The nationwide strike by jewelers entered its 20th day on Thursday to protest against a steep hike in import duty on gold, and an excise duty in unbranded jewrllery. In a country that is the largest buyer of bullion in the world, and where household gold consumption is worth about $45 billion, the extended strike is now weighing both on everyone’s minds as well as business. Here are five things you need to know about the strike.
Indian jewelers have been on an unprecedented strike for 20 days now to protest a Union Budget proposal to hike import duties on gold imports. Kumar Jain, vice president of the Mumbai Jewellers’ Association, which includes 10,000 jewellers and traders, has said the strike will continue until the import duty is rolled back. However, no action on changing the proposed duty structure is possible until the Finance Bill is tabled in Parliament, likely due on May 7.
Finance Minister Pranab Mukherjee is scheduled to meet with jeweller association heads on Friday to discuss their demands. Last month, Mr. Mukherjee had said he would consider their demands to roll back the excise duty and provide an “acceptable” solution, but made it clear that he would not reduce the import duty on gold and platinum.
The Union Budget for fiscal 2013 doubled import duty on gold to 4 per cent of value in its March budget and imposed a 0.3 per cent excise on unbranded jewellery, which forms the bulk of purchases in India. The move was aimed at reducing imports by the world’s biggest bullion buyer and shore up its current account deficit, which happens when imports are higher than exports. India’s household gold consumption of $45 billion is 82.1 per cent of the estimated current account deficit of the country at $56 billion.
Already, the government has reduced the import tariff value of gold from $573 per 10 grams to $530 per 10 grams, while the value was kept unchanged at $1,036 per kg for silver imports. The tariff value, which is released fortnightly, is the base price on which the customs duty is determined to prevent under-invoicing and discourage import of gold to ease pressure on balance of payments.
The Budget proposals could severely affect the $200 billion a year jewellery industry. Experts say they could cut India’s gold imports by a third to 655 tonnes, and push it to second place as the largest importer of the yellow metal, after China. Meanwhile, gold prices, which have climbed for years, plunged Wednesday to their lowest level in three months. Gold fell almost $58 to $1,614 per ounce. It has declined 15 per cent since September, when it hit a peak of $1,907. It had more than doubled since the financial crisis three years earlier.
Separately, the Reserve Bank of India has asked gem and jewellery exporters to submit monthly data on gold imports, in addition to banks and other nominated agencies, a move that would tighten reporting norms.. Gold is the second largest import in the country after crude oil, and large-scale dollar outflows drive down the rupee’s value.
—Source: FNF