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.