Gold import curbs to boost grey market in India

The national body of jewellers, the All India Gems & Jewellery Trade Federation (GJF), on Wednesday, said that the recent restrictions on gold imports will encourage smuggling and grey markets activities in the country.

“The restrictions effected by the Government of India on import of gold will promote grey markets and will not lessen the domestic consumptions. Gold is flowing in through the unofficial channels,” said Mitesh Khimji, Regional Chairman (East), GJF.

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India imports about 1200-1600 tonnes of gold annually. The country’s gems and jewellery market is pegged at around Rs 1,78,000 crore while in Odisha, the jewellery trade is estimated at Rs 5,000 to Rs 6,000 crore 9Rs 50-60 billion).

Reports of gold smuggling at different airports in India rose by 2,200 per cent last year, he claimed and added that the gold consumption has gone up despite increase in the import duty from one per cent to eight per cent in January last year.

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In May, the Reserve Bank of India (RBI) had restricted the import of gold on consignment basis by banks, only to meet the genuine needs of the exporters of gold jewellery.

And the central bank, this month, has decided to extend it to all nominated agencies or premier or star trading houses, which have been permitted by the government to import gold.

“This has affected the availability of raw material for jewellery making, paralysing the industry and rendering about one crore workers jobless,” he added.

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GJF called for ban on the gold imports intended towards parking of large funds in the form of raw bullion and other precious metals by HNIs (high networth individuals) and institutions.

This will reduce imports by 75 to 150 tonnes per annum (about 25 to 30 per cent). Besides, steps should be taken to stop sale of gold bars by unregistered dealers and star trading houses, if they are not operating in the G&J (gems and jewellery) sector, it demanded.

Khimji said, to bridge the current account deficit (CAD) gap, it may not be necessary to reduce the gold consumption.

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The trade body suggested that certain licensed jewellers be allowed to attract gold from consumers and deposit the same with scheduled banks, which will be easier to unlock rather than setting up Bullion Corp or getting banks to do this as they do not have the infrastructure of jewellers. By doing this, we may not require to import the yellow metal for the next 3 to 4 years, he observed.

Khimji pleaded for implementation of an amnesty scheme where in, no gift tax or income tax will be imposed if somebody staying abroad gifts gold to his near and dear ones in India.

Stating that the industry is concerned about the widening CAD, he said, there are other alternatives to combat it rather than curtailing gold imports.

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