KOCHI: Prime Minister Narendra Modi’s recent appeal to citizens to curb gold purchases, coupled with a drastic hike in import duties, has sent shockwaves through the bullion market. According to jewelry trade associations, national gold demand has plummeted by a staggering 70%. Between May 13—when the import duty was abruptly raised from 6% to 15%—and May 27, India's gold demand fell to just 7.5 tonnes, a steep decline from the 25 tonnes recorded during the same period last year.
The dual blow of the Prime Minister's advisory and the subsequent tax hike has heavily burdened consumers. With the new duty structure, the total tax on gold (including 3% GST) has surged from 9.18% to 18.45%.
The impact is acutely felt in Kerala, a state that accounts for nearly 25% of the country's total gold consumption with an annual turnover of approximately ₹1 lakh crore. S. Abdul Nazar, State General Secretary of the Kerala Gold and Silver Merchants Association (KGSMA), stated that the post-COVID recovery in the sector has been derailed. Industry insiders report a specific 35% decline in overall business across the state, with current sales dropping to just 30-40% of previous levels.
However, Dr. B. Govindan, Chairman of the Bhima Group and AKGSMA, offered a nuanced perspective. He noted that while the physical quantity of gold being purchased by individuals has dropped due to skyrocketing prices, the overall monetary value of the sales has not faced a severe crisis, proving that the cultural demand for the metal remains intact.
While jewelers agree with the government's broader goal of protecting forex reserves, they warn that penalizing legitimate businesses could fuel parallel black-market trade. Instead of solely restricting legal imports, merchants are urging the Central Government to implement a robust 'Gold Recycling' scheme to mobilize the estimated 30,000 tonnes of gold currently lying idle in Indian households and bank lockers.