Nagpur: Prime Minister Narendra Modi's appeal to citizens to refrain from buying gold for a year has sparked concern in the jewellery industry, with traders fearing a sharp impact on livelihoods and allied sectors.
Industry Reaction
Rajesh Rokde, president of Gems and Jewellery Council (GJC-Domestic) and a Nagpur-based jeweller, told TOI that such a move would affect not only traders but also push lakhs of artisans across the country into unemployment. GJC is a national guild representing the jewellery trade in India.
Rokde said the gold industry supports a wide ecosystem, ranging from designers, transporters, insurers, and service providers, besides contributing significantly to tax revenues.
Gold Monetisation Scheme Proposal
In response to the PM's appeal, GJC has renewed its pitch for the gold monetisation scheme it recently submitted to the Reserve Bank of India (RBI) and the Ministry of Finance. The proposal aims to reduce India's dependence on gold imports, aligning with the government's objective of curbing foreign exchange outgo.
Rokde said the scheme seeks to bring idle gold held by millions of households into the formal banking system. The yellow metal can then be lent to jewellers through RBI at a reasonable interest rate. GJC has suggested that the new scheme should be routed through jewellers.
Role of Jewellers
"Jewellers enjoy a generational trust with consumers and should be the route for such a scheme," Rokde said. "This can create a large domestic pool of gold, reduce imports, and ensure steady supply for the industry," he added.
Under the new plan, consumers would bring gold to the jeweller's counter, where it would be melted, purity certified, and deposited with RBI on their behalf. Consumers would also receive real-time confirmation of the gold, which would now be held in demat form with RBI. The depositor shall get interest on the value of gold deposits, which in turn would be lent to jewellers at a reasonable margin. This can bring large quantities of gold lying with people into the system and open a domestic source for procuring the metal for jewellers.
Lending Rates and Market Impact
GJC said jewellers have suggested that lending rates under the scheme should be around 5%. The jewellers have mixed views on the impact of Modi's appeal. Traders said buying has already been low due to high prices. Apart from physical gold and jewellery, investors also purchase exchange traded funds (ETFs). This may be in demat form, but physical gold is purchased by the asset management company against every unit of ETF sold. Financial advisors say gold ETFs are currently not favoured due to low expected returns, though sentiment has varied over time. There have been times when advisors were bullish on ETFs.
