Image Credits: Reuters
The gold market in India has seen its ups and downs over the years. But as gold
prices continue to increase, along with factors such as increased import duty, the
gold industry’s future remains unclear.
Goldsmiths and jewellers have taken the biggest hit. As prices are increasing and
the import duty has increased to 12.5% in the latest union budget, national import
has decreased which has brought down the amount of raw material available. This
has put a strain on the amount of gold being produced and sold in the market.
Customers are also buying less gold despite the festive season.
In Zaveri Bazaar in Mumbai, once known as the hub of jewellers and goldsmiths,
there used to be about 2 lakh gold artisans. This number has reduced by half as
employers cannot afford to pay them. As jewellers are not getting many orders,
goldsmiths are losing their jobs. Similarly, there is a major slowdown in the number
of new jewellery businesses while existing ones are slowly closing shop.
So why are we witnessing increases in gold prices? According to Business Today,
the mixed signals from the US-China trade talks along with public worry regarding
the upcoming recession have triggered an increase in gold prices in India.
Furthermore, a weak economic outlook worldwide is making gold a safer investment
compared to mutual funds or other options. This too has contributed to the increase
in prices.
However, there is one way that India’s jewellers can capitalize on the trade war. The
US government recently placed a 10% import duty on Chinese jewellery. India can
benefit here if they can provide incentives for foreign investors to shift their business
from China to India. India will need to work towards this and ease up on their
business policies, as currently, countries like Thailand and Vietnam offer much
friendlier policies. If India does manage to capitalize on the 10% import duty placed
on jewellery from China, it will be gaining on a $2 billion export market.
While India’s gold industry is going through a challenging low phase, there are ways
for it to gain a competitive advantage over other countries and hence benefit from
the export market.