Resolve to continue with indefinite strike despite losing out on increased sales during Navrataras, wedding months

With jewellers across the country resolving on Saturday to continue with their indefinite strike, India’s honeymoon with gold in the festive season will not happen. Shut shops in Delhi’s premier jewellery market Dariba Kalan are unlikely to make finance minister Pranab Mukherjee roll back his plan to bring unbranded jewellery under the excise duty net, while the surge in current account deficit to 4.3% in the third quarter of the year means the increase in import duty too stays.

Gold imports had peaked this fiscal as investors found few other options in a economy where growth has decelerated by 1.5% in one year. But the surge in imports has meant the current account deficit has added another 1.5%. So for the over three lakh jewellers across the country on strike for about two weeks now, the story continues.

After the Union Budget took the sheen out of India’s favourite yellow metal, that too during one of the peak seasons for gold buying, the Navratras, footfalls in jewellery bazaars have been muted. Opposing the Budget proposal of bringing unbranded jewellery under the excise duty ambit, protesters at the capital’s hub of jewellers, Karol Bagh, wholesale jewellery market Chandni Chowk, the bustling Zaveri Bazar of Mumbai or for that matter Pink City Jaipur’s colour stone market shuttered shops. As per the estimates of All India Gems and Jewellery Trade Federation, jewellers and goldsmiths are losing out on a business of about R1,000 crore every day due to the strike. In all, an estimated R15,000-16,000 crore losses have already been incurred.

?Besides the Navratras, it’s also the wedding season and in the south, Akshaya Tritiya is approaching, when gold sales soar. But the annual Budget has given us too many reasons to be up in arms even during this busy season,? says Ashok Minawala, former chairman of the All India Gems and Jewellery Trade Federation, and a Mumbai-based jeweller.

Sale of jewellery increases by 15-20% during Navratras and the wedding season, but this time around it’s a different story. ?Even though a few branded players are opening their outlets, their business in commercial jewellery hubs is impacted as they also have to shut shops due to the protest march and strikes. Also, buyers are staying away from the traditional gold markets because of the strike,? says Rakesh Saraf, general secretary, Delhi Gold Council. Branded gold jewellery players include Tanishq, Reliance Jewels and Gitanjali Gems.

Even the few retail shops that are not in the main markets and are operating say there is a drastic reduction in footfalls. ?The demand is quite muted and only a few customers drop in,? says Delhi-based jeweller RN Kapoor. On the other hand, with goldsmiths and workers on strike too, customers have been complaining about not getting their orders in time and not being able to shop during the festive season.

Jewellers and bullion merchants claim that the proposals in the Budget will shrink business by 25-30%. According to them, customs duty has quadrupled in two months. Basic custom duty on standard gold bars is up from 2% to 4%. Customers will now have to shell out at least R250 more on unbranded jewellery of 10 gm and R550 more on gold bars of 10 gm.

The Budget also provisions an 1% excise duty. Customers who purchase in cash of over R2 lakh are required to pay a 1% income tax at source and the jeweller is required to remit to the government. Jewellers say this will increase their paperwork, as well as burden them with increased government hurdles. A term in this regard that has become part of most of the slogans and posters across the country during protests is the ‘Inspector Raj’ that bullion merchants and retailers believe will happen if the proposals come into play. ?Consumers will end up paying 7% more when buying jewellery. We know we are losing out on business by going on an indefinite strike, but we don’t understand why our industry has been singled out and is being discriminated against,? argues Minawala.

Even though finance minister Pranab Mukherjee expressed a few days back that excise duty could be rolled back, bringing some relief to the agitating jewellers, he was clear that the increased customs duty will remain. India is the world’s biggest consumer of the yellow metal, with an annual consumption of over 900 tonnes. The country imported gold worth $46 billion last fiscal, nearly equivalent to its current account deficit, prompting policymakers to introduce measures to curb its import.

But for now, the striking bullion traders and jewellers have had a dull festive season, as the FM tries to curb ‘waste’ of foreign exchange on gold as an asset class.