A committee set up by NITI Aayog on transforming India’s gold market has recognised the untapped potential of this market to provide a stimulus to exports, economic growth and employment. It also envisioned developments towards achieving these objectives.
According to its report, titled “Transforming India’s Gold Market”, the committee deliberated on various themes aimed at transforming the gold market, which would, by 2022 see the industry’s contribution to the gross domestic product (GDP) rise from 1.3 per cent (2016) to 2.5-3.0 per cent and gold exports more than double to $20 billion from about $8 billion in the 2016-17 fiscal.
The report also said that the industry has potential to increase employment opportunities from 6.1 million in 2016-17 to more than 9 million and attract foreign direct investment of about $200 million by 2022 compared with $70 million in 2016-17.
However, the report also said the market size should increase without that having a negative impact on the current account deficit (CAD).
According to the report, the country’s gems and jewellery industry (including gold) is approximately Rs.650,000 crore in size, of which 90-95 per cent are of medium and small enterprises.
Globally, India is the second-largest gold market with a demand of around 800 tonnes and accounts for around 25 per cent of the world’s gold demand. Since domestic production of gold is minimal, demand is met largely through imports. This reliance on gold imports has an adverse impact on the CAD and further implications for the economy.
The report said that gold imports had declined from $53.8 billion in 2012-13 to $27.5 billion in 2016-17.
While international prices have doubled in the past decade, domestic prices have nearly trebled. The LBMA (London Bullion Market Association) price of gold rose from $695 an ounce in 2007 to $1,318 in 2017, whereas the domestic price rose from Rs.9,379 for 10 grams in 2007 to Rs.28,488 in 2017.
