Gold Glitters in India

You cannot find a single household in Kerala which does not possess gold. It has been officially stated that every single marriage in Kerala, the bride will wear at least 400 grams of 24 carat gold, which approximately makes for an addition of 80 tonnes of gold every year only for marriage purposes. In the elite marriage of the upper middle class, the minim gold, the bride will wear on her wedding day would be around  1000 grams or 1 Kg, and there will be atleast 1,00,000 such marriages in Kerala annually.

            Kerala has gold trove. The retail trade in the State is well spread out and has envious patrons and sizable businesses every year.  When the gold coins and jewellery found at Sri Padmanabha Swami Temple at Thiruvanathapuram was stated to be Rs 1.50 lakh Crore, no Keralite seemed to be exited except in the other parts of India. Kerala’s other temples like Sabarimala; Guruvayur is also in possession of a huge gold treasure.

            Kerala’s appetite for gold never severed even if the price of gold rise to monstrous proportions.  Today, in addition to small retail shops which make gold against orders, three is a big wholesale gold selling shops known as Retail brands like Malabar Gold, Alukkas, Kalyan, Prince, Josco, who have imposing colourful collection of branded jewellery for sale.

            Government had to resort to levying customs duty as it found that Gold was an important ingredient of import which created a huge current a/c deficit which occurred due to imports exceeding exports. Gold imports peaked to 162,000 Kg in May 2013. Government raised the Customs duty on imported Gold from 4% to 10% between March 2012 and August 2013.   In addition the Customs prescribed the Gold tariff, the minimum rate at which import of Gold could be allowed to land in the country. But one of the essential stipulations under which one can import gold is conditioned on the premise that every 1 Kg of gold imported, 200 grams should be re-exported in the form of finished jewellery. This is known as 80:20 formula. All these measures resulted in a drastic reduction of improted Gold which fell to 19,300 Kg and the current a/c deficit which was around $ 88 billion (Euro 53 billion), being 4.8% of the GDP to come down to less than $ 50 billion, which was a tad less than 2.5% of the GDP, which was the prescribed comfort level of the Reserve Bank of India.

            Though the import of Gold was curbed officially, the domestic demand remained the same.  According to World Gold Council, the gold demand in India was 975 tonnes in 2013 and is expected to touch 1,000 tonnes by 2014. Of the 975 tonnes of yellow metal required by India, we import around 900 tonnes annually.  In addition, the WGC estimates that smuggling of gold through land, sea, air ports occur which would constitute around 200 tonnes every year. The official estimates put out gold smuggling through Kozhikode and Kochi airport at 90 Kg which were seized between April and October of 2013. More than 100 Kg was smuggled into Chennai through sea in 2013. Gold is also smuggled into India through Nepal and Myanmar by road. Most of the gold from Dubai, Singapore reaches neighbouring countries; thereafter, this reaches India by sea, air, road routes. Officials report that around 700 Kg is smuggled into the country on a day-to-day basis. 871 cases of Gold smuggling worth Rs 99 Cr were filed in 2012,while this fiscal saw 1,131 cases worth Rs 320 Cr (till Dec 2013) being filed. Smuggled Gold valued Rs 2500 million ($41.18 million, Pound 24.75 million) was confiscated at various Ports, and airports in India between April-Dec 2013.

            The country has never seen such a large and sharp increase in contraband gold for two decades. Smugglers indulge in innovative ways to bring the metal. Gold is melted into seed shaped chips, hidden in dates or ground into granules and mixed with other metals to look like iron ore. The metal is converted into gold belt buckles and torch batteries.

            Smuggling is difficult to control. Regular use of the air route, taking advantage of airlines that club international routes with domestic ones using the same flight, coveted smuggling becomes easy. First, carriers smuggle gold from abroad, hide it in the aircraft, while another set of carriers board the same flight on the domestic route and walk away with the Consignment. This is unprecedented and unbelievable. A new industry has emerged. It is dangerous to both the economic and defence point of view. Smuggling rose by a whopping 300% between March 2013 and April 2014.

            In Kerala, the gulf returnee, can bring along with him up to 10 Kgs of gold by paying a nominal duty, if he has worked in abroad for a minimum period of time. Many poor workers, who had lose their job, or have poor pay or debts, become carriers, get a commission any way around Rs 30,000/- to Rs 50,000/- for every Kg of gold plus their air ticket charges are met. A large chunk of gold comes to India through this route and ends up with the jewellery firms. Nearly 50% of the 90 tons of gold annually used by Kerala is crafted as ornaments. New patterns account for around 500 Kgs. This is purchased against re-sale of old jewellery, etc. There are gold coins of 1 Kg, 2 Kg, 4 Kg variety. 10 gm gold coin sells briskly. Those who want to spend above Rs 50,000/- prefer jewellery but those who would like to invest less than that, go for gold coins. 5 Gms gold coins are purchased vividly towards investment by many.

            In all history, only 161,000 tons of the yellow metal has been mined. Between 2000-12, $ 44.5 billion (42% of the non ferrous metals exploration budget was allotted to gold mining). Global exploration expenditure funding to 29% ($ 152 billion), the gold mined is expected to touch 87.5 million ounces by 2014. Brazil, China, Ghana, Indonesia, Mangolia, United States are gold producing countries. South Africa, Australia has reduced production from their mines. China is the largest producer accounting for 16% of global mine supply, approx 13.8 million ounces (2013) and 14.5 million ounces in 2014.

            The traditional goldsmiths and small retail shops have been replaced by affluent branded shops which have a large commercial area with different patterns of gold jewellery neatly displayed. They have decorated show-rooms and beautiful film actresses as their brand ambassadors.  The prices for gold was determined by Kerala Jewellery Federation which announced its daily rate based on London bullion rate, value of the rate adopted by banks for exchange, local availability of Gold etc. But now, the big branded firms have come together under Kerala Gold Board rate. Grey market for retail gold gears its head, a dual pricing system emerges in Kerala with smuggled gold undercutting official pricing. The difference in rates indicates the yawning demand supply gap and bristling competition amongst traders of precious metals. The high end market retailers fixes prices which include around 500/gm as wastage charges which are tantamount to making charges as retail chains have huge overhead expenses while they trade in large volumes.

            Kerala based reputed chains have already have a base in Dubai and other Persian Gulf Countries. Recently two of the biggest groups have set shop in Mumbai knowing fully well that Mumbai market has a full- scape market using 200 tonnes of gold for jewellery.

            You need not try to search for buried gold in the confines of the mountains, as hilariously portrayed by the famous movie ‘Mackenna’s Gold’ which was filmed in the 1960s.  In Kerala, gold glitters in every home, summer or winter.