The Indian government is concerned about the sharp fall in gold imports during April and May of this financial year. According to the government sources, the 39% reduction in gold imports could create distress in the sector that employs millions of people. Gold prices have remained high at around INR 60,000 – 62,000 per 10 grams since March, making it unaffordable for many Indians. Experts believe that the decline in imports is due to high import duties, rising gold prices, the preference for exchange-traded funds (ETFs) and attractive sovereign gold bond schemes. While there is no distress in the sector as of now, if the current situation persists, it could become a significant concern for the sector and the Indian economy.
Gold prices have surged due to global uncertainties, high import duties, and a sluggish economy. However, the Indian government has introduced various investment schemes, such as gold ETFs and sovereign gold bonds, that have been impacting gold demand negatively. The preference for these schemes over physical gold has increased because they offer better returns, leading people to be wary of buying gold. Moreover, there is a liquidity crunch in the market that is indirectly impacting the demand for gold. Housewives, who save money to buy gold, are not able to do so because cash is in short supply. While there haven’t been any falls in revenues yet, there is a decline in overall market footfall due to these circumstances, according to the founder of Reshamm Group.
The situation is being monitored closely by government officials who fear the decline in the sector’s demand could cause distress to many employed by the industry. Despite a lack of distress at the moment, if gold imports continue to decline, the sector could suffer significant losses. As gold is a crucial part of the Indian economy, the government is trying to find solutions to address the situation, including considering a reduction of import duty. The industry is hoping for some relief to the dire circumstances that are affecting the industry.
