To curb a record trade deficit, the government imposed an import duty of 10% on gold, and tied imports for domestic consumption to exports, creating scarce supply of the yellow metal and boosting premiums to a record. Photo: Priyanka Parashar/Min
Mumbai/London: Indian gold imports may fall 70% in
the final quarter of 2013 from 255 tonnes in the year-ago period and
are expected to be half usual levels at 500-550 tonnes next year if new
import rules are maintained, Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation (GJF), said on Friday.
To curb a record trade deficit, the government imposed an import
duty of 10% on gold, and tied imports for domestic consumption to
exports, creating scarce supply of the yellow metal and boosting
premiums to a record.
As a result, Indians have depended heavily on old heirlooms and smuggled yellow metal to meet wedding demand.
“Year 2014 seems to be a difficult one for the Indian gem
and jewellery industry so far as gold imports are concerned,” Bamalwa
said in an interview at the Reuters Global Gold Forum.
India, which may import a lower-than-usual 700-750 tonnes
in 2013, is unlikely to ease its import policy or the customs duty
until the trade deficit is
under control, Bamalwa added.
“Demand (for) jewellery has not yet picked up, so the
industry is not yet in panic, but I am not (very) sure about the future -
say, after 30 days,” said Bamalwa.
The World Gold Council (WGC) cut its forecast for Indian
gold demand earlier this month, predicting the country could also lose
its crown as the world’s biggest consumer of bullion to China.
The WGC said Indian demand could be 900 tonnes in 2013, from its previous forecast of 1,000 tonnes.
Fourth-quarter demand is expected to be low because
consumers brought forward wedding purchases to April and May, when gold
prices fell drastically, Bamalwa said.
Premiums for gold in India climbed to a record $160 an
ounce above spot prices this week. By the end of the quarter, they may
have risen as high as $200 an ounce, Bamalwa said.
Spotlight On Exports
Under the government’s new rules, gold importers must
export 20% of their total imports. Importing agencies such as banks and
state-run companies can bring in a maximum of two consignments of metal
before having to furnish proof of exports, he said.
Jewellers are trying to increase exports but the global economic situation is “not very encouraging”, Bamalwa said.
Jewellery exports, on which domestic imports are
dependent under the new rule, have slid nearly 55% to $3.95 billion so
far this fiscal year, from April to October.
Falling exports will have a knock-on effect on future
imports because of the ties between the two, which in turn will hurt
domestic jewellers who should be seeing surging demand as the wedding
season gets into full swing.
The trade body plans to approach the government to
provide low-cost finance to jewellery exporters, against a 12-13%
funding cost now. Its global competitors get financing at 2-3%.
“We will be approaching the government for some
incentives, but since the country is going for general elections next
year, the incentives may not come before the next government comes to
power,” Bamalwa said. Elections are due in May in India.
Bamalwa said the government was “in no mood” to relax its
new import duty rules, or its gold export requirements, until the
current account deficit had been reined in. Reuters
PRASHANT SHARMA
PGDM-I
SOURCE-MINT
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