Pawan Kumar
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1. The Indian jewellery business has come a long way. Before, smaller players dominated the space, but now the organised retailers are quickly gaining market share. What do you think about what’s going on?
The consumer is the one who will benefit the most from this change. In the past, the purity and quality of gold were very important. Now, organised retailers make sure the quality of the products they sell stays high. Along with the higher quality standards, new benefits have been added, such as a 100% buyback guarantee, free maintenance for life, and free insurance coverage. Now, the big retail chains are opening up stores all over the world. We are much more connected around the world now. That lets consumers anywhere in the world get better services based on their value. We have 162 stores in India, bringing the total number of stores around the world to 301. We have started a plan in India called “one India, one gold rate.” Under this plan, we sell gold jewellery at the same price in all of our stores across the country. Since “one India, one tax,” or GST, has been put into place in India, why can’t the price of gold be the same all over the country? The best thing for a customer is for the price of gold to be the same everywhere. We are committed to protecting our customers’ rights, and the launch of the “one India, one gold rate” initiative shows that we are serious about this. We hope that the efforts of the state governments and the jewellery associations will lead to price parity in gold in other states as well in the near future. It will mostly help the people who buy things. Overall, the organised players are doing a much better job for their customers than the local jewellers did in the past.
Above all, Indian art and designs are known around the world for how well they are made. Indian retailers have the potential to become global brands based on originality and aspirational value because of our long history and skill in making jewellery.
India is the second biggest consumer of gold in the world, after China. There are strict rules to stop imports, but every year the demand at home grows. Do you see any good in making it easier to import gold?
Yes, naturally. If imports are made easier, the organised domestic jewellery retail business will do better. But the government has a lot to worry about, like the growing current account deficit and the falling value of the rupee. I think lowering import duties will be a growth multiplier for the gems and jewellery industry because it will boost the growth of jewellery exports and increase organised jewellery retail sales. This will lead to more money going to the government in the long run. It’s important to know that countries like the US, UK, China, Singapore, Malaysia, and GCC countries don’t charge any duty on gold imports. This makes it less likely that gold will be traded illegally.
Demand for gold in India is strong, especially in rural areas. Getting rid of gold import taxes and making the price of gold in India the same will increase demand even more. And it will have a big impact on the economy, leading to more jobs and more money saved by households.
Gold smuggling is another major trade problem that is getting worse because more gold is being imported. Gold is charged a 15% import duty, 3% GST, and other fees in India. With an effective tax rate of almost 18%, smuggled gold is Rs 250–300 per gramme cheaper. Smuggling gold hurts both the gold business and the government. Unofficial estimates say that about 4,000 tonnes of gold are brought into the country illegally every year. So, it’s not hard to figure out how much money the government loses because of gold smuggling. More importantly, the illegal money made from gold smuggling is used to pay for things like drug trafficking, breaking people’s rights, and terrorism.
The most recent numbers show that less gold is being brought in. In 2021, the country brought in 1068 tonnes of gold. In 2022, it brought in 706 tonnes. In December 2022, the amount of gold that was brought in dropped by 79%. But a drop in imports doesn’t mean that people are buying less gold. It means that a big chunk of the domestic gold demand is being met by gold that was brought in illegally.
If the government can stop people from smuggling gold and set up a clear, structured way to keep track of every transaction, it will put the country on a solid growth path and help India reach its goal of having a $5-trillion economy.
What do you (people in the jewellery business) hope to see in the upcoming Union Budget?
There are some problems that the government needs to fix right away. As I said, the Union government should make taxes and duties on gold more fair. A big worry for jewellery stores is that gold will have to pay more in import taxes. The higher tax encourages large-scale tax evasion and makes it more likely that gold will be smuggled. So, the jewellers in the organised segment lose their competitive edge to the jewellers who make jewellery with gold that was brought into the country illegally. With fake hallmarks, the jewellery made with stolen gold makes it to the retail market. This parallel grey market not only keeps organised retailers from growing and hurts customer trust in the jewellery market, but it also causes the government to lose a lot of money. The government should pay attention to this. So, we expect that the Union Budget 2023-24 will propose lowering the tax on gold imports and putting in place a digital system to keep track of how gold moves through the supply chain.
A lower import duty will make it less appealing to smuggle gold, which will force the illegal gold out of the markets in the long run. When gold comes from legal sources, quality is standardised and trade is clear.
Also, the government needs to offer more incentives for exports so that we can compete well with leading jewellery markets like UAE, Switzerland, and Hong Kong and increase the country’s share of global jewellery exports. India is currently sixth in the world when it comes to exporting jewellery. We could become the place where most of the world’s jewellery is made. We need to pay attention to the idea that “Make in India, Sell to the World.” In 2021 and 2022, the sector exported $39 billion worth of goods. It is expected to reach $45 billion this fiscal year.
4. What will happen to the exports of jewellery if there is a global recession?
I think that the global recession might only last for a short time. Higher interest rates are a little hard to deal with, but in India, especially in rural areas, gold is still one of the most popular ways to invest. Gold is seen as a safe haven by people and governments all over the world. Because of this, gold’s reputation as a safe haven is likely to reduce the effects of a recession.
5. This fiscal year, the Indian economy is expected to grow by 7%, and our home market is strong. How quickly will the gems and jewellery business grow this year? What do you get out of it?
A strong domestic market will definitely lead to faster business growth, which means higher sales volume and more money. We are sure that India will continue to grow, which will create jobs and bring in new customers for gold, especially among young people. Along with our plans to grow internationally this year, we are also going to grow in all 50 states. We’ll also set up jewellery factories in all of the country’s major manufacturing centres. When the economy in the countryside is doing well, the demand for gold goes up. Even if exports slow down, strong business in the country will make up for it.
