All India Gems and Jewellery Federation (GJF), the largest single trade body in India for the promotion and growth of trade in gems and jewellery across India, has urged the Union Finance Minister Arun Jaitley to avoid re-imposing curbs on gold imports as it could spell doom for the gems and jewellery sector. The GJF also sought the formation of a nodal Ministry to represent its sad plight.
The previous government had removed the restrictions on legal gold imports just before its term ended. The curbs were imposed around two years ago to bring run-away trade deficit under control. Indians used to import gold worth $25-40 bln per year , accounting for over 10% of the total goods imported into the country, before the curbs were imposed.
India has a trade deficit of around $120 per year, which was threatening to hit the $200 mark due to a craze for buying gold set off by rising prices for the metal. High trade deficit in turn drives down the value of the rupee, which again increased gold prices. The rising prices led people to believe that gold was a good investment, while that feeling led to further rises in prices. India is the world’s biggest ‘consumer’ of gold.
The gold federation, however, wanted a debate on whether it was speculation or genuine demand that was behind India’s hunger for gold. ”
“GJF has proposed a national debate on this matter because gold is part and parcel of the common man’s life since thousands of years,” it said.
Disputing some of the data of gold imports released in September-October 2014, GJF claims that the increase in gold imports in September- October 2014 was a normal trend.
“This increase was stimulated by advance buying prior to festival time and anticipation of additional curbs on gold imports as indicated by the Government. GJF also pointed out that the comparisons on a year-on-year (y-o-y) basis with September-October 2013 were meaningless as there were hardly any gold imports in September-October 2013 due to uncertainty following the imposition of the 80:20 Rule. Rather than relying on two months of data, GJF urged the Government to wait for two more quarters of data rather than deciding to impose curbs on a 2,000-year old sector.”
The All India Gems and Jewellery Trade Federation (GJF) represents over 6,00,000 players comprising manufacturers, wholesalers, retailers, distributors, laboratories, gemologists, designers and allied services to the domestic Gems & Jewellery industry. The Gems & Jewellery industry is a hand crafted and labour intensive with over 1 crore strong labour force engaged in the manufacturing of jewellery industry in the domestic sector.
GJF has also alleged that importers have not yet distributed gold imported in September-October 2014 to the jewelers as the gold hoarders were holding on to their stock in anticipation of higher profits resulting from further curbs and restrictions to be announced by the Government. GJF has alleged that the uncertainty created by the Government is responsible for higher imports.
As part of its self-regulation initiative, GJF has proposed to curb sales of gold coins and bars immediately by its members to restrict demand – gold coins and bars account for approximately around 300 tonnes (as per FICCI-AT Kearney report 2013). GJF has proposed unlocking of idle gold in the country to the tune of 1,000-1,500 tonnes within 3 years through Rashtriya Swarn Nivesh to take care of CAD.
Haresh Soni, Chairman, GJF, said, “Since the base of gold imports in September-October 2013 was low, the increase in September-October 2014 may seem very high but this comparison cannot be used to impose further restrictions. Gold prices have fallen and investment demand in gold has reduced drastically due to negative returns. Therefore, the gold, which is being imported, is purely used for manufacturing jewellery and not for investment purposes. It is unfair that the Government restricts the basic raw material for the gems and jewellery sector as this will result in loss of jobs to lakhs of jewellers. After all, the gems & jewellery sector is the second largest employer of people after the software industry and the Government should stimulate a comprehensive gold policy framework to curb smuggling and dispel internal volatility and uncertainty of supply-demand.”
The gold and precious stones sector has grown phenomenally on the national and international front in the last few years. The industry is in transition phase where family owned entrepreneurial businesses are slowly evolving and transforming into organized professional organizations.
Bachhraj Bamalwa, Director, GJF, added, “Gold cannot be made the sole culprit for widening CAD. Former Economic Advisory Council chief Mr. C. Rangarajan had said that India can afford up to $30 billion worth of gold imports every year. Gold prices have fallen around 38% to around USD 1200/ troy ounce since the peak of USD 1920/ troy ounce in 2011. Unlike many other mega imports of other products, the gems & jewellery sector creates value addition, provides employment and encourages indigenous manufacturing. The Government must include gems & jewellery sector in ‘Make in India’ initiative and encourage India’s glorious legacy of handcrafted jewellery making. Jewellers are mostly self employed entrepreneurs and already engaged in promoting the Prime Minister’s concept of ‘Make in India’. The current situation of CAD is much better than 1992 when we had foreign currency reserve of only 20 days of oil import and during this period gold was allowed to be gradually imported.”
Mr. Manish Jain, Vice Chairman, GJF, called for abolishing the 80:20 Rule to ensure smooth operation, calibration of imports and containment of high premiums on gold. “This will also eliminate monopoly in gold trading. GJF has also proposed alternate solution to contain CAD wherein Government can mandate 10% reduction in imports of gold over 2012 import figures. Monitored by importing / channelizing agencies on quarter by quarter basis to overcome seasonal slack or increase in consumption. This will be easy to implement while loosening the supply and demand elasticity. And contain CAD at the same time and remove import link to exports.” He added, “GJF also has urged the Government to bring down the duty on gold from 10% to 2% as it will make smuggling unprofitable. The hike of import duty on gold has built a parallel economy, leading to widescale gold smuggling, which has increased manifold. Bringing down duty to 2% would eliminate smuggling and also deployment of any black money for this process. On one hand, the Government is talking of recovering black money while on the other its policies are encouraging the black money economy.”
Ashok Minawala, Director, GJF, said he saw the possibility of unlocking idle gold in India through jewellers and bank. “The Rashtriya Swarn Scheme can be a pioneering initiative to help the Indian Government’s national agenda of reducing import of gold and discovering alternative sources of gold. Eligible jewellers will work as nominated agents of the Bank and will help collect unused and idle gold from households and temple trusts. In three years, we can help mobilise 1,000 to 1,500 tonnes of unused/ idle gold and make India free from importing gold for domestic consumption.”
GJF has made presentations on the gold deposit scheme ‘Rashtiya Swarna Nivesh’ programme to the Government and the RBI but is awaiting sanction and approval for implementation. This is the mechanism by incentivizing the depositors to deposit their idle gold for use in the manufacturing industry through recycling process which will ultimately lead to reduction of gold imports.