Ban Gold Advertising & 22-Carat, Says Indian Professor
Thursday, 8/14/2014 10:40
India's gold demand set to surge by 2030 as 28% of 1.2bn population marry...
INDIA'S GOLD advertisements and 22-carat jewelry should be banned, says a professor of public policy in the sub-continent, urging the government to curb demand directly in the world's No.1 consumer nation.
Writing in the
Hindu Business Line, Professor Parkash Chander of Jindal School of Government & Public Policy at the private O.P.Jindal University in Haryana says that "Advertisements promoting gold jewellery ought to be banned if the government is really serious – as it should be – about taming the Indian demand for gold."
With a gold and jewelry sector employing perhaps 3.5 million workers, India grew its private gold demand by more than a tenth in calendar 2013, but lagged China as the world No.1 after anti-gold import rules were imposed in July by the previous administration.
Unofficial inflows have surged however, with government seizures of
barely 2.3 tonnes over the last 12 months dwarfed by
estimates of 200-300 tonnes.
Noting the Indian public's preference for 22-carat gold items, "Banning the sale and purchase of gold jewellery of more than 18 carats will...reduce India's demand for gold," reckons Professor Chander, also recommending a bank-deposit scheme to attract some of India's estimated 20,000-tonnes private holdings, which can then be used to boost the Reserve Bank of India's official
gold bullion reserves.
What the
Economic Times calls "the government's constant encouragement to the banks to monetize the public's gold holdings" have so far failed, thanks it believes to "the lack of world-class infrastructure to refine...this gold."
The MMTC-Pamp facilities in Mewat, Haryana – the government's new joint-venture processing plant with Swiss-based refiners Pamp – gained approval in May for producing London Good Delivery bars for the international wholesale market.
"[This] will enable local jewelers to exchange their scrap jewelry against world class gold bullion," says James Jose of the Association of Gold Refineries & Mints, "thereby reducing direct gold bullion imports."
Legal gold imports to India fell hard in the second-half 2013 after the Congress administration raised duty to 10% and banned new imports unless traders had re-exported 20% of their previous shipment.
Those rules have been widely seen driving the two-thirds plunge in India's current account deficit, down from a multi-decade high of 4.7% of India's GDP in fiscal-year 2012-13 to 1.7% in the fiscal year ending April 2014.
Accounting for the upper estimate of illegal gold smuggling, however, India's CAD over the last fiscal year would have neared 2.2% on BullionVault's maths.
In the 12 months since the strict import rules were imposed, staff of national carrier Air India have been caught smuggling gold in 13 separate incidents, a junior civil aviation minister said last week.
The Indian government is expected to tighten security at the country's 185 tax-free special economic zones after police arrested a driver trying to smuggle 25 one-kilo gold bars – worth around $1 million – out of the zone in Surat.
A relaxation of India's gold import rules is meantime facing a court challenge by the jewelry industry, after
a surge in legal inflows in June saw the new government state it has no intentions of easing the curbs further.
Approved banks and other importers must calculate their next quota using their total volume of exports they've made over the last 3 years. But so-called "star trading houses" were allowed from 21 May to calculate their new quota based on total gold inflows over the previous two years.
That change was made before the new BJP government of Narendra Modi was sworn in, but after its electoral victory over the previous Congress administration.
"There is
no ground made out to recommend private players to import gold under 20:80 scheme," says a petition to the Delhi High Couty from the Delhi Bullion & Jewellers Welfare Association, "particularly at a time when the new government is being formed...The circular [was] issued in haste without consultation."
Further ahead, writes Professor Chander in the
Hindu Business Line, "approximately 28% of India's total population of more than 1.2 billion is in the 15-30 year age-group...a very large number of young people who are likely to marry over the next 15 years.
"Since marriages in India seldom take place without some gold jewellery for the bride, the demand for gold, unless controlled, will increase manifold" he believes between now and 2030.
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