Why Chidambaram will be a happy man this Diwali
What Finance Minister P Chidambaram's repeated appeals failed to do, rising gold prices might have done - curbed the appetite of Indians for the precious metal. Mr Chidambaram will not crib.
India is the world's biggest buyer of gold, and high gold imports have been a headache for the government as it attempts to control a record current account deficit and stabilise the rupee.
A survey by industry body Assocham says rising gold prices, which scaled to a record Rs 34,500 per 10 grams in the New Delhi market in August this year, have forced shoppers to shift from gold to diamonds and other metals like platinum.
"With gold prices rising, white gold, diamonds or platinum is the new trend among the buyers," a large Delhi-based jeweller told Assocham.
The industry body said the quantity of platinum and diamond in gold jewellery has increased significantly over the past one year and is likely to reach about 30-35 per cent of the total gold jewellery sales in the year 2015.
Nearly 76 per cent of jewelers surveyed said they are focusing on platinum-based diamond jewellery over the traditional gold and silver jewellery to tap the changing preferences of domestic consumers, the survey found.
"We are moving to diamond jewellery more aggressively, introducing lower-carat jewellery and also pushing silver jewellery," Mehul Choksi, chairman and managing director of Gitanjali Gems, had told Reuters earlier.
Gold prices in India have been at elevated levels over the last few months tracking the weakness in the rupee, which increases the landed cost of gold. Besides, gold prices in India are at a premium to global prices because of a supply squeeze.
Gold is in short supply in India after the government announced several measures to keep imports down. Mr Chidambaram-led finance ministry has increased the custom duty on gold. And the Reserve Bank has asked jewellers to export 20 per cent of all gold imported into India. As a result, premiums on Indian gold have expanded.
Gold imports were 3.38 tonnes and 7.24 tonnes in August and September, much lower than the normal average of 60 tonnes each month.
Not surprisingly, the demand for diamond jewellery has grown by over 25 per cent year-on-year this year, the survey found.
All this would be music to Mr Chidambaram's ears, whose numerous efforts to check gold import have finally started bearing fruit. India's current account deficit grew less than expected in the June quarter and is tipped to ease in coming months on lower gold imports improve the trade balance.
A narrowing current account deficit would reduce India's reliance on foreign money to fund the gap. That would mean a stable rupee and less problems at a time when the government is gearing to win a third straight term next year.
(With inputs from Reuters)
