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For the gems and jewellery sector, Gold attracts a 10% import duty which is a restraint. In import duty, The Union Budget did not show any reduction even after the industry’s requests.
Mr Pravin Shanker Pandya who is the Chairman of Gems and Jewellery Export Promotion Council (GJEPC) says that for reducing import duty on gold, the long pending demand which is currently at 10 percent, is not considered. Thereby undermining the competitive edge for the gems and jewellery manufacturers compared to their counterparts in other countries, this will continue to fuel smuggling of gold in the country. Because the corporate tax rates have been reduced for those having, MSMEs (medium and small scale enterprises) will have a benefit, he also feels this. Under skill India scheme, the development of centres will help the industry by increasing the number and availability of skilled labour.
All India Gems and Jeweller Trade Federation (GJF) Chairman Mr Nitin Khandelwal told that the industry has been facing serious challenges With the implementation of the PAN card limit of Rs 2 lakh. The PAN card limit should have been increased at Rs 5 lakh In order to avoid the challenges. Since past decade, organised sector, which is growing by at least 2 percent every year, is directly hit due to this. The 10% import duty has been impacting the industry as this is very high and he also feels this. There is also impact on profits of the domestic retail and manufacturing industry. to curb the smuggling of the yellow metal, the duty should be brought down to about 5 %.
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To control the imports that were soaring high, import duty on gold was made three times in the year 2013. However, in the last seven years, in 2016 the demand has been seen falling down to a lowest.
The second largest amount of gold in the world is consumed by India. Mainly to cut down the illegal import of the metal into the country, the centre is thinking of cutting the import duty on the yellow metal.
Currently, the gold import duty is 10% and it might be reduced to 6%
In the year 2015, the gold imports by India were about one-fourth of the world’s demand and in the first six months of this year have fallen down due to higher price and demonetisation of higher value old currency notes by the Indian government. To control the rising import of the precious metal, the government had spiked up the import levy on gold three times in 2013 to control the falling rupee value and to cut down the current deficit account.
The Chairman of Gem & Jewellery Export Promotion Council Praveen Shankar Pandya said because the import duty is high, the gold smuggling is happening because the smuggled gold turns out to be cheaper than the legally imported gold. The import levy should be taken to an amount where the smuggling of the jewellery is discouraged and visibility is introduced in the system.
There is a high cost for imported gold while Smuggled gold is cheaper said by Pandya. The duty cost should be high enough so that it doesn’t promote smuggling and brings in transparency.
Regarding on this matter, Commerce ministry has still not commented or declared anything.
This year, the smuggled gold imports were said to be in between 140 tonnes to 160 tonnes according to a report by the world gold council which is more than the 120 tonnes smuggled in 2015. In between 650 tonnes to 750 tonnes, the November 2016 gold consumption of the country is expected to be in between. In the last 7 years, this is the lowest demand.
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In October-November 2016, the gold import bill of is expected to be similar to the first six months, the country’s current account deficit (CAD) for these two months will be greater than the first half of the season as per ICRA. This year for gold, the remaining demand would further impact the deficit size of second half of 2016-17.Within $20 billion, India’s CAD should be which was near $22 billion in FY16, As per ICRA report. The gold import volumes may decline significantly in coming months if the recent amendments to the IncomeTax Act dispel demand for the holding of gold as well as jewellery. During December2016-March 2017, assuming that the volume of gold imports reverts to an average of around 45 tonnes per month which is seen in April-November 2016, in FY2017, India’s current account deficit would be curtailed at around $15 billion. However, if the quantity of gold imports in the last four months of FY2017 is raised at an average of 70 tonnes per month, driven by an extended wedding demand, India’s current account deficit could be as much as nearly $20 billion dollars in FY2017” informed Aditi Nayar, the Principal Economist at ICRA.
From $33.2 billion in April- October 2015 to $26.4 billion in April¬-October 2016, Imports of gold, silver and precious and semi-precious stones have fallen, whereas from $23.1 billion in April–October 2015 to $26.4 billion in April-¬October 2016 exports have increased.
Either the domestic stock was emptied or some unofficial channels used for imports concluded by these figures. The rise in Nov 2016 gold imports occurred to get stock for the wedding and festive season and may be to an extent as an impact of demonetization.
Through the legal channels, the demand for gold in the coming few months will impact the CAD in the second half this fiscal. In a range of $1150-1250 per ounce, ICRA expects the gold prices as per the international market trends.
In the third quarter of this fiscal, The oil imports will not see any growth as due to demonetization temporarily and the demand for diesel for irrigation related activities is also falling due to good stock levels the oil imports will not see any growth.
Organization of the Petroleum Exporting Countries (OPEC), On November 2016, from January 2017 had decided to cut down total crude oil production by 1.2 million barrels per day. This will keep crude costs greater than $55per gun barrel in December16-March17 which was at $45/barrel for April-November2016. This improves in raw price boosts India’s crude import bill by $4billion in staying off this financial.
In the first quarter of FY17 CAD of India was $0.3 billion against $6.1 billion in Q1 FY16.
In the second quarter of FY17, the trade deficit of merchandises is falling. So the second quarter CAD will come out to $2.5-3-5 billion dollars which are more than 50% drop from $8.5 billion dollars of the second quarter of FY16.
As per ICRA, the CAD of the first half of the FY17 is going to be below $4billion.
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