Gold import relaxations to give fillip to jewellery industry in 2015

 The Dollar Business Bureau The Indian government’s move to withdraw some of the restrictions placed on the import of gold is expected to provide a fillip to the jewellery industry which has been recording lower than expected volumes in the last few months, as per a report by research firm ICRA. The agency is of the view that improvement in availability, reintroduction of low cost gold metal loans and stabilisation of gold prices at lower levels will drive volume growth for Indian jewellers over the medium term. Last year, the government withdrew the extant restrictions on the import of gold levied during Q3 CY2013 and the Reserve Bank of India (RBI) has withdrawn the 80:20 rule for Authorized Dealer Category banks. The 80:20 principle had considerably constrained the availability of the yellow metal in the market, especially during Q3 and part of Q4 CY13. Imports during H2 CY13 dropped by nearly 70% to about 90 tonnes per quarter as against an average of 225 tonnes in the previous eight quarters, also forcing jewellers to scale down expansion plans, says the report. However, the supply gradually improved during H1 CY 14, aided by the May 2014 notification allowing import of gold for domestic use by the nominated agencies. Imports during Q3 CY 14 were also spurred on by the apprehensions of additional restrictions. After restricted supply during CY13, supply is likely to meet most of the demand requirements during the current year and outpace demand going forward, as jewellers build up inventory to support expansion plans, says ICRA. In terms of supply, imports are expected to reach around 850 tonnes in 2015, at the levels witnessed prior to the curbs over the medium term. The easing of restrictions also assumes greater significance for organised players who are largely reliant on nominated agencies for supplies. The near term jewellery volumes in the country are also expected to benefit from the renewed thrust on store expansion, says the report.

 This article was published on January 6, 2015.