Prime Minister Narendra Modi, addressing a rally in Hyderabad recently, urged Indian citizens to reduce the consumption of fossil fuels and avoid purchasing gold for a year, among other advisory statements.
The statements of the PM come as the country grapples with the economic fallout of the ongoing Iran-US war and surging crude oil prices.
So, what does avoiding the purchase of gold mean for the average buyer? My Kolkata asked city jewellers and economists on what the repercussions might be.
Suvankar Sen, MD & CEO of Senco Gold & Diamonds, says it all depends on how much gold India imports.
“The jewellery industry is already adapting with lower-weight and lower-carat products to maintain affordability for consumers. If these trends continue, India’s annual gold imports could potentially decline to nearly 550 tonnes, compared to the historical average of around 700 tonnes,” said Sen.
While Sen wholeheartedly supports the decision of the PM, he hoped that the government would try to mobilise dormant assets like temple gold, invested gold, and gold sitting idle in various pockets of the economy, which is estimated to be almost 2,000 tonnes.
Nilanjan Ghosh, vice president and senior director, Observer Research Foundation, says these are purely demand-management measures.
“We are not on the supply side. There’s a threshold for the Reserve Bank of India beyond which inflation goes haywire. The consumer price index stays at five per cent to be balanced,” said Ghosh.
India is among the top two importers of gold in the world. Though India has maintained a good hedging strategy by keeping crude oil in check after 2020, the demand is on the rise. It is the same for gold.
“This is also to keep the Rupee in check and prevent excessive inflation amid rising demands,” added Ghosh.
“We have urged the government to consider alternative measures, such as monetising existing household gold, rather than discouraging new purchases, to manage the trade deficit,” Pratik Dugar, director of Indian Gem & Jewellery Creation.
Dugar elaborated that the gold prices are already at a record high. With a steep decline in sales, some industry reports indicate a potential 30-40% drop in volume.
Kirit Bhansali, chairman, Gem and Jewellery Export Promotion Council, expresses resilience for the gem and jewellery industry in India.
“The gem and jewellery sector is one of India’s largest employment generators, supporting the livelihoods of nearly five million workers, artisans, and small businesses across the country, and the industry will continue to work responsibly while safeguarding these livelihoods. The Indian gem and jewellery industry has always shown resilience during difficult periods, be it the Gold Control Act, the 80:20 rule, or other challenging phases in the past, the industry has worked together and successfully adapted to changing circumstances,” said Bhansali.
“We are currently consulting with industry stakeholders and will collectively work towards finding balanced and practical solutions for the way forward, while continuing to support the national interest,” added Bhansali.
Siddharthaa Sawansukha, managing director, Sawansukha Jewellers, mentions how gold is an emotional object for most Indians.
“It has been a part of our culture for centuries. This may also become an opportunity for the industry to focus more on responsible buying, lightweight innovation, recycling, exchange, and value creation rather than only volume,” said Sawansukha.