India leads the world in gold consumption, with demand increasing by an average of 13% annually over the past decade, while real GDP, inflation, and population growth rates were around 6%, 8%, and 12% respectively. The World Gold Council (WGC) reports that Indians possess over 18,000 tonnes of gold, accounting for 11% of the global supply, the largest share worldwide. This gold stock is expected to grow in the coming decade. The demand in the Indian gold market is divided into 75% for jewelry, 23% for investment, and 2% for industrial use, with over half of the jewelry demand being driven by investment purposes.
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Evolving Perceptions and Investment Trends in Gold in India
The perception of gold in India has shifted from being primarily an adornment and status symbol with significant emotional value, to being recognized as a viable investment option. Increasing numbers of Indians now consider gold an important part of their investment portfolios. Forecasts indicate strong economic growth in India until 2035, which will positively impact all forms of gold purchasing. With half of India’s population under 25 and an estimated 160 million weddings in the next decade, understanding the gold purchasing behavior of this demographic is crucial.
Consumers traditionally accumulate gold over time and convert it into jewelry later, but under the GST regime, they pay double tax when exchanging bullion for jewelry. The Sovereign Gold Bond (SGB) has benefited from this shift away from bar and coin purchases, but it is not a physically backed asset. A GST rate of 1.25% is considered ideal for the gold trade, given that gold is an investment asset, and the customs duty on gold is already high.
You can buy gold and silver bullion online.
If you want to buy gold coins in India, I suggest purchasing from reputable jewellery shops like P.C. Chandra, Tanishq, etc., and inquire about the resale rate. Banks also sell gold coins, but they often charge higher than market rates due to claims of higher purity and certificates, and they cannot buy these coins back (per RBI directive). There are also fewer buyers for bank-issued gold coins in the market.
Avoid purchasing jewellery at all costs.
When selling it, you can expect to lose around 20% of its value. Gold jewellery, also known as “Stree Dhan,” is valuable during extreme financial distress. Women usually have an emotional connection with it and only sell it when absolutely necessary.
Indian Gold Coins, available in 5g, 10g, and 20g denominations, can be purchased from MMTC outlets in various cities and from certain accredited retailers and banks. Details (price, addresses of outlets, etc.) are available on the official National Gold Coin Scheme site. However, note that the price markup over spot gold rates (IBJA Rates) is relatively high for Indian Gold Coins. Online retailers like Bluestone and RSBL offer gold coins at lower markups, available on Flipkart and Amazon India. It is advisable to buy from reputable, established online dealers.
A highly recommended company is APMEX.
They provide a reliable service and ensure examined purity, no risk, and better security, offering an excellent level of privacy and confidentiality. Muthoot Finance, one of the largest NBFCs and a reputed financial corporation in India, also offers a range of gold coins in diverse sizes and designs. Their gold coins are available at competitive prices, and they provide curated schemes for investing in gold coins. Always check the current gold coin rate before making a decision.
You can purchase gold coins for various purposes – corporate gifts, family gifts, investments, and savings. When buying gold, evaluate the purity of the coin. It is also possible to buy gold at second-hand stores, yard sales, and auctions, then refine it to 24K purity at a refiner.
When buying gold from a jeweller, ensure they have a registered GST number and a known history. Compare rates at 2 to 3 jewellers to get discounts, especially during festive seasons like Diwali when gold is considered auspicious and a symbol of wealth.
Buying gold coins online is straightforward, with product details such as gold weight, purity, and size clearly mentioned. Most coins sold on various platforms come with a purity certificate and tamper-proof packaging. Authorized sellers like Muthoot Finance offer gold coins in 22 carat and 24 carat purity in various designs and weights to suit your needs.
Gold jewellery, also known as “Stree Dhan,” is valuable during extreme financial distress. Women usually have an emotional connection with it and only sell it when absolutely necessary.
MMTC in BKC, a government entity, supplies metal to major jewellers like TBZ. Their coins are known for unmatched purity and trustworthiness. For instance, I own Sovereign Gold Bonds (SGBs) that have gained 20%, and though tempted to sell for profit, I have never considered selling family jewellery.
Here are common places to buy 24k (999.99) purity gold coins in India:
Similarly, avoid buying gold coins from reputed jewellers online or from banks. Instead, purchase from primary dealers who supply gold to jewellery outfits in industrial quantities and also retail coins and bars to smaller jewellers.
An example of a primary dealer in Mumbai is Riddhi Siddhi Bullion (RSBL), located at 109, Shahi Galli, Sheikh Memon Street, Zaveri Bazar, Mumbai 400002. Buy only .995 purity coins of the highest weight you can afford from a primary dealer to save on making charges and margins.
Jewelry Stores: Popular stores like Tanishq, Kalyan Jewellers, Malabar Gold & Diamonds, and Joyalukkas offer various purities of gold coins.
Banks: HDFC Bank, ICICI Bank, State Bank of India (SBI), and others have schemes for selling gold coins. Visit the bank’s branch or website for details.
Online Retailers: Reputable platforms like Amazon India, Flipkart, and Paytm Mall offer gold coins with various purities. Ensure you buy from trusted sellers with good reviews.
Government Mints: The Indian Government Mint, with branches in Mumbai, Kolkata, Hyderabad, and Noida, produces gold coins of various purities.
Gold Souks: In cities like Mumbai, Delhi, Chennai, and Kolkata, gold markets or souks have sellers offering different purities of gold.
When buying gold coins, ensure you purchase from reputable sources to avoid counterfeit or impure products.
When it comes to the best bullion brands in India, several options stand out, each with its unique offerings and strengths. Here’s a detailed overview:
MMTC-PAMP is considered the premium option in the bullion market.
MMTC-PAMP
MMTC-PAMP is considered the premium option in the bullion market. They offer 99.99% pure gold in the form of coins and bars. MMTC-PAMP products are known for their high quality and purity. They also facilitate physical delivery, albeit with higher making charges and mark-ups compared to market rates. Many digital gold providers, like HDFC Sec and Motilal Oswal, partner with MMTC-PAMP for their offerings.
RPL (Rajesh Exports)
RPL is a solid and reliable brand, known for its consistent quality. They are one of the prominent players in the Indian bullion market.
RSBL (RiddiSiddhi Bullions Limited)
RSBL is another well-known name in the bullion market. They offer a wide range of gold and silver products, although personal purchase experiences are less documented.
Kundan
Kundan offers a variety of bullion products with good market presence. They are known for their wide range of options in gold and silver.
BRPL (Bangalore Refinery Private Limited)
BRPL is recognized for its reliable bullion products. They have a good reputation in the market for quality and purity.
Reliance Jewels
Reliance Jewels is part of the Reliance Group and offers various gold and silver bullion products. They are known for their extensive network and trustworthiness.
Tanishq
Tanishq, a part of the Tata Group, is renowned for its quality and brand trust. They offer a range of gold products, although primarily known for jewelry rather than bullion.
Senco
Senco offers 995 gold, which is slightly less pure than 999 or higher. They are well-regarded in the jewelry market but not specifically for high-purity bullion.
Gujarat Gold Centre
An old player in the market, Gujarat Gold Centre is known for its established presence and reliability in the bullion market.
India Government Mint.
The India Government Mint produces well-made bullion products, known for their quality and authenticity. They are a trusted source for purchasing gold coins and bars.
Augmont
Augmont, which partners with Kuvera, offers a digital platform for investing in gold and silver. They facilitate physical delivery with insured shipment and transparent invoicing. Users have reported positive experiences with their delivery services.
Local Jewelers
In rural areas, people often prefer buying from reputed local goldsmiths they trust. Buying gold biscuits or coins from MMTC in AC Guards is recommended due to their certified bars with serial numbers and competitive pricing.
Digital Gold Providers
Digital gold providers like Google Pay, PhonePe, Kuvera, and Paytm partner with MMTC-PAMP and offer the convenience of buying and selling gold digitally. However, there is limited anecdotal evidence regarding physical delivery experiences from these platforms.
Considerations
- Cost: Digital gold and bullion from banks/post offices tend to be more expensive due to higher mark-ups and GST.
- Purity: Ensure you are buying 99.99% pure gold, especially from local jewelers.
- Physical vs Digital: Physical gold involves additional costs like GST and delivery charges, while digital gold offers convenience but comes with its own set of fees.
- Investment Alternatives: Sovereign Gold Bonds (SGB) and gold ETFs are cost-effective alternatives to physical gold, offering better liquidity and tax benefits.
MMTC-PAMP stands out as the premium choice for bullion in India, while RPL, RSBL, and Kundan offer reliable alternatives. For digital gold, platforms partnering with MMTC-PAMP are trusted, though physical delivery experiences may vary.
How much gold is held in India?
Gold has a special place in Indian culture and society, and is widely used for weddings, religious festivals, and as a store of value. The country has a long history of gold ownership and trading, and it is estimated that India accounts for around a quarter of the global demand for gold. The data given 744 metric tonnes gold is an official reserve i.e. under the custody of Reserve Bank of India not the Indian public and other agencies are having. Indian households may have accumulated up to 25,000 tonnes of gold, the international price (25 metric tonne) would be as much as (+) $1,135 billion, or equivalent of more than 40% of India’s nominal gross domestic product (GDP). thereby retaining the tag of the world’s largest holders of the metal, according to the London head quartered World Gold Council (WGC) estimate.
However, despite the country’s love affair with the precious metal, there is no official data on how much gold is held in India. It’s true Indian households hold more gold than the world can even imagine. Estimates vary widely, with some suggesting that there could be as much as 25,000 tonnes of gold within the country’s borders. But 25K tonne is a very conservative figure, modest estimate should be 33000-35000 Tn. In 2012 estimate based on past Reports of various international orgs was 22K. From 2012-2021 India must have added 8T very easily. This figure includes gold in the form of jewelry, coins, and bars. Should we take in account is the gold reserve from 5 most popular temples in India they are Tirupati Balaji temple, padmanabhaswamy temple, Vaishnavi devi mandir, Varanasi temple, shirdi saibaba mandir, the total gold reserves of all the temples are 24000 metric tonnes. So, between 50 000 and 60 000 metric tonnes gold held in India is a possible fact.
One reason for the lack of accurate data is the prevalence of unofficial imports, or smuggling. India imposes a high import duty on refined gold bars, currently set at 10%. This means that the price of gold in India can be significantly higher than the international gold price, creating an incentive for smugglers to bring gold into the country illegally. In india average middle-class family has 20 sovereign coins of gold at their homes
The Indian government also strictly controls the entities that are authorized to import gold into the country, and has imposed restrictions on gold imports in the past. For example, between 2013 and 2015, the government imposed severe impediments on gold import flows in an attempt to reduce the country’s trade deficit.
Despite these challenges, India remains a major player in the global gold market. The country’s vast and populous cities support multiple large and active gold trading centers, and are responsible for the majority of gold imports. Delhi, Ahmedabad, and Bangalore are the most important importation points, with Delhi being by far the most active.
In recent years, the Indian government has taken steps to reduce the country’s reliance on imported gold. One approach has been to promote domestic recycling, with the aim of reducing the need for non-domestic supply. However, given the strong cultural and economic factors driving gold demand in India, it is unlikely that the country will ever completely wean itself off its love of the precious metal.
India’s ultra-rich are buying gold.
India’s community of high-net-worth individuals is growing fast and, for them, the most favored form of investment is gold. The HNI population in India rose by around 20.86% in 2018, and their wealth is estimated to have grown by more than 11%, to $530 billion. India is one of the fastest growing HNI segments in the world, currently contributing approximately 1.2% to the global HNI wealth.
The number and wealth of the ultra HNIs has leapfrogged in the last decade. With an estimate that in the next five years, there would be about 219,000 such households, up from the current 62,000 households, their net worth is also expected to grow five times,” says
Rupesh Nagoria, product head at broking firm, Alchemist House.
And, importantly, while their assets are growing the members of this class are also getting younger.
The average age of Indian high NetWorth individuals (HNIs) has fallen to the mid-40s from the early 50s in just five years. Though precious metals still hold the roost, Indian HNIs are experimenting with a gamut of investments, from fixed income instruments, commodities to art and private equity firms.
But, with equities in India looking overvalued, wealth managers are setting their eyes on the yellow metal.
“We have been advising clients to invest in gold since the last one year. The interest has tremendously shot up during the last few days, with the festive season coupled with the marriage season. The allocations have certainly gone up from less than 1% to 5% of our clients’ portfolio,”.
Bullion advisor at investment firm, Wealth Management
Manish Bhatia of Religare Macquarie Private Wealth said that around five years ago, people did look at art or films funds as an alternative investment option. “It turned out to be too exotic for most. Not many are looking at these as investment options now, and have moved to less riskier options like gold,” he adds. Adding that Indian gold prices are highly correlated with international prices, he said the fluctuations in the Rupee-US Dollar impact domestic gold prices and have to be closely followed by most HNI investors.
Trends and Preferences in Gold Investment Among Young Indians
A recent survey on gold investment trends in India reveals that a significant number of young investors are actively engaged in this market. The survey, which included 88 percent of respondents aged up to 30 years, found that 55 percent of them are aware of gold ETFs. Notably, 72 percent of respondents perceive gold as a risk-free investment, reflecting a strong preference for stability. Among the various investment options, 43 percent of respondents invest in gold funds, with SBI Gold Fund being the most preferred, followed by HDFC Gold Fund. Physical gold remains popular, with 36 percent of respondents opting for this traditional form of investment. The analysis also indicates diverse investment motivations: 36 percent invest for returns, 21 percent for safety and liquidity, and 13 percent avoid risky funds altogether. Additionally, the government’s Gold Monetisation Scheme and Gold Sovereign Bonds offer alternative avenues for gold investment, alongside Gold Mutual Funds, enhancing the overall appeal and accessibility of gold as a secure and lucrative investment option in India.
The Indian gold industry.
The Indian gold industry is an important part of the country’s economy, contributing 1.3% to Indian GDP. Although still fragmented, the industry has become more organized and regulated over the last few years. Chain stores have gained market share at the expense of stand-alone retailers, increasing their share to 35% by 2024.
Demonetization and GST on the Economy and Jewelry Trade
The Indian government has implemented several measures to formalize the economy, streamline taxes, improve compliance, and reduce reliance on cash transactions, such as demonetization and the Goods and Services Tax (GST). Demonetization pushed the growth of digital and banking transactions, but it also negatively impacted the unorganized sector in the short to medium term. GST standardized tax rates and reduced business costs, benefiting interstate business transactions the most.
The impact of GST on the jewelry trade is notable, as it changed the way manufacturers and retailers transact with each other. Retailers now rely on either job work or outright purchases of jewelry from fabricators, and a large part of the bullion remains on the manufacturers’ books. The elimination of local levies such as VAT allows retailers to purchase bullion from any state and benefit from online apps that have introduced greater pricing transparency. However, compliance costs have increased, and the GST negatively impacted retail gold bar and coin purchases.
Top 10 chain stores in India.
The Indian jewelry market is expected to reach $110 billion by 2025. The market is split between products for women, children, and men, with Indian consumers preferring domestic brands such as Tanishq, Kalyan Jewellers, PC Jeweller, and Joyalukkas. Wedding jewelry accounts for over 50% of all jewelry sales in India, with Indian brides wearing jewelry from head to toe on their big day. Indian consumers prefer gold and diamonds, with gold symbolizing prosperity and long-term commitment and diamonds gaining popularity since 2013. Even high-income jewelry consumers in India place much importance on the actual materials than on the brands themselves. Online shopping and product discovery are developing in India, with e-commerce gaining ground, and consumers aged 18 to 45 representing about 70-80% of online shoppers. Additionally, lab-grown diamonds are gaining traction in the Indian market, and customization and personalization of jewelry are growing trends. India is the world’s second-largest consumer of gold, and according to the World Gold Council, it has become a ‘strong pillar of support for the global gold markets’.
| Name | Stores | Cities/Towns | Company description |
|---|---|---|---|
| Tanishq (including Zoya) | 382 | 209 | Tanishq is a well-known Indian jewellery brand that was launched in 1994 by the Tata Group. It offers a wide range of gold, diamond, and platinum jewellery for men, women, and children. Tanishq is known for its exquisite designs and craftsmanship, and it has become a popular brand among Indian consumers. Zoya, on the other hand, is a sub-brand of Tanishq that offers luxury diamond jewelry. Zoya is known for its high-end designs and exclusive collections, and it targets affluent consumers who are looking for unique and exquisite jewelry pieces. Tanishq and Zoya have a strong presence in India and have expanded to several countries around the world. They have won several awards for their designs and craftsmanship, and their products are highly regarded by consumers and critics alike. |
| Malabar Gold and Diamonds | 150 | 111 | Malabar Gold and Diamonds is a prominent jewelry brand that was founded in Kerala, India in 1993. It has since become one of the largest jewellery retailers in India, with over 250 showrooms across the country, as well as in the Middle East, Southeast Asia, and the US. Malabar Gold and Diamonds offers a wide range of gold, diamond, platinum, and silver jewelry, including traditional Indian designs as well as contemporary styles. The brand is known for its high-quality craftsmanship and use of the finest materials, and it has won several awards for its designs and customer service. In addition to jewelry, Malabar Gold and Diamonds also offers gold coins and bars, as well as other gift items such as watches, perfumes, and accessories. The brand is committed to ethical and sustainable practices and sources its materials from trusted suppliers. Overall, Malabar Gold and Diamonds has built a strong reputation for its quality products and customer service, and it remains a popular choice for consumers in India and beyond. |
| Senco Gold and Diamonds | 126 | 85 | Senco Gold and Diamonds is a well-known jewellery brand that originated in Kolkata, India in 1994. It offers a wide range of gold, diamond, and other precious stone jewellery for men, women, and children, as well as bridal jewellery sets. Senco Gold and Diamonds is known for its unique and intricate designs, which incorporate both traditional Indian styles as well as contemporary elements. The brand is also committed to using high-quality materials and the latest technology to ensure the durability and longevity of its products. In addition to jewellery, Senco Gold and Diamonds also offers gold coins, bars, and other gift items such as silverware and accessories. The brand has a strong presence in eastern India and has expanded to other regions of the country as well. Senco Gold and Diamonds has won several awards for its designs and customer service, and it is widely regarded as a trusted and reliable brand by consumers. The company also has a strong commitment to social responsibility and supports several charitable initiatives in the areas of education, healthcare, and community development. |
| Kalyan Jewellers | 116 | 87 | Kalyan Jewellers is a prominent jewellery brand that was founded in Kerala, India in 1993. It has since become one of the largest jewellery retailers in India, with over 150 showrooms across the country, as well as in the Middle East and Southeast Asia. Kalyan Jewellers offers a wide range of gold, diamond, and platinum jewelry for men, women, and children, including traditional Indian designs as well as contemporary styles. The brand is known for its high-quality craftsmanship and use of the finest materials, and it has won several awards for its designs and customer service. In addition to jewellery, Kalyan Jewellers also offers gold coins, bars, and other gift items such as watches, perfumes, and accessories. The brand is committed to ethical and sustainable practices and sources its materials from trusted suppliers. Kalyan Jewellers has built a strong reputation for its quality products and customer service, and it remains a popular choice for consumers in India and beyond. The brand has also been associated with several high-profile celebrities and has launched several successful marketing campaigns to promote its products. Overall, Kalyan Jewellers is a trusted and reliable brand that has become a household name in India’s jewellery industry. |
| Reliance Jewels | 99 | 85 | Reliance Jewels is a jewellery brand that is part of Reliance Retail, one of India’s largest retail chains. The brand was launched in 2007 and offers a wide range of gold, diamond, and platinum jewellery for men, women, and children, as well as silver jewellery and fashion accessories. Reliance Jewels is known for its high-quality craftsmanship and use of the finest materials, and it offers a range of traditional and contemporary designs to suit different tastes and occasions. The brand is also committed to ethical and sustainable practices and sources its materials from trusted suppliers. Reliance Jewels has a strong presence in India, with over 80 showrooms across the country. The brand also offers a range of online services, including online shopping, virtual try-ons, and home delivery. Overall, Reliance Jewels is a trusted and reliable brand that offers a wide range of jewellery options for different budgets and occasions. The brand has built a strong reputation for its quality products and customer service, and it remains a popular choice for consumers in India. |
| Joyallukas | 85 | 67 | Joyalukkas is a jewellery brand that originated in Thrissur, Kerala, India in 1987. It has since grown to become one of the largest jewellery retailers in the world, with over 160 showrooms across 11 countries, including India, the Middle East, Singapore, and the UK. Joyalukkas offers a wide range of gold, diamond, and platinum jewellery for men, women, and children, as well as bridal jewellery sets and fashion accessories. The brand is known for its high-quality craftsmanship and use of the finest materials, and it offers a range of traditional and contemporary designs to suit different tastes and occasions. In addition to jewellery, Joyalukkas also offers gold coins, bars, and other gift items such as watches, perfumes, and accessories. The brand is committed to ethical and sustainable practices and sources its materials from trusted suppliers. Joyalukkas has won several awards for its designs and customer service, and it is widely regarded as a trusted and reliable brand by consumers. The company also has a strong commitment to social responsibility and supports several charitable initiatives in the areas of education, healthcare, and community development. Overall, Joyalukkas is a trusted and respected brand that has become a household name in India’s jewellery industry and beyond. |
| PC Jewellers | 82 | 68 | PC Jewellers is a prominent jewellery brand that was founded in Delhi, India in 2005. It offers a wide range of gold, diamond, and platinum jewellery for men, women, and children, including traditional Indian designs as well as contemporary styles. PC Jewellers is known for its high-quality craftsmanship and use of the finest materials, and it has won several awards for its designs and customer service. The brand is also committed to ethical and sustainable practices and sources its materials from trusted suppliers. In addition to jewellery, PC Jewellers also offers gold coins, bars, and other gift items such as watches, perfumes, and accessories. The brand has a strong presence in India, with over 100 showrooms across the country. PC Jewellers has faced some controversies and challenges in the past, including allegations of fraud and disputes with investors, but the brand has taken steps to address these issues and maintain its reputation for quality and reliability. |
| Shubh Jewellers | 82 | N/A* | Shubh Jewellers is a jewellery brand based in India that offers a range of gold, diamond, and silver jewellery, as well as gemstones and other accessories. The brand appears to have a strong focus on traditional Indian designs and craftsmanship, and it has several showrooms across India. |
| PC Chandra Jewellers | 57 | 50 | PC Chandra Jewellers is a prominent jewellery brand that was founded in Kolkata, India in 1939. It offers a wide range of gold, diamond, and platinum jewellery for men, women, and children, including traditional Indian designs as well as contemporary styles. PC Chandra Jewellers is known for its high-quality craftsmanship and use of the finest materials, and it has won several awards for its designs and customer service. The brand is also committed to ethical and sustainable practices and sources its materials from trusted suppliers. In addition to jewellery, PC Chandra Jewellers also offers gold coins, bars, and other gift items such as watches, perfumes, and accessories. The brand has a strong presence in India, with over 40 showrooms across the country. PC Chandra Jewellers has built a strong reputation for its quality products and customer service, and it remains a popular choice for consumers in India. The brand has also been associated with several high-profile celebrities and has launched several successful marketing campaigns to promote its products. Overall, PC Chandra Jeweler’s is a trusted and reliable brand that has become a household name in India’s jewelry industry. |
| Orra Jewellery | 58 | 25 | Orra Jewlery is a jewelry brand that was founded in Mumbai, India in 2004. It offers a wide range of gold, diamond, and platinum jewelry for men, women, and children, including traditional Indian designs as well as contemporary styles. Orra Jewlery is known for its high-quality craftsmanship and use of the finest materials, and it has won several awards for its designs and customer service. The brand is also committed to ethical and sustainable practices and sources its materials from trusted suppliers. In addition to jewellery, Orra Jewellery also offers gold coins, bars, and other gift items such as watches, perfumes, and accessories. The brand has a strong presence in India, with over 30 showrooms across the country. Orra Jewellery has a unique identity and has positioned itself as a brand that caters to modern, independent women who value quality and design. The brand has collaborated with several designers and artists to create exclusive collections and has also launched several successful marketing campaigns to promote its products. |
India responsible for almost 29% of the global jewelry consumption.
The demand for lightweight and studded jewelry has been on the rise in India.
With bridal jewelry dominating the gold jewelry landscape and plain gold jewelry maintaining the majority of the market share. India’s gold jewelry exports have grown steadily over the years, with bridal jewelry accounting for 50-55% of the market share. South India is the dominant region for gold jewelry consumption in the country, accounting for 40% of the total jewelry demand. India also has a significant silver jewelry market and is the world’s largest fabricator of silver jewelry.
A 2019 survey conducted by Hall & Partners found that 60% of women in India owned gold jewelry, followed by 57% who owned silver jewelry, and only 26% who owned diamond jewelry. India was the largest consumer of gold before being overtaken by China in 2009. In 2021, India bought 611t of gold jewelry, second only to China (673t) but ahead of all other gold-consuming markets.
Financing remains a crucial challenge for the industry, particularly for smaller independent jewelers, who rely on the monthly gold scheme for funding or who act as money lenders. The manufacturing industry remains fragmented, with only 15-20% of units operating as organized and large-scale facilities. However, jewelry parks are being established to help address ethical concerns and working conditions for artisans. Going forward, national and regional chain stores are expected to continue to gain market share, while organized manufacturers will see their market share grow as many large players limit themselves to working only with organized manufacturers.
Government Restrictions on Gold Imports – A Timeline
India is one of the world’s largest gold importers, and the Indian government has implemented several restrictions on gold imports over the years in an attempt to reduce the country’s trade deficit. In this article, we provide a timeline of the major government restrictions on gold imports. RBI Restricts Gold Imports to Curb Forex Outgo,
- 1998: The Indian government allowed nominated agencies and nominated banks to import gold in a variety of ways, including receiving loans from suppliers, on a credit basis, on a consignment basis, and on an unfixed price basis.
- May 13, 2013: The Reserve Bank of India (RBI) restricted nominated banks from importing gold on a loan or an unfixed price basis. Banks could only import gold on a consignment basis.
- June 4, 2013: The RBI extended the consignment basis restriction to all nominated agencies, premier trading houses, and star trading houses.
- June 27, 2013: Authorized dealers of foreign exchange were prohibited from advancing credit to importers of gold, and all Letters of Credit had to be on a 100% cash margin basis. All gold imports had to be on a Documents against Payment (DP) basis.
- July 22, 2013: The RBI introduced the 80/20 rule, requiring that at least 20% of all gold imported into India be made available for export. The 20% of imported gold earmarked for export had to remain in bonded warehouses until it was exported.
- August 14, 2013: The RBI banned the import of gold coins and medallions. All gold imports had to arrive through customs bonded warehouses. Premier and star trading warehouses and entities based in special economic zones (SEZs) and export-oriented units (EOUs) could only import gold into India for the sole purpose of exporting it again. Gold doré bar imports required a license from the Directorate General of Foreign Trade (DGFT).
- May 21, 2014: Premier and star trading houses were allowed to participate in the 80/20 rule.
- November 28, 2014: The Indian government withdrew the 80/20 rule scheme.
- February 18, 2015: The RBI and Indian government allowed nominated banks to import gold on a consignment basis, but only against upfront payments. Premier and star trading houses could import gold on a Documents against Payment (DP) basis with no restrictions on end use. The ban on the importation of gold coins and medallions was lifted, but banks could still not sell gold coins and medallions.
India’s gold imports were high before the government implemented these restrictions, with an average of 735 tonnes of gold imported per year between 2001 and 2015. Gold imports were particularly high in 2010, 2011, and 2012, before the restrictions began to take effect. The restrictions led to a decrease in gold imports, with 828 tonnes imported in 2013, 779 tonnes in 2014, and over 900 tonnes in 2015.
Higher gold imports have been curtailing the government’s efforts to stem the yawning gap in the country’s current account deficit See also: India’s ultra rich are buying gold. However, jewelers in the country are already facing the music, given the extremely perilous situation with low gold stocks and correspondingly high premiums of around $40 per ounce or more.
India has been the world’s biggest consumer and importer of gold, and most purchases are an essential part of Indian weddings and religious festivals. The country’s purchases of gold and silver shot up 138% in April to $7.5 billion, the highest so far this year, pushing up the country’s trade deficit to $17.7 billion. India had imported just 471 tonnes in 2020-21.
All of this will ensure that the gold bracelet or the chunky chain will become more expensive for the Indian bride, and despite the dip in gold price, she will not be able to partake in the current price slide to the fullest extent.
Moreover, several small and medium jewelry manufacturers across the country, are also set to be hit. These traders have been depositing their daily sales realizations with nominated banks. Now, with the government’s latest move, they will be forced to lock up funds to maintain the necessary stock level.
Small players are bound to get marginalized in the already highly competitive trade. This will also impact their future fund-raising capabilities.
The Indian government has already taken several steps in the recent past, including raising import duties twice, basic customs duty on gold was 7.5 per cent, now it will be 12.5 per cent, to curb inbound shipments. Last week, the government announced that it would issue index linked bonds early June, to try and wean away investors from gold.
India’s finance minister said that the government had anticipated an increase in gold imports in April and May, since “all over India, these are months when there is the largest number of weddings. So, we were not surprised that gold imports increased in the second half of April,” he told the media.
ALARM BELLS for gold in India.
Metals and Minerals Trading Corporation of India (MMTC) has already sounded the alarm bells. An official said India’s gold imports are expected to fall by 50% to below 500 tonnes this fiscal – if the RBI’s recent move to restrict banks’ bullion imports is completely effective. The official added if the notification is not released, the country’s overall gold imports are likely to cross the 1,000 tonne mark this year given the downtrend in gold prices and high domestic demand.
Incidentally, MMTC’s overseas purchase of gold could increase sharply to 200 tonnes, as against 38 tonnes last year, if RBI curbs are not imposed, the official added. Gold prices have declined by 15% as compared to a year ago. However, high premiums in the spot market continue to limit purchases at the retail level.
Jewelers across the country have been complaining of high premiums on gold and limited availability. While some banks are charging premiums on London prices at around $20 to $30 an ounce, retailers say the large buy orders from China and Dubai are responsible for pushing up physical premiums to levels not seen for a long time.
While Hong Kong and Singapore buyers are paying a premium of around $5 per ounce for a gold bar, Dubai buyers are paying a premium of $10 per kilo. Turkey was reportedly paying a premium of $25 an ounce over the London price, while many retailers in India say they have been coughing up premiums of nearly $40 per ounce.
Investment and jewelry demand within India is often decidedly blurry.
This is one of the many reasons why the Indian government’s quest to rein in gold imports is rather quixotic and, it begs the question, how sustainable is the current regulatory framework? In its daily precious metals note, UBS asks exactly that, commenting that, while the situation is fluid, “There is a clear recognition of the reality that a decent portion of demand – particularly in the form of jewelry and ornaments linked to festivals and wedding traditions – will remain intact.”
This is supported by Standard Bank, that writes in its latest Commodities strategy note, that, although premiums in China fell somewhat in recent sessions, “looking at gold physical demand more broadly in Asia, our Standard Bank Gold Physical Flow Index indicates that demand remains relatively healthy, actually been rising in the past week. “This, the bank says, is a positive sign, “indicating a higher gold price in the next few days,” adding, “Part of such a rise in gold demand would be seasonal factors.”
According to UBS, while jewellery demand remains robust, it says, the investment element of gold demand in India, which is, admittedly, rather smaller than jewelry is likely to be affected. And, while it accepts that because of the potential for blurring mentioned earlier, accurate levels of investment demand are difficult to ascertain, it says: “feedback from the ground is that the former [investment] has come off this year”.
Global gold sentiment combined with restricted supplies and is visible in the lower flows seen into Indian ETFs as well as the appetite for investment products like coins (small bars).
For UBS, the upcoming elections in India will be an important signpost for the local gold market.
“The outcome could impact gold regulations through its effect on expectations for the economy and the direction of the currency. The general view for now is that some changes could occur; most expect these changes to be broadly within the current framework, although a more significant shift could not really be ruled out either.”