The gems & jewellery sector has been waiting for long to be in the good books of the Modi government and it looks like we are getting there. Like a child who has been scolded and is now maturing into a well-guided individual, I feel the jewellery industry, spearheaded by the bullion category, is finally finding its way. It requires checks and balances, and policy measures for growth; that’s what the finance ministry has done by providing a direction for future. The government will formulate a comprehensive gold policy to develop the precious metal as an asset class, which suggests the commodity will no longer be categorically claimed as the ‘undisclosed treasure’ but a fair investment and luxury holding. The government will also establish a system of consumer-friendly and trade-efficient system of regulated gold exchanges in the country.
Gold monetisation, a dream of the Modi government, didn’t find favour with the masses earlier. So the scheme will be revamped to enable people to open a hassle-free gold deposit account, finance minister Arun Jaitley said in his Budget speech. Gold spot exchanges, another international approach to managing gold more professionally and transparently, will also be established. This surely will help the industry become more mature and digitally advanced, apart from removing intermediaries in the gold trade. Sourcing the metal by a trader in rural India will be easy and viable. This rural sector covers over 65% of the Indian gold consumption. The middlemen encouraged a lot of unaccounted cash transactions, which can now be a thing of the past.
The idea of a gold bank is also floated, which can help channelise the inventory into more fruitful use. A gold deposit account will lead to recycling of the commodity within the market, which will, in turn, result in lower imports and discourage hoarding of the precious metal. Other desirable sops for the sector include the reduction in the 10% gold import duty and reduced GST on gold. Going ahead, the government needs to support exports, which will further boost skilled employment and align the country’s gold trade with other nations, especially the US, Hong Kong and the UAE that accounted for 75% of the total gems and jewellery exports from India during FY17.
Gold has been one of the largest importing commodities in India, after oil. However, India is also one of the largest exporters of gems & jewellery and the industry is considered to play a vital role in the economy as it contributes a major chunk to the total foreign reserves of the country. Net exports of gems and jewellery from India rose at a compound annual growth rate (CAGR) of 7.01% between FY05 and FY17. The net exports rose from $15.66 billion in FY05 to $35.59 billion in FY17. The overall net exports stood at $35.59 billion during FY17, registering a rise of 9.07% over FY16.
Drafting a futuristic plan for the gems & jewellery sector without any temporary frills, I feel the government is all set to take this Industry more seriously with a structure that would prove to be a foundation in its international growth and domestic sustenance.
By Rajiv Popley, Director, Popley Group