The fall in demand comes even as gold prices in Mumbai dipped to Rs. 29,000 per 10 grams on Monday from Rs. 31,150 registered on November 10, the day after demonetisation was announced.
GV Sreedhar, Chairman, All India Gems & Jewellery Trade Federation, said the domestic jewellery industry, estimated at Rs. 4.80 lakh crore, has shrunk by over 80 per cent despite gold prices dipping sharply in the last few days as dollar strengthened and demand remained weak in India, the largest consumer of gold.
The circulation of money has dried up completely and people who were willing to purchase gold worth Rs. 20-30 lakh for marriage are now settling for Rs. 1 lakh jewellery, he said.
Shutting shop
Many of the small gold jewellery making units have shut shop temporarily as they could not pay salary to employees.
Despite the hardship, Sreedhar said, the industry is with the government in its fight against black money and is hopeful that the bold step will make the industry more transparent and stronger.
“I believe it will take at least three months for signs of normalcy to return in the jewellery trade,” he said.
The government should stop looking at the jewellery industry with a negative tint as it employs over six crore people, largely less educated and skilled workforce.
The industry is largely unorganised and any wrong-doing by a few small jewellers taints the entire industry, resulting in harsh decision by the government, he said.
On the jewellery export front, Praveen Shankar Pandya, Chairman, Gem and Jewellery Export Promotion Council, said though the high value demonetisation has not impacted shipments directly it has hit SME units which undertake job work from large exporters.
“Whatever the exporters pay the SME units are in cheques but these units deal in cash at their level. So to that extent there is difficulty,” he said.
The Council is working closely with the industry to ensure that export orders are not delayed, particularly with peak Christmas and New Year season around the corner, he said.
“The government should enhance availability of bank finance to jewellery export-oriented units which has shrunk drastically after the NPA crisis in the industry,” he said.
Bank finance should be extended in dollar terms as both our raw material and receivable are in dollar terms, he said.
Source: The Hindu Business Line