Mumbai: After income disclosure scheme, withdrawal of Rs 500 and Rs 1,000 notes is anticipated to bring the gold and jewellery business to a standstill. After the announcement was made on Tuesday, jewelers were receiving frantic calls from customers seeking to close pre-midnight purchases.
With 80 per cent of transactions happening in cash, the bullion and jewellery trade will be the most affected by the move, said Bachhraj Bamalwa, former chairman, All India Gems and Jewellery Trade Federation.
“It is a great step taken by the government. There will be chaos in the market and the jewellery and gold trade will suffer, but it will ultimately turn out to be good for the economy. The trade has been always looked upon as a generator of black money and this is also an opportunity for the trade to come out clean,” he said.
However, the centre should also take alternative steps to improve the economy after this, he added.
According to him, after the PM made the announcement on Tuesday, customers were calling up jewellers frantically enquiring whether they could buy jewellery or bullion before midnight.
“For high-value purchases like gold and jewellery, customers generally tend to pay in Rs 500 and 1000 rupee notes and buying gold with 100 rupee notes does not seem practical. This is going to impact the sales significantly,” said Sudheesh Nambiath, lead analyst, Precious Metals Demand, GFMS, South Asia and UAE.
However, industry watchers also anticipate that there will be a surge in demand for gold over next few days until most of this currency gets converted into gold. In such transactions the bills could be back-dated.
The cash transactions in the jewellery trade also have been supporting flow of black money. Industry watchers think that at least 30 to 40 per cent of the unaccounted money should be going into the trade.
According to P R Somasundaram, MD, World Gold Council, India, the income disclosure plan, open till last month, was one among the main reasons for the slower demand for gold in the September quarter.
(This story originally appeared on Financial Chronicle)
