Within a span of month’s time the Indian government has fallen in to its own rifts, After causing a spike in cotton prices following the imposition of an export ban where I did the story for Cotton & India . The whole process lasted about 72 hours from beginning to end. Days after, desperate to fund ongoing budget shortfalls, the government shifted its attention to price controls in a market it knew China would absolutely not mind to having the price kept artificially low – gold.
When an announcement made by the government to impose to levy an excise duty on unbranded jewelry. The response was swift – a countrywide strike among India’s jewellers who all went dark, crippling demand from one of the traditionally strongest gold markets in the world.
The three-week-old strike was called off by Indian jewellers.
The wedding season is at its peak in India, with Akshaya Tritiya, one of the biggest gold buying festivals later in the month, making the period crucial for jewellers.
The Indian finance ministry has caved, and while it took three days to end the cotton export ban, it took three weeks to end the excise duty proposal 🙂
Here are some facts provided by Reuters :
The strike was staged to protest against an excise levy on unbranded jewellery of 0.3 percent, and a tax collected at source on transactions worth more than 200,000 rupees. The annual budget also doubled import duty on gold to 4 percent.
The moves were game-changers for the $200 billion a year jewellery industry and experts had predicted they could cut gold imports by a third to 655 tonnes in 2012, allowing China to overtake India as the biggest gold importer.
The strike by jewellers resulted in a loss of 200 billion rupees, according to industry officials.
It must lead to an artificial demand and the cash clunkers awaiting when the market opens tomorrow.
Keep an eye on gold futures they will ride wild