High gold prices have affected the demand for the precious metal, which declined 9 per cent in 2019 over the previous year. According to the World Gold Council, gold demand from India in 2019 was 690.4 tonnes against 760.4 tonnes in 2018.

While jewellery demand was down 9 per cent, investment demand was down 10 per cent by volumes. In value terms, however, gold demand at Rs 2,17,700 crore was up 3 per cent in 2019 compared with the previous year.

“India’s gold demand was lower primarily on account of a sharp surge in prices of over 20 per cent in the second half. The growth in the first half was followed by a sharp drop in the third quarter. Diwali and Dhanteras revived hopes but the volatility coupled with a higher price impacted demand in the lower and middle price bands,” said Somasundaram PR, managing director, India, World Gold Council.

As a result of the high prices, recycled gold demand increased 37 per cent to a record 119 tonnes.

The council while welcoming the decision to make hallmarking mandatory, said short term challenges for the industry would remain as large sections of the industry compete on low margins and fear tax uncertainty, leaving very little incentive for long term investments.

Gold demand in 2020 is expected to be in the range of 700-800 tonnes.

Rough diamond sales

The Gems and Jewellery Export Promotion Council has urged the finance ministry to consider allowing sale of rough diamonds by foreign companies. At present, there is no provision of charging income tax if a foreign company imports rough diamonds into India for display and exhibition purpose under a temporary import bond. But sale is not allowed. The council feels a presumptive turnover linked tax of 0.125 per cent can be charged if sale is allowed.

“The idea is to allow direct access of local players to the foreign mining companies and their trading arms. It will be easier for business and the government may even consider collecting tax in a fair and transparent manner,” said Sabyasachi Ray, executive director GJEPC.

He was speaking with The Telegraph on the sidelines of the ground breaking ceremony of a Common Facility Centre in Calcutta for the benefit of the artisans of the city.

The council has also sought lowering import duty in cut and polished diamonds and gemstones from 7.5 per cent to 2.5 per cent amid the falling import and export of gems and jewellery.