Gold import bill likely to fall further by 15 per cent to $26.8 bn
Mumbai-India (April 5) While the slide in the gold import bill continues in FY17, the trend in the March quarter seems to indicate that it will be arrested, as demand continues to be good. However, projections of El Nino spoiling the rural demand story and uncertainties over how the Goods and Service Tax will be implemented will determine the future course of the precious metal.
A new gold policy in the pipeline and talks of Aadhaar-based authentication being extended for jewellery buying are other factors that could decide the way gold demand moves, going ahead.
The import bill till February in financial year 2016-17 was $23.3 billion against a quantity of 558 tonnes of gold. The healthy trend has continued in March and import is estimated around 80-85 tonnes during this month, which means the estimated import bill for the whole of FY 2016-17 will be around $26.8 billion for a quantity of 640 tonnes. However, the demand trend is expected to continue ahead of Akshaya Tritiya, an auspicious occasion when sales on a single day are quite high. Akshaya Tritiya falls on 28 April.
Sudheesh Nambiath, Lead Analyst-Precious Metals Demand, GFMS, Thomson Reuters said, "The trend remained strong in March such that total imports in the first quarter are likely to be in a range of 210-215 tonnes, 78 per cent higher than the same period last year. Whether this trend can continue for the rest of the quarter hinges on how the GST rates on jewellery are set".
GST will decide the trend for gold demand and import as there are several uncertainties, including how old jewellery sold against new purchases will be treated under the GST regime, and even if old jewellery is sold for cash the issue of showing a bill will arise. For buyers of such jewellery, whether or not input credit will be available is not certain as of now.
Nitin Khandelwal, chairman, the Gem & Jewellery Foundation said, "The VAT rate across the country is 1 per cent except for 1.2 per cent in Maharashtra and 5 per cent in Kerala, where under the composite scheme, it comes to 1.5 per cent. If the rate is kept quite high as feared, the trade will shift to the unorganised sector."
Even for excise duty, according to the GFMS annual survey released on Monday, "it is estimated that fewer than 2,000 jewellery manufacturers registered for excise as at the end of 2016. This may be a small percentage of the total number of manufacturers spread across India." Most took shelter under the threshold of turnover limit below which registration is not required.
Bullion business is also observing some changes that could set the trend if GST and its rules, and the new gold policy are found unfavourable to the industry. Nambiath says, "Given the uncertainty, many retailers are also shifting increasingly towards gold metal loans this quarter. We estimate that out of the total gold supplied by banks, 30-35 per cent would have been on the lease, against 23 per cent estimated for the last calendar year."
Source: BusinessStandard
