Gold imports to India declined 32.4 per cent in 2011-12, as the government stepped up measures to control the precious metal’s flow into the country, including rises in import duties.
A Reuters poll estimated that gold imports to India stood at 655 tonnes in the last financial year, compared with 969 tonnes the year before. In 2009-10, the year which saw a a worsening global economic sentiment, following the collapse of the US investment bank Lehman Brothers in September 2008, India’s gold import stood at 816 tonnes.
The decline in the past financial year assumes significance as the Gems and Jewellery Export Promotion Council (GJEPC) has been receiving repeated complaints from its members for non-availability of gold in remote areas. Looking at the growing appetite of Indian consumers for gold, the decline in import may put further pressure on prices.
During the March quarter, gold imports are estimated to have fallen 68 per cent to a mere 90 tonnes, compared with 283 tonnes in the corresponding quarter a year ago, the poll showed. The steep fall was attributed to a 21-day nationwide strike by jewellers, demanding the rollback of excise duty on non-branded jewellery. Considering that around 18,000 tonnes of gold were held by Indian consumers for the past several years, the government raised import duty from one per cent to two per cent in January and again to four per cent in March this year.
Union Finance Minister Pranab Mukherjee, while presenting the annual budget for 2012-13 in March, said gold imports should be restricted to control the swelling current account deficit. Following that, the Reserve Bank of India (RBI) tightened guidelines for gold loan companies. It has set up the K U B Rao Committee to examine the linkage between gold import and pledging of jewellery with gold loan companies like Muthoot Finance and Manappuram Finance that have witnessed enormous growth in the past few years.
“We do not see any linkage between gold import and lending against gold jewellery. No consumer buys bullion and converts it into jewellery over a period of time for mortgaging with non-banking finance companies (NBFCs). The consumer tends to lose nearly 50 per cent of the value of gold in the process, due to around 15 per cent of making charges. We do not finance bullion products like coins and bars that are closely linked with imports,” said George Alexandar Muthoot, chairman of the Association of Gold Loan Companies and managing director of Muthoot Finance. RBI restricted NBFCs to maintain loan to value at 60 per cent and asked them not to lend against bullions, while the same were not applicable for nationalised banks. In a recent representation to RBI, the association asked for a level-playing field.
“Gold demand has been consistently lower due to the lack of festival season. Uncertainty ahead of jewellers’ long strike hit gold import hard,” said Bachhraj Bamalwa, chairman of All India Gems and Jewellery Trade Federation. According to a report, Metals and Minerals Trading Corp, a public sector trading company, witnessed 30 per cent fall in gold imports at 171 tonnes against 245 tonnes the previous year.
India’s gold import bill shot up during 2011-12 to around $56 billion as against $33 billion the year before.
