The government's move to hike the excise duty on gold to control the current account deficit has led to a shortage of the precious metal besides the industry seeing potential job losses and renewed smuggling activity, according to the All India Gems and Jewellery Trade Federation (GJF).
GJF, which is the nodal trade body representing over 600,000 players from the industry, said the government's attitude could lead to a hike in gold premiums and incentivise hawala trade.
Speaking to reporters here on Friday, GJF officials said higher imports registered during April and May was a one-off measure as a majority of jewellers went on to stockpile gold for the upcoming marriage and festive season. However, for the remaining part of the year, imports could drop much below the official estimates.
"Being a labour-intensive sector and employing around 60 million, the Rs 2,75,000-crore sector has been cutting back on the planned investments due to the high borrowing costs, falling margins and increased competition," said Mohanlal Jain, general board of director, GJF.