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Friday, January 03, 2014
Jewellery industry expects steady demand in 2014
The widening current account deficit made the government to curb gold imports in 2013. From four per cent in the beginning of the year, gold import duty was hiked to 10 per cent in a staggered manner. However, little did it impact demand as in April-May when the prices fell, the consumption surged. In the April-June quarter, gold demand rose by 71 per cent to 310 tonnes against the same period in 2012 and jewellery demand surged 51 per cent to 188 tonnes. .
By August, RBI introduced the 80/20 formula, under which 20 per cent of every consignment should be for re-export. The confusion over the new rule remained till November as the official imports came to a halt and led to supply crunch in the market. The premium levied on gold by nominated agencies and banks shot up from less than $5 an ounce earlier to a high of $160 in 2013.
“From a policy point of view, it was a tough year for jewellery sector. The country went back to the ‘Gold Control Raj’ days. Increased smuggling has started pushing the industry into the hands of anti-social elements,” said Haresh Soni, chairman, All India Gems and Jewellery Trade Federation.
This also is taking the sector back to the unorganised players. “Taxes and duties have made gold jewellery business difficult in India. The jewellery sector is shifting back to unorganised sector and it is difficult for us to compete with them in the new environment. So we are now looking at newer markets like the Far East, where the jewellery consumption has been growing,” M P Ahmed, chairman, Malabar Gold and Diamonds had said.
According to Karan Vasa, associate VP, Riddi Siddhi Bullions, the supply crunch also affected the jewellery-manufacturing sector, which has shed almost 25 per cent of its workforce. “The manufacturing sector is facing threat from the smuggled jewellery from overseas. Jewellery is available much cheaper abroad due to the high import duty and premium in India,” he said.
As per the World Gold Council data, the jewellery consumption in the Gulf region and south-east Asian countries surged in Q3 of the year, indicating smuggling to India.
WGC’s estimate of gold demand in the September quarter was 150 per cent higher than the gold import data released by the finance ministry, owing to increased recycled gold and part of the smuggled gold made available in the market. As per WGC till September, the country consumed 715 tonnes of gold and would touch 900 tonnes for the calendar year. Of this, jewellery consumption till September was up 13 per cent.
Industry believes that the consumption of jewellery will remain steady in 2014 as well. However, investment demand will depend upon several factors, including government policies and price fluctuations.
“The demand for jewellery will remain steady in the coming year. We have been requesting the government to bring down the import duty and relax the import norms. The industry will continue to restrain the sales of gold for investment purposes and this will keep imports between 725 to 775 tonnes for the entire year,’ said Soni.