The Indian Bullion and Jewellers Association (IBJA) expects gold prices to drop to ₹23,000-24,000 levels for 10 grams by Diwali, with the new National Democratic Alliance Government taking a series of business-friendly measures. Gold prices on Thursday fell by ₹825 to ₹27,950 on the RBI directive of easing norms.
On Wednesday, the Reserve Bank of India allowed Star Trading Houses and Premier Trading Houses to import gold diluting the 80:20 scheme, which allowed importers to place new order only after ensuring export of 20 per cent of the earlier imported consignment.
This development is expected to immediately improve the supply of gold. The spot premium of ₹1-1.5 lakh charged for a kg of gold could get diluted soon with the RBI relaxing import norms, said traders.
Addressing a press conference on Thursday, Mohit Kamboj, President, IBJA, said that the industry expects import duty to come down to four per cent from 10 per cent after the new Government takes charge.
“There are possibilities that the import duty may be reduced in the next 15-20 days, even before the Budget is presented. The reduction in duty and strong rupee are expected to drag gold prices in the next two months,” he said.
The association expects gold demand to pick up from July as business sentiments improve with the new Government announcing a series of policy measures. The drop in gold prices will prove timely to boost demand during the festival season in August, said Kamboj.
Asked whether the Association would move the RBI to remove the restrictive 80:20 scheme, he said there are few clauses in the scheme that are causing problems and they need to be fixed. As such, the policy is good for the country.
“We want the RBI to ease the banks non performing asset (NPA) norms for the industry, so that the industry can come back on its feet and repay the loans which were defaulted earlier. We need the right business environment to revive our business and pay back the bank loans. We do not want to cheat banks,” he said.
Banks have an exposure of ₹2.5 lakh crore to the gems and jewellery industry, of which ₹37,000 crore has been classified as NPAs. Kamboj said the loans had turned bad primarily since the banks abruptly curtailed loans in August last year for purchasing gold.