Proposes
to curb gold coin/ bar sales immediately as part of self-regulation
GJF
alleges that importers are hoarding gold and not distributing to jewellers
GJF
also proposes unlocking of idle gold in households & trusts to resolve CAD
GJF
seeks nodal Ministry for representing the domestic gems & jewellery sector
November 19, 2014: All India Gems and Jewellery Trade Federation (GJF), the
national nodal and the largest single trade body in India for the promotion and
growth of trade in gems and jewellery across India, has urged the Union Finance
Minister Shri Arun Jaitley, the Finance Ministry and the Reserve Bank of India
to avoid imposing curbs on gold imports as it could spell doom for the gems and
jewellery sector. Considering that the gems & jewellery sector has been
going through tough times, GJF also sought the formation of a nodal Ministry to
represent its sad plight and sorry state. GJF has proposed a national debate on
this matter because gold is part and parcel of the common man’s life since
thousands of years.
Disputing some of the data of gold imports released in
September-October 2014, GJF claims that the increase in gold imports in September-
October 2014 was a normal trend. This increase was stimulated by advance buying
prior to festival time and anticipation of additional curbs on gold imports as
indicated by the Government. GJF also pointed out that the comparisons on a
year-on-year (y-o-y) basis with September-October 2013 were meaningless as
there were hardly any gold imports in September-October 2013 due to uncertainty
following the imposition of the 80:20 Rule. Rather than relying on two months
of data, GJF urged the Government to wait for two more quarters of data rather
than deciding to impose curbs on a 2,000-year old sector. GJF has also alleged
that importers have not yet distributed gold imported in September-October 2014
to the jewelers as the gold hoarders were holding on to their stock in
anticipation of higher profits resulting from further curbs and restrictions to
be announced by the Government. GJF has alleged that the uncertainty created by
the Government is responsible for higher imports.
As part of its self-regulation initiative, GJF has proposed
to curb sales of gold coins and bars immediately by its members to restrict
demand – gold coins and bars account for approximately around 300 tonnes (as
per FICCI-AT Kearney report 2013). GJF has proposed unlocking of idle gold in
the country to the tune of 1,000-1,500 tonnes within 3 years through Rashtriya
Swarn Nivesh to take care of CAD.
Mr. Haresh Soni, Chairman, GJF, said, “Since the base of gold
imports in September-October 2013 was low, the increase in September-October
2014 may seem very high but this comparison cannot be used to impose further
restrictions. Gold prices have fallen and investment demand in gold has reduced
drastically due to negative returns. Therefore, the gold, which is being
imported, is purely used for manufacturing jewellery and not for investment
purposes. It is unfair that the Government restricts the basic raw material for
the gems and jewellery sector as this will result in loss of jobs to lakhs of
jewellers. After all, the gems & jewellery sector is the second largest
employer of people after the software industry and the Government should
stimulate a comprehensive gold policy framework to curb smuggling and dispel
internal volatility and uncertainty of supply-demand.”
Mr. Bachhraj Bamalwa, Director, GJF, added, “Gold cannot be
made the sole culprit for widening CAD. Former Economic Advisory Council chief
Mr. C. Rangarajan had said that India can afford up to $30 billion worth of
gold imports every year. Gold prices have fallen around 38% to around USD 1200/
troy ounce since the peak of USD 1920/ troy ounce in 2011. Unlike many other
mega imports of other products, the gems & jewellery sector creates value
addition, provides employment and encourages indigenous manufacturing. The
Government must include gems & jewellery sector in ‘Make in India’
initiative and encourage India’s glorious legacy of handcrafted jewellery
making. Jewellers are mostly self employed entrepreneurs and already engaged in
promoting the Prime Minister’s concept of ‘Make in India’. The current
situation of CAD is much better than 1992 when we had foreign currency reserve
of only 20 days of oil import and during this period gold was allowed to be
gradually imported.”
Mr. Manish Jain, Vice Chairman, GJF, said, “GJF calls for
abolishing the 80:20 Rule to ensure smooth operation, calibration of imports
and containment of high premiums on gold. This will also eliminate monopoly in
gold trading. GJF has also proposed alternate solution to contain CAD wherein
Government can mandate 10% reduction in imports of gold over 2012 import
figures. Monitored by importing / channelizing agencies on quarter by quarter
basis to overcome seasonal slack or increase in consumption. This will be easy
to implement while loosening the supply and demand elasticity. And contain CAD
at the same time and remove import link to exports.” He added, “GJF also has
urged the Government to bring down the duty on gold from 10% to 2% as it will
make smuggling unprofitable. The hike of import duty on gold has built a
parallel economy, leading to widescale gold smuggling, which has increased
manifold. Bringing down duty to 2% would eliminate smuggling and also deployment
of any black money for this process. On one hand, the Government is talking of
recovering black money while on the other its policies are encouraging the
black money economy.”
Ashok Minawala, Director, GJF, said, “GJF sees the
possibility of unlocking idle gold in India through jewellers and bank. The Rashtriya
Swarn Scheme can be a pioneering initiative to help the Indian Government's
national agenda of reducing import of gold and discovering alternative sources
of gold. Eligible jewellers will work as nominated agents of the Bank and will
help collect unused and idle gold from households and temple trusts. In three years,
we can help mobilise 1,000 to 1,500 tonnes of unused/ idle gold and make India
free from importing gold for domestic consumption." GJF has made presentations
on the gold deposit scheme ‘Rashtiya Swarna Nivesh’ programme to the Government
and the RBI but is awaiting sanction and approval for implementation. This is
the mechanism by incentivizing the depositors to deposit their idle gold for
use in the manufacturing industry through recycling process which will
ultimately lead to reduction of gold imports.
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