Gold jewellery exports from India are likely to decline by at least 15 per cent this year on scarcity of gold for fabrication, coupled with poor global demand due to the ongoing economic crisis. In the first five months of this financial year, exports have seen a sharp fall. This is likely to be arrested in the December quarter, on Christmas orders.
After an emphatic 51 per cent growth in 2012-13 (to Rs 71,363 crore from Rs 47,284 crore the previous year), gold jewellery exports started falling on unavailability of gold, due to the government's frequent import restrictions. The decline was 57 per cent in April-August to Rs 15,610 crore from Rs 36,404 crore in the same period last year. Vipul Shah, chairman of the Gems & Jewellery Export Promotion Council, feels a recovery is likely in orders for the coming Christmas, New Year and Mothers' Day season abroad. The estimated growth is 15 per cent in the October–December quarter. However, gold jewellery is only 20 per cent of overall gems and jewellery export.
"Gold jewellery exports are expected to decline in the next two years, unless import restrictions on the yellow metal ease," went a report by CARE Ratings, titled Structural measures diminishing the sparkle of jewellery industry.'
To contain the burgeoning current account deficit, the government raised the import duty on gold frequently; it is now 10 per cent. Also, the import duty on gold jewellery was revised upwards to 15 per cent; plus, 20 per cent of imported gold must go to exporters. Due to ambiguity in the policy's details, India's gold import declined sharply in the July–September quarter, to what the World Gold Council estimated was a little less than 100 tonnes against 223 tonnes in the corresponding period last year.
The Directorate General of Commercial Intelligence and Statistics estimates gold import at a mere 63 tonnes in the third quarter of the current calendar year. "Undue restrictions on gold import has not only hampered its supply for the domestic gems and jewellery sector but also paralysed exports. Unavailability of gold has caused a severe problem for jewellery exports in the last few months," said Rajesh Mehta, managing director of Rajesh Exports
, one of India's largest jewellery exporters. The CARE report expects export to grow moderately during the long term, driven by increasing demand for cut and polished diamond exports. This is expected to grow to its historically highest levels in the next couple of years, driven by expected recovery in the major export markets of America and Europe.
In addition to a raise in the import duty from eight per cent to 10 per cent early this year, the Reserve Bank of India withdrew leasing of gold and also prohibited import of gold coins and medallions. Further, RBI directed that all letters of credit be opened by nominated banks/agencies for the import of gold under all categories be only on a 100 per cent cash margin basis. Gold and silver on the Mumbai spot market moved down on Tuesday on the back of strength in the dollar and a rise in SPDR gold holdings. Gold fell to Rs 30,265 per 10g, down by 0.4 per cent, while silver saw a 2.9 per cent fall to Rs 47,225 a kg.