According to the recent gold market India study said, Indian gold jewellery imports remain very small! Another point highlighted was, Round tripping continues despite government measures to reduce fictitious exports! Here is the question!
In contrast to exports, gold jewellery imports into India remain small. Primarily, imported jewellery is machine-made and is either high-end or from international brands that do not manufacture locally. The bulk of India’s jewellery imports are from the UAE, the US and Italy. Given India’s expertise in handcrafted jewellery, handmade pieces rarely feature in India’s jewellery imports.
While the vast majority of Indian exports are genuine, there remains an element that is not. The practice of round tripping (RT) involves exporting gold (jewellery, bars or coins) with the sole purpose of the product being melted down and re-imported into the original exporting country. This circular flow of gold inflates trade statistics and in India is used by firms to artificially boost their trading volumes and, in turn, secure less expensive finance on the basis of a higher turnover.
Due to various government programmes to promote overseas trade, export credit is usually less expensive, and inflating exports through round tripping allows exporters’ access to more credit at lower rates than other companies would pay. The government has introduced measures that, to some extent, curtail this practice by restricting exports of 24-carat jewellery.
In its notification of 14 August 2017, the government permitted only the export of gold jewellery containing gold between 8 and a maximum of 22 carats. There have also been changes to value addition norms to help prevent RT. In setting value addition norms the government must perform a delicate balancing act because if they are too high they may negatively impact genuine jewellery exporters.
In 2017, the government banned the export of 24-carat medallions and coins but subsequently allowed 22-carat versions to be exported with a value addition of 1.5%. Despite the measures taken by the government, RT continues, particularly in the jewellery trade with the UAE, Hong Kong and Singapore.
This can involve crude jewellery in the form of bangles, which is close enough in form to be exported as jewellery but crude enough to carry negligible making charges. After arriving at its destination, the jewellery is melted down and shipped back to India in bar form through official or unofficial channels.
Prior to the measures taken in August 2017, RT focused on exporting jewellery in medallion form and without any value addition this wrongly inflated India’s jewellery export figures.
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