Amid high volatility in prices and huge demand of gold in the country, jewellery retailers are demanding tapping of gold in the domestic market itself through bonds and gold deposits.
The retailers are also mulling putting a stop to selling of gold coins and gold bars to curtail investments made in gold, according to an official of trade body All India Gems and Jewellery Trade Federation.
"It is estimated that Indian houses hold close to 25,000 tonnes of gold and at current gold price, it represents $1.25 trillion.
"The gold stock itself represents over 50% of the economy. Even if 10% of the gold savings are tapped, it would represent resources of Rs 7,00,000 crore or $125 billion," All India Gems and Jewellery Trade Federation Regional Chairman G Anantha Padmanabhan told PTI.
The government's directive to restrict supply of gold has led to a huge shortage of gold in the market and it has developed premiums on gold rates, he said.
To a query he said the Federation was holding talks with members and other associations to stop retailing gold coins and gold bars as investments which would further reduce use of gold by 10-15%. "We hope it will be implemented by July 1," he said.
Stating rise in import duty on gold from 1% in January 2012 to 8% in June 2013, he alleged it would lead to illegal imports of gold.
"We suggest that certain licensed jewellers be allowed to attract gold from customers through bonds or schemes and deposit it with scheduled banks," he said.
"ETFs (Exchange Traded Funds) and Gold traded funds may be allowed to loan the idle gold stocks to channelise agencies which in turn be circulated in the manufacturing process of the gems and jewellery industry," he said.
"This will help reduce CAD (Current Account Deficit) and allow 50% of ETF gold to be used for the Gem and Jewellery sector, reducing the double imports," he said.
The Reserve Bank should encourage gold deposit schemes from consumers to organised jewellers since it would increase the monetisation of idle gold stock, Padmanabhan said.
He reiterated that any tough measure (on import of gold) would put a premium on the domestic prices, leading to influx of gold into the country through "illegal" channels, further leading to heavy loss of revenue to the government.
"Non-availability of the gold to the industry will encourage resellers to enter this sector in buying gold from banks and selling at huge premiums," he added.
Suggesting that the 4% additional customs duty collected by government be allocated to develop the gem and jewellery sector, he said: "The Gems and Jewellery industry has over one crore labour force engaged in manufacturing jewellery in the domestic sector. The industry size is estimated to be around Rs 2.75 lakh crore."
Gems and Jewellery Industry has only flourished post abolition of Gold Control Act 1991 and contributed to the exchequer through job creation.
"We request the government not to take piecemeal decisions and destroy this industry that is taking strides into organised business," he said.
"Thousands of crores of rupees have been invested into employment creating infrastructure in the last few years and it (the industry) should not be curtailed," another official said.
The industry demands continuation of 25% margin requirement and 180 days payment cycles for gold loans, he said.