Note ban, PNB fraud hit gold business: Zaveri Bazaar jewellers face challenging timeshttps://indianexpress.com/article/cities/mumbai/note-ban-pnb-fraud-hit-gold-business-zaveri-bazaar-jewellers-face-challenging-times-5433922/

Note ban, PNB fraud hit gold business: Zaveri Bazaar jewellers face challenging times

Zaveri Bazaar is currently doing sales worth Rs 165 crore daily, as against Rs 170 crore per day last year and Rs 225 crore worth of sales before demonetisation in 2016.

According to the latest report of the World Gold Council (WSG), gold demand in India is expected to be muted in 2018 due to a steep rise in prices. It is likely to be at the lower end of the 700 to 800 tonnes range. India’s gold demand in 2017 was 771.2 tonnes.

Even as the government is working to set up a domestic gold council to promote growth of the sector, jewellers and job workers at Zaveri Bazaar in Mumbai, the largest gold market in Asia, feel that high price of gold, contracting gems and jewellery exports, demonetisation and the Punjab National Bank (PNB) fraud involving diamantaires Nirav Modi and Mehul Choksi have severely hit the financial health of the sector.

According to Raman Solanki, owner of Sangam Jewels and Gold LLP and a director of All India Gems and Jewellery Trade Fereration (GJF), the domestic sales of gems and jewellery have not picked up since currency notes of Rs 500 and Rs 1,000 were banned in November 2016. “Sales have not been very good despite the arrival of the festive and wedding season. Since demonetisation, a lot of money which used to flow into gems and jewellery sector is now being diverted to other class of investments,” said Solanki. He also said that there is a significant pile up of inventories in the market as sales of several jewellers have declined by about 25 per cent. “A lot of people are recycling (exchanging) old gold instead of buying fresh.”

Zaveri Bazaar is currently doing sales worth Rs 165 crore daily, as against Rs 170 crore per day last year and Rs 225 crore worth of sales before demonetisation in 2016.

The country’s gems and jewellery exports contracted by 8 per cent to about $32.72 billion in 2017-18 owing to demand slowdown in major markets, including the US. The labour-intensive sector contributes about 14 per cent to the country’s overall exports.

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Kumar Jain, director at Umedmal Tilokchand Zaveri, said that with the rupee weakening against the dollar, the price of gold has increased from Rs 29,635 per 10 gm in October 2017 to Rs 32,800 as of November 1. This has resulted in a dip in demand for gold and jewellery as consumers have curtailed their expenses. Jain said the ongoing trade war between the US and China has hit global business transactions.

“Rural sales which used to contribute 60 per cent to the total retail sales in Maharashtra have this year come down by at least 20 per cent due to drought in several regions in the state,” said Jain.

However, he said with Diwali and the wedding season round the corner, the jewellery sales are likely to get a boost in urban centres.

According to the latest report of the World Gold Council (WSG), gold demand in India is expected to be muted in 2018 due to a steep rise in prices. It is likely to be at the lower end of the 700 to 800 tonnes range. India’s gold demand in 2017 was 771.2 tonnes.

At Zaveri Bazaar, nearly 70 per cent of about one lakh gold karigars or job workers who typically are the lowest in the chain in the gold jewellery business have been sent home mostly to West Bengal as sales of jewellers have significantly reduced in the last two years, said Kalidas Sinha Roy, general secretary of Bengali Swarna Shilpi Kalyan Sangh.

“There are about 10,000 micro small scale units at Zaveri Bazaar that employ people who work on gold ornaments. But due to low retail sales there isn’t enough work. Out of the one lakh workers four years ago, only 30 per cent are still employed by these unit. Rest have been sent back to their villages. Both demonetisation and Goods and Services Tax (GST) have slowed the pace of retail sales. There is a lot of uncertainty in the market. We don’t know what the future holds for us,” said Roy.

Solanki of GJF said several jewellers and diamond traders are also facing funding issues as the banks have tightened their purses since the Rs 13,600 crore fraud at PNB.

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“The entire Nirav Modi and Mehul Choksi episode has massively impacted the bank ratings of the diamond industry. As a result, we are facing increased scrutiny by banks for funding. Banks are now asking for additional documents and in fact a number of lenders have also re-opened old cases and are asking for additional documents for previous years. This has also led to funding problems,” said Solanki.