KOLKATA: Jewellers are up in arms against the new 20-80 principle worked out by the Reserve Bank of India to curb gold imports.
While availability will come down in the market, there is an apprehension that a large section of small jewellers will have to rely on the grey market for the supply of gold to meet the local demand. Jewellers say the government should come out with stricter rules to stop the sale of gold coins and bars rather than issuing new strictures at short intervals to curb imports in a bid to check the widening current account deficit (CAD).
Jewellers in south India that consumes more than 40% of the country's gold imports said RBI strictures were creating more confusion in the market. C Vinod Hayagriv, managing director of Bangalore-based jewellery firm C Krishnaiah Chetty & Sons, said: "RBI's diktats have created confusion in the market. This is not the right approach to curb imports. The government had earlier allowed banks to sell gold coins and bars which had made these two products an attractive investment and we had seen a mad rush for them. The government was not worried then because the rupee was not sliding to the extent that it is happening now."
Hayagriv added that jewellers were still selling coins and bars although the government has now asked banks to stop selling them. "Unless the government comes out with harsh rules to stop the sale of coins and bars, it will be difficult to address the CAD problem. This sort of a piecemeal effort will only destroy the industry which employs nearly 35 lakh people. This will open the floodgate for illegal gold trade," he said.
On Monday, the apex bank asked nominated banks and agencies to ensure that at least one fifth of every lot of gold imported -- in any form or purity --should exclusively be made available for the purpose of export.
But the export market for gold jewellery has declined by 60% in the first three months and there is no sign of an immediate recovery. This means that the availability of gold in the domestic market will come down going by the RBI formula. Gold jewellery exports in the first quarter of the current fiscal climbed down to.`11,847.41 crore from .`29,689.08 crore in the corresponding period of the previous year.
"It will not be an easy task to increase exports overnight. It will take time. But, in the meantime, the life of small unorganised jewellers will become tough as it will be difficult for them to procure gold from the market. There is every possibility that they will have to rely on the grey market," said Pankaj Parekh, vice-chairman, Gem & Jewellery Export Promotion Council (GJEPC).
There is no incentive for exports as the international situation is not favourable. There are issues regarding payments too. "Exporters get finance at higher costs and how would they be globally competitive. Mom-n-pop jewellers and retailers will have to pay a hefty premium for sourcing gold. They will try to source gold through illegal routes," said Haresh Soni, chairman, All India Gem & Jewellery Trade Federation.
The trade is also worried whether jewellers will be able to complete the orders placed by international buyers during the five-day India International Jewellery Show (IIJS) being held from August 8. Though most jewellers are ready with their stocks that will be exhibited at the show, they are still unsure whether gold will be available to complete the subsequent orders.
Source:-economictimes.indiatimes.com
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