India's Gold Shortage Gets Political, "Killing" Jewelry Business
Monday, 9/16/2013 17:51
New BJP candidate targets jewelers & retailers caught without gold as festival season begins...
INDIA'S STRICT gold bullion import rules are becoming increasingly politicized as shortages hurt the jewelry business, and the world No.1 consumer nation moves towards local 2014 elections.
Starting after the Hindu calendar's 'closed season' of Chaturmas, this year's post-harvest boom in India's gold demand is likely to prove strong, say analysts at Standard Chartered Bank, thanks to "a bumper monsoon season" driving rural incomes higher.
But while demand over the last three months still totaled 120 tonnes, new gold bullion imports were only 10 tonnes, believes joint-director of the Bombay Bullion Association Mukesh Mehta, quoted by DNA.
"The government’s faulty policies are to blame, and we're bearing its brunt," says Mehta, publicly backing the nationalist BJP party's new prime ministerial candidate, Narendra Modi, on behalf of the gold and jewelry industry.
India's current Congress Party government has raised import duty on gold and silver to 10% by value, and imposed a series of strict measures aimed at stopping inflows of bullion, which it blames for India's large current account deficit with the rest of the world.
"Almost 30,000 tonnes of undisclosed gold is lying in India," Mehta went on, discussing a scheme he believes the BJP would implement if elected under Modi, who as chief minister a decade ago was blamed for allowing and
even supporting violent attacks against Muslim citizens.
"The government should start a scheme where people disclose their gold. Banks must be allowed to take gold as mortgage against loan. It will bring out a lot of gold into the market."
"There is
a short supply of gold in the market," agrees
Business Today, quoting Titan Co.'s managing director Bhaskar Bhat.
"We are somehow managing," says Bhat, whose company runs the 150-store Tanishq chain of retailers. "We are managing hand-to-mouth."
"I think," says Harmesh Arora, a spokesman for the Bombay Bullion Association, "we are going to see a big shortage in about a fortnight's time as we get close to the festival season."
Monday saw the Reserve Bank of India cut import-duty levels on
gold bullion by more than 5%, and cut silver duty by 6% in Rupee terms, to match the continued drop in world prices.
Gold hit all-time highs for India buyers in late August, as the Rupee sank to new all-time lows on the currency markets despite the block on new gold imports.
As the Rupee has since rallied, and the international benchmark price for gold bullion has fallen, the domestic Indian price has now retreated almost 15% according to data from market-development organization the World Gold Council.
The current clampdown on legal gold bullion imports is "killing" the jewelry business, DNA quotes the Bombay Bullion Association's Mehta. Official data put the number of jobs in the sector at 1.3 million.
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