The Indian gold industry is pivoting towards recycling and monetisation as the government raises import duties on the precious metal. The World Gold Council estimates that every 1% increase in import duty reduces consumer gold demand by approximately 6.4 tonnes. With the latest hike, this could suppress demand by nearly 57 tonnes annually, prompting stakeholders to explore alternative sources.
Impact of Higher Duties
The import duty hike, announced in the recent budget, aims to curb gold imports and manage the current account deficit. However, it also raises costs for consumers and jewellers. Industry experts believe that recycling and monetisation schemes can help bridge the supply gap without relying heavily on imports.
Recycling as a Solution
Gold recycling involves melting and refining old jewellery, coins, and bars. India has a vast stock of gold held by households, estimated at over 25,000 tonnes. Encouraging individuals to sell their idle gold can provide a steady supply for the industry. Several jewellers have launched buyback programmes offering competitive prices.
Monetisation Schemes
The government's Gold Monetisation Scheme (GMS) allows individuals to deposit gold with banks and earn interest. However, adoption has been slow due to low returns and procedural hurdles. Industry bodies are now pushing for higher interest rates and simplified processes to attract more participants.
Industry Response
Jewellers are investing in refining capacity and awareness campaigns. The Gem and Jewellery Export Promotion Council (GJEPC) has called for incentives for recycling units. Meanwhile, digital platforms for gold trading are gaining traction, enabling consumers to sell gold easily.
The shift towards recycling and monetisation could also reduce India's dependence on imports, which currently meet about 80% of domestic demand. Analysts note that a robust recycling ecosystem would stabilise prices and support the jewellery sector.
Challenges Ahead
Despite the potential, challenges remain. Consumers often prefer to hold gold as an asset rather than sell it. Transparency in pricing and purity assessment is critical to build trust. Additionally, the informal sector dominates gold trading, making it difficult to channel recycled gold into the formal economy.
The World Gold Council suggests that a 1% duty cut could boost demand by 6.4 tonnes, but the government is unlikely to reverse the hike soon. Thus, the industry is adapting by focusing on domestic resources.
In conclusion, the gold duty hike is accelerating the transition towards a more sustainable gold ecosystem in India. Recycling and monetisation are emerging as key strategies to mitigate demand suppression and ensure supply stability.
