Gold sales have almost halved since late last month, as traders said tightened restrictions on anonymous cash-based purchases are keeping buyers away from market at the beginning of the festival season.
Bullion dealers, bankers and jewellers said they don't see much activity in gold even as the key festivals of Dussehra and Dhanteras are approaching. The festival season that stretches to November accounts for as much as 60 per cent of India's annual gold sales, but the trade is unsure about demand this year as the prices are also ruling high.
New rules announced on August 23 have made it compulsory for consumers to furnish KYC (know your customer) information when they buy gold worth Rs 50,000 or more, compared with Rs 2 lakh previously. The curbs, imposed under the Prevention of Money Laundering Act (PMLA), have made customers vary of harassment at the hands of authorities, keeping them away from jewel lers, traders said. While reduced demand for gold may work in favour of the government -large import of the metal is often blamed for stretching India's fiscal deficit wide -the trade says the country is actually losing on tax revenue as demand is shifting from official routes to unofficial channels such as smuggled gold.
Surendra Mehta, national secretary at the India Bullion & Jewellers Association, said while the government had lowered the threshold to apply KYC rules on August 23, the trade started to feel the real pinch from the beginning of this month.
The drop in demand -which he said is as much as 50 per cent -has not only affected retail sales, but hurt business-to-business sales as well. “There were very little footfall in jewellery exhibitions that took place in the last fortnight. For instance, the Jewellery Wonder Show held in New Delhi between September 16 and 18 did not evoke much response. So the drop is being noticed both in the B2C and B2B segments,“ he said.
The drop in demand -which he said is as much as 50 per cent -has not only affected retail sales, but hurt business-to-business sales as well. “There were very little footfall in jewellery exhibitions that took place in the last fortnight. For instance, the Jewellery Wonder Show held in New Delhi between September 16 and 18 did not evoke much response. So the drop is being noticed both in the B2C and B2B segments,“ he said.
Average daily sales in India during the August-September period are 2.5 tonnes, which have now reduced to about 1.25 tonnes, trade sources said. The World Gold Council predicted that India, the second biggest consumer of gold after China, would require 650-750 tonnes of gold this year. If the slowdown in demand continues, it may have to revise the outlook.
Traders expect the stricter KYC requirement to drive many gold buyers to unofficial channels.While they can remain anonymous, it is also cheaper to buy from such sources as no tax is paid to the government. “There is a difference of almost Rs 625 per 10 gm between the official and unofficial gold,“ said a bullion dealer, who did not want to be named.
On Wednesday , gold was trading at Rs 29,995 per 10 gm in Mumbai's Zaveri Bazar. In the international market, spot gold was at $1,313.50 (Rs 84,537) a troy ounce (about 31.1 grams).
Source: economictimes.indiatimes.com