Jwellery Industry gets some respite

The jewellery industry in India has been going through difficult times. Ever since the RBI put restrictions on Gold imports in August last year, the cost of funds for jewellers had increased significantly. Now there seems to be light at the end of the tunnel. The RBI has liberalized its 80:20 rule, under which 20% of the gold imported would have had to be exported. Although the ratio has been maintained, the central bank has now allowed designated export houses to import the commodity. Also, banks are now allowed to make Gold available to jewellers.

This is welcome news for the domestic jewellery industry. The restrictions had led to a sharp fall in Gold imports and this can now be expected to reverse. As per an article in the Business Standard, monthly Gold imports could double to 60 tonnes from 25-30 tonnes currently. This will increase the supply of the yellow metal in the country leading to a minor fall in prices. However the most important impact of this decision could be on Gold imports via illegal channels. With more gold available through legal imports, smuggling of the yellow metal should see a fall in the coming months.