Courtesy: Hard Assets
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Sunday, February 23, 2014
Who is #1 consumer of gold? Does smuggling count?
Indian jewelers want tariffs reduced
New Delhi, February 21, 2014: The recently released Gold Demand Trends Report 2013 by the World Gold Council states that China surpassed India to become the world’s top consumer of the yellow metal in 2013. However, based on official imports and smuggled gold, India’s consumption is still higher.
According to the report China tops the list with total gold imports of 1066 tons. India’s official gold imports totaled 975 tons during the year. The report also states that nearly 200 tons of gold were smuggled to India during the year. Adding the official and smuggled gold, the total gold consumed by the country would be 1075, which is higher than the gold imports by China.
The tight curbs imposed by the government and the Reserve Bank of India (RBI) brought down the official gold imports by the country. On the other hand, the short supply of the yellow metal led to increased gold flow through alternative channels such as recycled gold and smuggled gold. The demand for gold continued to remain robust in the country during the year. The rising demand was partly fed by recycled and smuggled gold.
The most recent data released by the Directorate of Revenue Intelligence (DRI) and India Customs indicate that seized gold in the country during the initial nine-month period current fiscal has increased three fold when compared with the entire year previous fiscal. The enforcement agencies nabbed 1,074.41 kilogram of gold during April to December as against 326.23 kilograms seized during entire FY 13.
MUMBAI (Scrap Monster): The Gem and Jewelry Export Promotion Council (GJEPC), the top jewelry export promotion body under the Indian Commerce Ministry today urged the government to cut down the present 10% import duty on gold to 2%. GJEPC made the request to the Ministry of Commerce and the Ministry of Finance in a memorandum which stated that a reduction of import duty is necessary as government has now achieved the target of controlling the current account deficit (CAD) of the country by imposing necessary import restrictions.
Jewelers were assured by the Finance Ministry a few weeks ago that they will be looking into easing the gold import duty as soon as the CAD of the country improves. Indian Finance Minister, Mr. P. Chidambaram had comforted the jewelers to roll back the existing gold import duty of 10 % to a reasonable low. Due to the ballooning CAD in India over the year, the Govt. through RBI had introduced various regulatory measures to reduce gold import which would consequently cut down the CAD. Over the year, the Govt. has obtained the desired results by bringing CAD under controllable level. As a result, jewelers have come out with the request of reverting the import duty to the original level of 2%.
According to the GJEPC Chairman, Mr. Vipul Shah, now that the CAD and import duty has come under control, the hiked import duty should be rolled back to lower level. He argues that the RBI-imposed 80:20 scheme (according to which 20 % from the imported gold should be set aside for jewelry export) is adversely affecting their business over the year. The decline of gold import and the lack of stocks had even rendered the jewelry artisans jobless. Indian jewelers were also unable to satisfy the increased demand of their customers.
Commenting on the consequence of gold import hike in 2013, Shah says that a marginal decline of 2.22 % was witnessed in the export of gems and jewelry from India. Estimates show a loss of Rs. 163942.91 Crore in the jewelry industry during the time period of April 2013 and January 2014.
While everyone was focused on the interim budget for any hint on gold import reduction, the finance minister declined to make any firm decision on import duty cut and informed that the Govt. will be looking into the matter after due assessment of CAD.
Courtesy: Hard Assets