Indian Prime Minister Narendra Modi has called on his countrymen to avoid buying gold for at least a year to protect foreign exchange reserves. This appeal is surprising in India, where gold plays a crucial role in savings, weddings and religious festivals.
Modi said on Sunday: “Within a year, we should not buy gold jewelry on any occasion.” He also called on people to reduce fuel consumption and unnecessary overseas travel. He pointed out that India spends a huge amount of money importing gold every year and people should avoid buying non-essential items.
This unusual request highlights how the Middle East wars and the resulting energy shortages have exacerbated India’s trade deficit and weakened the rupee. Gold is the second-largest import item in India after oil, and India is the world’s second-largest importer of gold.
It remains to be seen to what extent the Indian people will respond to Modi’s call. Precious metals have permeated almost every aspect of the Indian economy and cultural life. Many Indians like to keep them as savings, and buying gold during weddings and festivals is also regarded as an auspicious act.
However, the stocks of local jewelry manufacturers generally declined on Monday. The share price of Titan Co., India’s largest jeweler, dropped by as much as 6.6% in the Mumbai stock market. The share prices of Senco Gold Ltd. and Kalyan Jewellers India Ltd. fell by 10.8% and 9.5% respectively.
Indian banks have been unable to import gold and silver for five consecutive weeks. This unusually long period of stagnation has pushed up domestic prices and threatens a supply shortage in the world’s second-largest precious metals market.
According to traders with direct knowledge of the matter, goods have been stuck at customs since the start of the new fiscal year on April 1, due to administrative bottlenecks and unclear tax policies.
Indian lenders are no strangers to occasional hiccups in the import of precious metals, but the current delays could lead to shortages in the local market. Jewelers are trying to replenish their inventories after the Akshaya Tritiya festival, which is an auspicious time to buy gold and silver.
“The import ban has lasted an unusually long time,” said Sunil Kashyap, general manager of trading company FinMet Pte Ltd. “The situation is getting more and more tense,” he added, as jewellers hope to stock up after the festival when international prices fall.
Traders said that banks are still seeking clarity on whether gold and silver will be exempted from the Integrated Goods and Services Tax (IGST). As the information is sensitive, these traders requested anonymity. They said that gold and silver had previously been exempted, but it is not clear whether this policy will continue to be effective.
The Department of Financial Services and the customs department in India have not yet responded to the reporter’s request for comment by email.
A well-informed official said that the customs is waiting for approval and will attach a tax statement, but the specific details are still unclear. The official requested anonymity because the information is sensitive.
