| As the Indian markets have started showing some signs of improvement recently and the Rupee also has slowly started becoming stronger, the mood in India’s gem & jewellery industry is upbeat with a ray of hope that the new government (likely to be formed under leadership of Mr. Narendra Modi) would vigorously implement the economic reforms to help regain its lost glitter during recent years. |
| The Reserve Bank of India (RBI) last week gave permission to more banks including HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank and Yes Bank to import gold. The jewellery industry circles here while welcoming this step say that this move is expected to increase gold imports by around 40 tones per month from the 20 in February. The All India Gems and Jewellery Trade Federation (GJF) has appreciated the apex bank’s measure by saying that this would be a beginner step towards the more relaxations of the 80:20 rule. Earlier, only six banks and three state-run trading agencies were allowed to import gold but now with more banks being allowed to import gold in India, the short-supply of the yellow metal is expected to ease after which the premiums may also come down. The bullion industry in India expects two consequences to RBI’s decision to allow more private banks to import the yellow metal into the country. Firstly, the gold imports which has gone down since August last year following the strict curbs may increase twofold. Secondly, with more banks importing gold, it can bring down the gold prices in domestic market. |
| Mr. KC Chakrabarty, former RBI Deputy Governor says, “More banks importing gold would ease the short supply of gold that can bring down the domestic prices. The existence of more players will create healthy competition to import gold at cheaper prices. Gold imports at lower rates would ultimately help to improve the Current Account Deficit (CAD) situation in the country.” The industry circles here also feel that India’s gold imports are likely to rebound in the second half as the new government may ease trade curbs while festivals and weddings would, as usual, spur the domestic demand. The upward imports from mid-year would help overseas purchases over 2014 to match the 825 metric tons which were imported in 2013. |
| On the other hand, the Indian Rupee achieved its biggest quarterly gain since September 2012 because foreign investors boosted purchases of the country’s assets on optimism that a new government would hasten an economic recovery.
Inflation has also eased in February and the government sources forecast that the economic growth would go up from a decade-low and shortfalls would shrink in the fiscal year ending March 31. Indian shares and bonds this year have also earned $9.3 billion from foreign investors, as opinion polls for elections here show that the main opposition Bharatiya Janata Party would win the most seats in elections starting this month. |
| The credit of Rupee becoming stronger partially goes to the “credibility and transparency” brought to India’s monetary policy by present RBI Governor Mr. Raghuram Rajan. But this not enough, India now not only needs a faster economic growth rate than the (present) 4.9 per cent but the country also needs to reduce inflation, presently prevailing just over 8 per cent. India’s sitting Finance Minister Mr. P. Chidambaram says India must achieve economic growth averaging 8 per cent which is obligatory to breed jobs for the growing numbers of youth.
Poll surveys here suggest that India is likely to get a coalition government headed by Mr. Narendra Modi but it would not be a very tough task for him to revive the country’s economy. Posted by Suresh Chotai |
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