Entire jewellery industry of India is highly upset with the government's recent measures to curb import of gold to contain the Current Account Deficit (CAD) as it (the industry) has already started feeling the impact of condensed supply of the yellow metal. This uncertainty over the stock has made many artisans jobless and the situation has assumed such alarming propositions that they may dislocate the country's jewellery industry worth Rs. 2.75 lakh crore. The Reserve Bank of India (RBI) also has asked banks, nominated agencies and star trading houses not to import gold on a shipment basis for inland sales and has insisted on 100% cash margin for letters of credit.
Indian consumers hold nearly 25,000 tonne of gold All-India Gems and Jewellery Trade Federation (GJF) has strongly expressed its agony and opposition against such drastic steps of the Indian government by simultaneously holding Press Conferences in major cities like Mumbai, Delhi and Kolkata wherein the GJF has also suggested some alternative measures to curb the consumption of gold. One of its prime suggestions is to encourage the banks to introduce Gold Deposit Schemes with attractive interest offerings to consumers to curtail short supply of gold caused by import restrictions. The measure would minimize the requirement for imports, thus, containing the CAD which is bullying the financial situation of the country and would also support the needs of gold supply for the jewellery industry. As per an estimate, Indian consumers hold nearly 25,000 tonne of gold. Even if only 10% of this huge stock is mobilized, the country's exchequer can get a whopping amount of Rs 700,000 crore, thereby largely reducing the requirement of gold imports for at least three to four years; say the GJF office-bearers. The supreme body of jewellery industry has also suggested putting a ban on sales of raw bars and coins to the consumers. The low value added bullion would eliminate gold hoarding by consumers and organizations and at the same time it would help curtail imports by 25 to 30%. It has also stressed on need to introduce an amnesty scheme under which people residing abroad can gift gold to citizens in India without any tax liability.
Denouncing the restrictions on supply of gold by the banks, the GJF stated that enormous increase in gold import duty by 800% has worked adversely. It has not only paralyzed the jewellery manufacturing industry but also pushed the country back to the notorious era of smuggling and black marketing. Despite the government restrictions, gold jewellery demand has not been subdued. Curbs on imports by government may ease the situation for a while, but would lead to grave problems in the long run, GJF has warned. Representatives of the GJF are scheduled to meet government officials in June end to impress upon the government to reverse its ban on letting small jewellers avail of gold loans on 25% margin requirement, with a 180-day payment cycle. They have already submitted a White Paper to the Finance Ministry on several steps that may help reduce the gold imports.
