Friday, April 15, 2011

Gold Industry In India

Market potential / demand situation:

Gold is driving the gems and jewellery export orders from India.
India was the strongest growth market in 2010 with total annual consumer demand of 963.1 tonnes. This registered growth of 66% relative to 2009. Gold purchases in India accounted for 32% of the global total in 2010.

According to the Investment Commission of India, exports are likely to grow to US$ 25 billion by 2012. According to a new report called "Indian Gems and Jewellery Market - Future Prospects to 2011", by RNCOS, published in September 2009, the Indian gems and jewellery sector is expected to grow at a compound annual growth rate (CAGR) of around 14% from 2009 to 2012.

Indian appetite for gold has been on the rise. Major contributing factors are: gold is an important holiday gift, wedding gift, protection against inflation, source of investment which comes in handy during cash crunch situation, rapid growth in country along withincrease in per capita income led to emergence of new middle class that added gold to diversify their external reserves. Also poor performance of alternative investments was main motivation behind increasing demand of gold.

Demand for gold used in technology was 419.6 tonnes, 12.4% higher than in 2009 as the electronics segment fuelled recovery in the sector, with demand returning to long-term trend levels. Demand soared by 41% year-on-year in US$ terms to a record US$17 billion.

Structure of the industry in the sense is the industry fragmented
Though India is the leading consumer of gold in the world, the gold market in India is largely fragmented and unorganized. India's gold market is estimated to have more than300,000 jewellers, mostly small, family-run businesses, a WGC study showed

Cyclicality / seasonality in the industry
Demand for Gold in India is depended on monsoons and harvest of the Country as both these factors determine the amount of purchasing power that people will have. As vast majority of the Indian population (70%) live in villages, and accounts for more than two thirds of Indian gold demand.

Indians are among the world’s most conscientious savers and risk averse, with a potentially rising savings rate of 30-40% of income. Being risk averse, great faith in the wealth preservation qualities of gold, which inspires confidence, stability and security

Seasonaltrend in gold buying is observes as gold is an important holiday gift. The biggest gold-buying days of the year areDhanteras, AkshayaTritiya when purchasing gold is believed to invoke prosperity

With 50% of the Indian population under 25 and approximately 150 million weddings anticipated over the next decade, the World Gold Council estimates that wedding-related purchasing will drive approximately 500 tonnes a year.

Government Policies

 100 per cent foreign direct investment (FDI) in gems and jewellery through the automatic route is allowed.

 Setting up of SEZs and gems and jewellery parks to promote investment in the sector.

 To promote export of gems and jewellery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has been increased from US$ 0.1 million to US$ 1 million.

 Import of gold of 18 carat and above under the replenishment scheme.

 The export of coloured gemstones on a consignment basis has been allowed. The government has announced a series of measures to help gems and jewellery exports in the Foreign Trade Policy 2009-14.

 It has been decided to neutralise duty incidence on gold jewellery exports, to allow duty drawback on such exports.

 The reduction of customs duty on specified gems and jewellery machinery is a step toward improving G&J manufacturing activity in India and is a welcome step.