Huge shortages of gold in the South as a result of the government’s measures to curb gold imports, appear to have skewed the market in India, resulting in scanty sales across retailers in the region. The short supply of gold is also likely to lead to lower jewellery exports from the region.

India’s four Southern states account for over 40% of the nation’s overall gold demand.

Gold retailers in Coimbatore in Tamil Nadu and Thrissur and Kochi in Kerala are reportedly out of stock. With precious metal inventory down to low single digit numbers, these huge gold consuming cities have been facing gold supply constraints.

“Shortages of raw gold or unrefined gold have been coming in from the South. The region is the biggest consumer,” confirmed Madhusudanbhai Jodha, bullion retailer.

The ongoing marriage season, wherein people tend to buy gold coins or small pieces of jewellery as a gift for the couple and parents stock up on heavy gold jewellery pieces for the bridal couple, has also been hit.

Prominent manufacturing hubs like Hyderabad and Kerala in the South, which have many export processing zones which cater to the precious metal, have also been facing staggered supplies.

With only 3% of India’s population, Kerala is estimated to gobble up 20% of the country’s gold every year. Some 3,000 people are employed in the gold industry in this tiny state.

“Almost every house in Kerala would have some gold tucked away as savings, either to be given away as wedding gifts for the daughter or to raise cash by way of gold loans or outright sale in times of need,” said Jodha.

Apart from Chennai, which has become something of a hub for gold consumption, towns like Coimbatore, Madurai, Trichy and Salem have also become important centres for the sale of the yellow metal.

Bullion retailer Malabar Gold, which opened its first outlet in Mumbai this week, has 25 showrooms in Kerala. The focus, for the retailer, has shifted to Tamil Nadu and Andhra Pradesh, since the states offer good potential, said an official.

Nominated agencies like the Minerals and Metals Trading Corporation (MMTC) and the Bank of Nova Scotia have been urged to increase their supply base to the exporters in South India. While MMTC caters to a select group of exporters in Chennai, and few outlets in Coimbatore, Bangalore, Hyderabad and Kochi, the Bank of Nova Scotia channel gold to many retailers.

SOUTH CENTRAL TO GOLD

As a region, South India is the largest consumer of gold in the country with bullion retailers targetting the region for expansion. Many gold retailers have opened their outlets in the region.

Jewellery retailers maintain that the tradition of buying gold and the reputation of the precious metal as a comparatively safe investment, has given an added impetus to the trend.

Tamil Nadu, incidentally, leads in gold consumption among the Southern states.

“While the bigger bullion brands will most probably source from other parts of the country and meet their requirements and demands in the South, the smaller, local retailers in the South are in a major mess given the scant supply,” said Purshottam Jaberwal, bullion retailer, who has outlets across smaller towns in the South.

India is completely dependent on imported gold to meet its demand requirements. The strong cultural affinity and love affair with gold shows no signs of abating across the country, despite the government’s intervention in the form of import curbs, said retailers.