21 Oct 2021
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Budget, No Respite
Diamond, Jewellery Sectors Unhappy with Union Budget
By: Diamond World News Service
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Aug 14 2014 6:09PM
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Reference: 9438  

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Colored Gemstones:
Only single small good step that was taken by the Budget pertained to withdrawal of duty on imports of pre-form precious and semi-precious stones. Actually, if imports of raw materials for the colored stones sector are facilitated, there is scope for promoting exports of these gemstones from the country in view of the changing fashion trend in some overseas markets. This is expected to lead to some increase in demand for colored gemstones.

Gold Jewellery:
If, however, the gems and jewellery industry is most disappointed with the Union Budget it is because of its reluctance to place gold jewellery exports on a healthy footing. Last year, the Union Government stepped up the import duty on gold in order to reduce the current account deficit. No doubt the same was thus reduced, but higher rate of the import duty on gold continues. Besides, the jewellery export trade was to purchase its requirements of gold from certain designated importers who were expected to supply 20 per cent of their gold imports to exporters of gold jewellery.

Representatives of the gold jewellery exporters, did represent to the Government that the import duty on gold should be brought down from 10 per cent to the earlier level of 2 per cent, and the Reserve Bank should be asked to scrap 80:20 rate in regard to imports of gold. Such an arrangement continued to restrict the supply of gold for the promotion of gold jewellery exports from the country. The very fact that after the increase in import duty on gold, exports of gold jewellery from the country fell significantly was quite evident. However the Union Budget failed to remedy this situation and introduce some special scheme for promoting exports of gold jewellery from the country. This no doubt reduced imports of gold into the country for domestic consumption, but simultaneously unintentionally, this encouraged smuggling of gold into the country. In other words, direct imports of gold thus came down, smuggling of gold into the country not only continued but went up, the higher import duty on legal imports of gold, provided indirect incentives to smugglers to step up their illegal activity of bringing more gold into the country surreptitiously as the margin on such illegal activity increased.

Overseas Expectations:
Meanwhile, some of the overseas markets, which are now having summer vacation, are expected to resume their normal business activity by the middle of the next month. The diamond industry and trade expect their overseas enquiries by the latter half of August 2014.

Bullion Discouraged:
The sentiment in the bullion market continued to be affected by the current uncertain international political situation. In the overseas markets, gold was quoted around US$ 1304.34 per ounce and silver at US$ 20.60 per ounce on 17 July 2014. In the domestic market, standard gold was quoted around Rs. 27,935 for 10 grammes, while silver was traded around Rs. 45,350 per kg. The bullion trade was expecting that import duty on gold might be brought down to a reasonable level, as the unduly high import duty on it encouraged smuggling and pulled down exports of gold jewellery from the country. However the Union Government has remained adamant not to bring down import duty on gold, even for promoting exports of gold jewellery from the country!

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