FICCI Comments on Relaxing the Import Curbs on Gold

 ficciNew Delhi, 23 May 2014:  FICCI welcomes the RBI’s move to relax the import curbs on Gold by allowing some large private gold importers i.e. star and premier trading houses, to import the yellow metal, although, within 20:80 scheme. This move will help in reduction of gold prices in the domestic market and will also help in reviving the growth of the industry slowly. Since last one year the growth of Indian Gems & Jewellery sector has been quite negatively impacted due to various restrictions imposed on gold imports. Whilst the move was to reduce the widening CAD, it had severely affected the industry and key macroeconomic variables attached with it like employment in the sector and exports. RBI has established its autonomous decision making authority by taking this step.

‘Moreover now, with the stable and reduced CAD position, FICCI expects that the new Government will bring in further reforms in gold import policy to stimulate the growth of this high export earner sector of India. Jeweler community is positive about this development and would want the new government to take steps which would enhance the trust and relationship amongst all the stakeholders in this sector’, said Mr Sidharth Birla, President FICCI

The recent step of RBI to allow star/premier trading houses to import Gold, albeit, under 20:80 scheme is a much welcome move. Further, RBI also permits banks to give gold metal loans to domestic jewellery manufacturers from domestic import quota. Industry is appreciative of these positive developments and is hopeful that the prices of gold will reduce in domestic market in near term.

Over the past one year, this industry has been severely affected by the number of import restrictions imposed on gold.  Government raised the gold import duty last year to 10 percent from 4 percent and also mandated that 20 percent of imported gold be exported, which is known as the 80:20 rule.

‘The policy restrictions imposed on this sector, which were intended to control investment demand of gold has negatively impacted the domestic jewellery production, employment and exports. As per recent reports, Gold jewellery exports from India fell 39.63 per cent to $7.86 billion in the year to March 2014. The curbs also spurred smuggling into India, the world’s biggest buyer, through illegal “hawala” channels, which are informal international networks for remitting money. In my belief Imports of metal should be allowed for a longer tenure and the existing import scheme of 20 : 80 should be done away with; thus helping the sector to reach its true potential’, Mr Mehul Choksi, Chairman FICCI Luxury Lifestyle Gems & Jewellery Forum, Chairman & MD Gitanjali Groups stated.