Chaos and Confusion among Indian Jewellers

Utter confusion and chaos are prevailing among Indian jewelers after All India Gems & Jewellery Trade Federation (GJF) and India Bullion and Jewellers Association (IBJA) called off the 18-day nation-wide strike recently. This has created major crisis of confidence against leaders of the above two trade bodies and a vertical split among various jewelers associations.

Prime demands of the striking jewelers were to force the government to roll back 1% excise duty levied on gold as well studded jewellery and to enhance the PAN provision to a purchase of INR 500,000 from prevailing INR 200,000. The trade bodies alleged that the provision of excise duty would lead to ‘re-introduction of inspector raj’.

But the government remained unmoved. In a meeting with the representatives of trade bodies, the officials of finance ministry categorically denied to roll back the 1% excise. They only assured the striking jewelers that there would not be ‘any harassment’ from the country’s excise department. So the trade bodies had no option left with them but to withdraw the ongoing strike after 18 days. The finance ministry has constituted a Task Force which will submit its report on how to implement the provision of 1% duty without any harassment from excise inspectors.

The confusion and crisis of confidence started from this point which has engineered a vertical split among the jewelers. Some of them allege that the leaders were ‘managed’ by the government. So they have decided to continue with the strike till the government totally withdraws the duty.

In a way, it was a ‘diplomatic victory’ for the government as it was successful in dividing the united strength of the jewelers. With major trade bodies like GJF and IBJA deciding to withdraw the strike, the government now will breathe a sigh of relief. Those which are still on strike are mostly local trade bodies in some parts of Northern and Southern states of the country.

We have already mentioned here in our earlier blog that policy of the Indian government whether present or past, is to discourage physical possession and ‘hoarding’ of the gold. Huge import bills of the yellow metal (about 900 tons every year) cause ‘unbearable damage’ to the country’s economy. So the government has been introducing various schemes to bring down gold demand with latest among them is levy of 1% excise duty on gold and studded jewellery. Earlier, it had increased the gold import duty from 2% to 10%. It has also recently introduced measures like Sovereign Gold Bonds, Gold Monetization Scheme and Ashok Chakra Gold Coins.

So, the Finance Minister Mr. Arun Jaitley was in no mood to ‘surrender to the mighty force’ of striking jewelers. Although the strike is said to be causing a huge loss of business of about USD 150 million daily to the jewelers but indirectly it has benefited the government as gold imports during March has halved because of stoppage in work.

One of the historians have cautioned to the gold loving Indian people. History has it that India had been raided time and again by foreign rulers due to its ‘huge treasury of gold and precious stones’ and looted it, he says. Even today, Indian people and its rich temple trusts are said to have hoarded about 22,000 to 30,000 tons of gold in their treasury. Well, this may even become a ‘security hazard,’ who knows?

Posted by Suresh Chotai