Finance Minister Arun Jaitley might have delivered a Budget for growth but his largesse did not extend to the Indian jewellery industry. Despite widespread expectations that import restrictions would be reduced, Jaitley has continued with both the 10 per cent import duty and the unpopular 80:20 rule (requiring re-exports of at least 20 per cent of all imported gold).
From the moment Jaitley noted the country must remain watchful of the current account deficit, the prospects for an easing of gold import restrictions looked slim. Although unpopular, these import restrictions have contributed significantly to the reduction in India's current account deficit.
From a monthly average of around 100 tonnes in previous years, Indian gold imports have dropped sharply, running at an average of less than 25 tonnes per month since mid-2013.
India's jewellery industry will continue to be hamstrung by high import duties and the added costs associated with the unwieldy 80:20 rule. In time, stronger economic growth should improve the prospects for a relaxation of India's strict gold import restrictions, but for now the jewellery industry will have to wait a little longer before the good times finally arrive.
Head of commodities research, Natixis, London