Gold Imports May Fall to 400 Tonnes Amid Duty Hike: Jewellers

The government has raised gold and silver import duties from 6 per cent to 15 per cent to curb non-essential imports and protect forex revenues. Gold prices are also high and rural consumption may weaken because of a below-normal monsoon. How much drop in demand and imports do you anticipate this year?

We are seeing a decline of 40 per cent to 65 per cent at individual stores compared to last year. Between January and April, India imported around 200 tonnes of bullion. Earlier, about 450 tonnes of jewellery was sold domestically, 150-200 tonnes of bullion and coins were sold, and 125-150 tonnes of bullion was converted into jewellery for exports. That took overall sales to around 750-800 tonnes annually.

Now domestic jewellery sales could come down from 450 tonnes to around 300-325 tonnes. Bullion and coin sales may decline from 150-200 tonnes to nearly 75 tonnes because we are actively discouraging customers from buying bullion and coins. Jewellery exports could remain at around 100-125 tonnes.

The import bill, which was around $72 billion or nearly ₹7.2 lakh crore, may come down to around $35-40 billion or ₹4-4.5 lakh crore this year.

Does that mean the industry itself will shrink by around ₹3 lakh crore this year?

No. The industry turnover may still remain close to ₹7 lakh crore because recycled gold will increase substantially. Old jewellery lying in households for 30-40 years will come back into the system for refurbishing and remaking. Imports will logically reduce, but jewellers’ turnover can remain stable.

Recycled gold, which was around 125-150 tonnes last year, could rise to 200-250 tonnes this year. India has around 34,000-40,000 tonnes of gold lying with households. Even if 0.5-1 per cent of this gets refurbished annually, that itself can generate 350-400 tonnes of recycled gold.

The earlier Gold Monetisation Scheme was not very successful. What changes are being proposed now?

Previously, jewellers were not involved directly in the scheme and customers were dealing only with banks. That created complications and lack of trust. We have proposed that jewellers should be involved along with banks and demat systems. That will improve confidence.

We have also proposed giving 2 per cent interest on the gold value, not the cash value. So if a household deposits 300 grams of gold, they could receive around 6-8 grams additionally. That way, rising gold prices will still benefit households.

If the revised scheme is approved by the Finance Ministry, imports could reduce further from around 525 tonnes to nearly 375-400 tonnes.

Even if the monetisation scheme does not work, do you still expect recycling to rise?

Yes. Retail jewellers have already started promoting gold recycling schemes. Several corporates saw 20-30 lakh customers exchange old jewellery last year itself. Discounts are being offered on labour charges and old gold exchange. Even without government approval, recycled gold can increase from around 125 tonnes to 200-225 tonnes this year.

Higher import duties usually lead to smuggling. How serious could that problem become this time?

We estimate that around 130-160 tonnes of gold may enter the country through unofficial channels because of the duty hike. There is a large incentive for anti-social elements to smuggle gold when such price gaps emerge.

What kind of support does the industry expect from the government now?

The government should proactively introduce bullion banks, revive the Gold Monetisation Scheme and consider allowing some RBI bullion to be channelled to jewellers. This industry supports around 70-80 lakh karigars and workers. If demand weakens sharply, around 15-20 lakh workers could face displacement. The government should ensure the industry is supported during this transition.