India, which vies with China as the top consumer of bullion, is working on new policies to improve transparency and help expand its US$19 billion gold jewelry industry, according to people with knowledge of the matter.
The plans being worked out by India’s finance and commerce ministries along with industry groups should be finalized by the end of March next year, the people said, asking not to be identified because they are not authorized to speak publicly.
Indian Ministry of Finance spokesman D.S. Malik did not answer calls to his cellphone, while a spokeswoman for the Indian Ministry of Commerce did not reply to an e-mail seeking comment.
Photo: AFP
The start of a spot bullion exchange, to make gold supply more transparent and help enforce purity standards is under consideration, the people said.
An import tax of 10 percent could also be reduced as the government seeks to eliminate smuggling, they said.
The plans also include a dedicated bank for the jewelry industry, according to one of the people.
The overhaul of India’s disorganized and fragmented gold jewelry industry is meant to bolster confidence among consumers, where the gifting of gold at weddings and festivals or its purchase as a store of value are deeply held traditions. Ensuring quality standards and allowing supply chains to be easily tracked are ways to enhance trust.
The estimate for the size of the sector was given by the Mumbai-based India Bullion and Jewellers Association Ltd.
The measures could help underpin Indian demand, which is recovering after slumping to a seven-year low last year.
Consumption is projected to rise to between 771 tonnes and 862 tonnes by 2020, from an estimated 590 tonnes to 680 tonnes this year, buoyed in the short term by a lower-than-expected goods and services tax to be implemented next month, the World Gold Council (WGC) said last week.
Gold for August delivery on Friday rose about 0.1 percent to US$1,255.20, but was down 1.1 percent for the week.
The Indian government fixed the tax on gold at 3 percent, lower than the 5 percent feared by the industry, as it replaces more than a dozen domestic levies with a single duty.
“The gold supply chain should become more transparent and efficient, and the tax reform could boost economic growth, which we see as supporting gold demand,” said the WGC, a producer body that advocates for the metal.
Over the medium term, the sector will find it tougher to evade taxes as legal imports go through the banking system and a full trail will now be established by the new nationwide tax compared with previous duties, which were levied at the state level only, Credit Suisse Group AG said in a note Thursday.
The government is also keen to get the public to recycle its jewelry to reduce the nation’s reliance on imports. After a slow start to its plans to monetize the precious metal held in households and institutions, the government is looking to tweak the scheme and attract more participants, the people said, without giving details.
Other metals:
Spot silver settled at US$16.7 per ounce on Friday, down 3.7 percent for the week.
Copper rose 0.3 percent to US$5,677.50 per tonne on Friday.
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