Gold duty hike triggers liquidity, job concerns in jewellery sector

Ahmedabad: As the govt of India announced an increase in import duty on gold and silver to 15%, the gems and jewellery industry in Gujarat has raised major concerns over liquidity as well as jobs in the industry.

Bullion traders also warn of a rise in unofficial trade channels.Under the new structure, the basic customs duty on gold and silver imports has been increased to 10% from 5%, while the Agriculture Infrastructure and Development Cess (AIDC) has been raised to 5% from 1%, taking the total effective levy to 15%.In the Ahmedabad market, gold price rose to Rs 1.65 lakh per 10g, an increase of Rs 10,000 in a single trading session.

The govt moves comes as the Centre seeks to curb rising precious metal imports, narrow the trade deficit and support the rupee amid mounting external pressures.Industry representatives pointed to weakening domestic demand and growing concerns over employment generation in the gems and jewellery sector following the duty increase. “The industry supports the govt’s broader economic objectives. However, the rise in duties and the PM’s call to avoid gold purchases has already begun to impact demand.

Gold is already being sold at a discounted rate of $200 per ounce, as buyers are staying away amid elevated prices and uncertainty following the customs duty hike.

In the near-term, we do not expect any major demand to sustain. A recessionary trend is becoming visible in the trade, and this could put jobs across the jewellery value chain at risk,” said Haresh Acharya, director of the India Bullion and Jewellers’ Association (IBJA).Meanwhile the Gems and Jewellery Export Promotion Council (GJEPC) convened a meeting with major retailers and manufacturers and submitted recommendations to the Prime Minister, aimed at reducing import dependence and strengthening domestic recycling. Among the measures proposed by the industry body are greater promotion of lower-carat jewellery such as 14K and 9K products, which it estimates could reduce gold imports by 20-30%, encouraging exchange of old gold for new jewellery purchases, revamping the Gold Monetisation Scheme (GMS) to mobilise India’s estimated 25,000 tonnes of idle household gold stock, and discouraging investment demand for gold bars, billets and coins.The council also sought a dedicated policy framework for jewellery exporters, arguing that the sector earns significant foreign exchange and requires support amid global economic uncertainty.According to GJEPC, exporters are now facing bank guarantees of nearly Rs 28 lakh to Rs 30 lakh per kg of duty-free gold, creating severe liquidity stress, particularly for micro, small and medium enterprises (MSMEs), which account for nearly 80% of the council’s membership base.Industry stakeholders said the sector is willing to align with the govt’s broader objective of reducing import dependence and promoting recycling-led consumption. “We are encouraging gold exchange programmes in a big way so that consumers recycle existing jewellery instead of purchasing fresh bullion. We have also requested the govt to consider pausing investments into gold ETFs for a year to ease import pressure.

Demand for 24-carat purchases has already slowed sharply, and many businesses across the sector are now rethinking their business models in response to the changing market dynamics,” said Jigar Soni, president of the Jewellers’ Association Ahmedabad (JAA).