After the excited panic buying on the night of November 8, soon after Prime minister Narendra Modi announced the demonetisation, there is a lull in the jewellery market with sales down by as much as 70 per cent coupled by fears of surveillance by the tax man. Sales peak during Diwali, especially the beginning of the festival on Dhanteras, an auspicious day for Gujaratis to buy gold. However, when the markets opened in the new year after the Diwali vacation, expecting to do brisk sales for the wedding season, demonetisation came as a blow. Stories did the rounds about how people drove in with bags full of cash in the invalidated denominations of Rs 500 and Rs 1000 and bought off shelves of gold from branded stores that remained open way past the midnight of November 8.
The Director General of Central Excise Intelligence (DGCEI) immediately put up its antennae and over 600 jewellers were asked to report sales of gold. Used to having brisk business from October to March, with the exception of the month-long inauspicious period ‘Kamurta’ which is from December 13- January 14, jewellers in the state are bracing for a slow revival in business activity that will take 2-3 months.
Ahmedabad’s famous jewellery market -Manekchowk that houses around 50 retail jewellery shops and around 200 odd wholesalers – is facing its worst slowdown ever since the last union budget imposed 1 per cent excise duty on jewellery items and made identity documents mandatory to make purchases over Rs 2 lakh. Jewellers across Gujarat had gone on strike against that duty.
The industry that was up in arms against the government regarding the restrictions saw green shoots appear around Navratri when buying had picked up, only to be hit by the currency ban. Manekchowk unofficially shutdown for 2 days while a few big jewellery retail brands and bullion traders with ample stock made a quick buck out of the panic that landed people in gold shops to with the de-circulated bills.
Transactions have wound down to cheques and jewellers are faced with cash crunch for their own operations,says Shanti Patel, President of apex body Gem and Jewelry Trade Council of India (GJTCI). He says that jewellery businesses cannot function on notes of smaller denomination and the situation looks to worsen with ‘Angadias’ (the informal courier) and diamond polishing workers looking to return after the extended Diwali break by November 21.
Despite many big retailers offering innovative discounts on making charges, business has now come to a crawl as customers strapped for cash and standing in long queues at banks and ATM’s refuse to take the bait. A well known event organiser in Ahmedabad said that people have started scaling down their lucrative ‘theme weddings’ by 50 %, even to the extent of asking fewer relatives to turn up for reception- a telling metaphor of the otherwise boisterous ‘shaadi season’ in the state.
Many jewellers in Surat- the world’s diamond hub have downed their shutters, but call on their old trusted customers to conduct furtive business through backdoors out of the earshot and eyesight of the tax sleuths. The situation is expected to turn awry once the diamond industry currently on a extended Diwali vacation buzzes to life on December 15.
“The diamond business is closely linked to the jewellery business. Ninety per cent of diamond merchants use formal banking systems only to make international payments for rough diamonds, otherwise the entire trade is conducted through Hawala and via the Angadia network. Customers now troop in groups of 5-6 and make purchases by taking advantage of common surnames and showing identity proof,” says a source in Surat.
In Rajkot too there is caution in accepting cheques for jewellery sales. “Being a high-worth product, we cannot sell jewellery except against cash. Suppose, the cheque bounces! Electronic transfers are also not reliable in these times,” says Bhayabhai Saholiya, president of Rajkot Gold Dealers Association, an organisation of jewellers of Rajkot.
There are about 125 retail jewellery outlets in Rajkot. It is biggest gold market of Saurashtra and one of the biggest in state. Many jewellery artisans from Rajkot also run stores in Dubai’s gold Souk. But Rajmahel Road, where these shops and showrooms are located has been wearing a deserted look for a week now. They are also closing shops by 7.30 pm to save on power bills.
“Business is nil. When people are spending days in queues for a few hundred, it’s obvious there will be no business for us anytime sooner even though marriage season has started. But rather than our business, we are more concern by the hardship that people are facing,” Saholiya adds.