. But we are going to take it head on,” said Bachharaj Bamalwa, ex-chairman of GJF.
RBI also attached certain restrictions on import of gold in various forms earlier, too. Those were applicable on nominated banks, agencies, premier, star trading houses, units in special economic zones and export-oriented units, which were permitted to import gold for use in the domestic sector.
“Why only gold jewellery players have been made victim of CAD? In fact, gold is adding assets to the country while other consumer products including luxury goods are liabilities. Why the government is silent on those luxury goods?” asked Soni.
The government has taken several measures to contain CAD, which yielded no result. Hence, it should look at other sectors as well including luxury items, he added.