Jewellery exports from India set to jump on new RBI rules

Mumbai: Gold jewellery exports from India, the world’s biggest consumer last year, are poised to surge as the Reserve Bank of India (RBI) seeks to curtail domestic bullion use and boost shipments to defend a weakening currency, a trade group said.
Shipments may jump as much as 71% to 120 tonnes in the year that began on 1 April from 70 tonnes a year earlier, said Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council. RBI’s order this week to set aside 20% of imported gold in any form for exports will help reverse a drop in jewellery shipments, he said.

Exports slumped 59% to $1.66 billion in the April-June quarter from a year earlier after the government doubled a tax on gold imports and curbed financing, fueling a shortage of precious metal in the domestic market, Shah said. India is seeking to tackle a record current-account deficit, which weakened the rupee to an all-time low, by reducing bullion imports. The deficit is the biggest risk to the $1.9 trillion economy, according to the central bank.

“With this new policy taking effect, we are now looking at a positive growth,” Shah said. “The 20:80 ratio will curtail imports for domestic use and at the same time exporters will also get supply.”
Gold imports may tumble 63% to 175 tonnes in the six months through December from a year earlier, according to Bachhraj Bamalwa, a director at the All India Gems and Jewellery Trade Federation. Assured supplies to exporters may help boost sales of shippers including Rajesh Exports Ltd, Gitanjali Gems Ltd, Shree Ganesh Jewellery House (I) Ltd and Tara Jewels Ltd.

Import curbs
The central bank said importers may supply gold only to the jewellery business and dealers who sell to jewellers. Shippers have to retain 20% of the gold in bonded warehouses and will be allowed to make fresh purchases only after at least 75% of the quantity has been exported, the bank said. The country exported gold jewellery, coins and medallions worth $18.3 billion in 2012-2013, according to data from the export promotion council.

“The new measures would boost exports of jewellers, which shall offset some of the import burden of gold,” Kishore Narne, head of commodity and currency at Motilal Oswal Securities Ltd, said in a report on 23 July. “This is one more addition to the plethora of measures announced recently on gold in order to control the trade deficit numbers.”

Rupee record
The current-account deficit, the broadest measure of trade tracking goods, services and investment income, widened to $87.8 billion in the year ended 31 March from $78.2 billion in 2011-2012, according to official data. The rupee touched a record low of 61.2125 per dollar on 8 July.

Gold consumption in India, which imports almost all the bullion it uses, was 864.2 tonnes last year, according to data from the World Gold Council. The country accounted for 20% of global demand in 2012, according to the council. Imports in June shrank to about 38 tonnes from 162 tonnes in May, according to the All India Gems and Jewellery Trade Federation.

Gold is heading for the first annual drop in 13 years after some investors lost faith in the metal as a store of value. Prices rebounded 12% to $1,320.14 an ounce from an almost three-year low last month as demand for jewellery and coins rose.
Exports of polished diamonds, gold jewellery, coins and bars from India may climb 8% to 10% this year, export council’s Shah said. Shipments fell 9% to $39 billion in 2012-2013, data from the council showed.

Gradually, the US market, which is our main export destination, is picking up, said Shah. The Middle East and the Far East markets are also looking up, while Europe remains slow because of the recession.

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