The sudden ban of high-value notes on November 8, 2016, has taken its toll on gold demand in the short run.
However, the long-term benefits from the transparency measures ushered in by the demonetisation exercise will generate a “benign and gold-supportive” policy approach, concludes a new report from World Gold Council (WGC).
“The note ban measures will benefit industry at large. In the short term, there will be pain as it will be a behavioural change — more for the trade than the consumer. It is affecting those pockets where there was little transparency,” PR Somasundaram, Managing Director, India, WGC, told
Gold demand was hurt in the short run because of demonetisation and concerns on what will happen next, he said.
The report ‘India’s Gold Market: Evolution & Innovation’ highlighted that ‘demonetisation’ was not new to India, but the effects of the latest move are far reaching.
Will benefit consumers He said consumers will benefit as opacity in prices will go. “I see demonetisation as a very significant benefit for consumers for the long-term. How this is marketed to consumers is important,” he said.
Transition to the new ecosystem will shape consumer sentiments in the next few months, particularly during Akshaya Tritaya, he said.
If 2016 was the year that brought transformative changes (PAN card, one per cent excise, demonetisation and hallmarking) to the gold industry, 2017 will transform the way gold is bought in India, he said.
“With these transparency measures from demonetisation, you will bring back the millennials in a big way to gold. This is because you will present gold as a transparent asset class,” he said.
As much as 45 per cent of Indians are below the age of 25. Somasundaram felt that much would depend on how demonetisation has reshaped consumer behaviour towards discretionary spending.
“We believe it has not been lost. As an asset class, gold will not lose its sheen,” he said.
Transparent biz practices The report also said that business practices across the gold trade will become more transparent, especially with the introduction of Goods and Services Tax, mandatory hallmarking and a massive push by organised jewellers to promote non-cash payments.