The Indian gem & jewellery, which is already in dire straits with liquidity problems have now to fear the grey market, thanks to the hike in the import duty on gold. While the trade organizations and businesses have gone into a huddle to approach the central government to review its budget proposal. Meanwhile, individual jewellers, who are staring into a 25 to 30 per cent decline in business in the near future, are looking for some solace from the government.
The hike in the duty on gold imports to 12.5 per cent from 10 per cent came, surprisingly, when the nation’s demand was already hit due to higher prices. The weakening global economic outlook and the volatility in oil and trade war between the US and China etc had investors moving towards safe assets like gold, the price rose to above $1,400 an ounce this year, affecting the domestic market negatively.
Analyst note that the import duty hike on gold will negatively impact India’s total gold industry, with the grey market thriving thereby diluting efforts by the government to reduce cash transactions.
According to the World Gold Council, last year India’s demand for gold jewellery totalled 598 tonnes in down slightly from 601.9 tonnes in 2017. India’s is the second largest consumer of gold next only to China, being closely associated with the tradition of the country’s population.
Organizations like the Gem & Jewellery Export Promotion Council, Gem & Jewellery Council, IBJA and other trade organisations are now in the process of approaching the Government of India regarding the issue, hoping to receive some relief in rollback and a further reduction in the import duty on gold.