Jewellers in India plan to tap a slice of the 20 000 tons of gold stashed in homes and temples to cut the country’s reliance on overseas purchases after the government curbed imports to bolster its currency.
The All India Gem & Jewellery Trade Federation, representing about 300 000 gold manufacturers and retailers, was asking members to offer incentives to lure holders to recycle their old jewellery, chairman Haresh Soni said yesterday.
Using more scrap and hoarded metal may further reduce Indian imports of gold, which are forecast to tumble 22 percent in the second half.
India doubled a tax on imports to 8 percent this year and tightened financing to reduce demand and contain its record current account deficit.
Jewellers have suspended sales of coins and bars to retail buyers until the current account deficit has stabilised.
Imports of gold could be cut by as much as 35 percent if jewellers also succeeded in tapping the idle gold, Soni said.
Consumption in India, which imports almost all the bullion it needs, accounted for 20 percent of global demand last year, according to data from the World Gold Council.
Imports may drop 22 percent to 372.5 tons in the six months to December from a year earlier, according to a Bloomberg survey.
But full-year imports may climb to about 902 tons from 860 tons last year after a surge in purchases in April and May as prices plunged, according to calculations based on data from the council and the federation.
“It’s certainly a good step and will reduce gold imports to some extent,” said Sugandha Sachdeva, an associate vice-president at Religare Commodities. “Indians have a fascination for gold and if prices fall further they will purchase more.”
On Tuesday Finance Minister Palaniappan Chidambaram appealed to Indians to moderate their demand for the metal, while ruling out a complete ban on imports.
Referring to purchases of coins and gold bars by retail investors, Vinod Hayagriv, the managing director of C Krishniah Chetty & Sons, said: “The government should only be worried about hoarding and should not be worried about normal consumption.”
India’s current account deficit, the broadest measure of trade, widened to $87.8 billion (about R865bn), or 4.8 percent of gross domestic product, in the year to March from $78.2bn in the previous year.
The deficit is mainly fuelled by imports of crude oil and bullion. – Bloomberg