While jewellers across India are planning to launch an agitation against the Indian government’s proposal to increase import duty on gold to around 6% from the current 4%, a massive jump in gold imports has been witnessed across the country.
“With the news that the government is considering such a move (to hike import duty) and could most probably make an announcement in the Budget next month, bullion houses have jacked up their imports of the precious metal considerably since the last week,” said Prithviraj Kothari, of bullion house Ridhi Sidhi Bullions.
“As compared to the normal 5-6 metric tonnes each week, traders have imported more than 30 metric tonnes already in the last five days,” he added.
Bullion traders have already been chaffing at the bit with both the Central Government and the Reserve Bank of India indicating measures in the offing that would help reduce the import of gold in the country, given the high current account deficit. Most jewellery houses are planning to shut shop as a form of protest.
“This is a move to destabilise the jewellery sector, which generates the highest employment. Do these mandarins sitting in Delhi (government) not realise that many people will be out of a job if they hike import duties on gold? Most small gold retailers will have to close down their business,” said an official of the All India Gems and Jewellery Trade Federation.
He said jewellers across the country would definitely keep their shops closed for an indefinite period if the government does impose a duty hike.
“We cannot survive in this atmosphere. Gold smuggling has reached new levels across the country and especially since the two import hikes last year,” added Mahesh Sadhaye of bullion house Krishnamiah Chetty.
“The monster (smuggling) will only grow with more talk of import hikes. These were effectively dealt with in the past, and today the jewellery industry is organised. A new hike will deal a body blow to the sector, which has been posting good returns,” Sadhaye added.
New data has shown that India imported $39.5 billion of gold in the first nine months of this fiscal (April-December 2012), but exported gold jewellery worth one third of that amount despite higher value of finished products.
The Federation of Indian Exporters Organisations has said India exported gold jewellery to the tune of $12.12 billion in the first nine months of this fiscal, which was just 30.68% of the value of imported gold.
Between April to December 2012, gold imports jumped 40.23% over $28.16 billion imported during the corresponding period of April to December 2011.
Retailers said the rush for gold imports has translated into higher retail demand for jewellery in South Indian states that celebrate the annual harvest festival of Pongal and Sankranti next week, and in the North with Lohri, when newlywed couples customarily buy gold.