Will Ensure Adequate Funds For Gems And Jewellery Sector, Suresh Prabhu Says
Commerce and Industry Minister Suresh Prabhu Friday said he has taken up with the Finance Ministry the issue concerning credit to the gems and jewellery sector to ensure adequate availability of funds for them.
Prabhu also said the ministries are looking at the industry's demand for cutting import duty on gold to 4 percent from 10 percent.
The industry also wants a reduction in the duty on the diamond to 2.5 percent from 7.5 percent.
“This is one of the important issues...for the industry that is export-oriented... If you have import duties, the working capital gets blocked up. So, we are already working on that.”
“At the same time, the Ministry of Finance has a responsibility to curtail CAD (current account deficit). Therefore, they are also trying to find out how we can keep the imports under control. So, we have to balance both together,” the minister told reporters.
On financing issues of the sector, Prabhu said meetings were held with bankers to address the matter as the genuine needs of the industry should be looked at.
“I have again taken up the issue with the Finance Ministry and we will make sure that the industry is not starved of necessary finances,” he added.
The gems and jewellery sector, especially the diamond industry, is facing credit crunch as banks have tightened their hands following the Rs 14,000-crore Nirav Modi scam in Punjab National Bank.
The minister also stated that the government would soon come out with a gold policy and set up a domestic gold council to promote the growth of the sector.
The country’s annual gems and jewellery exports stand at about $40 billion. The sector, which contributes 13.5 percent to India's total merchandise exports, employs about five million people. It also accounts for 7 percent of the country's gross domestic product.
Also read: India Rules Out Higher Gold Tax
Commerce Secretary Anup Wadhawan said various stakeholders are being consulted on the formulation of the policy and setting up of the council.
“I hope to reach a logical outcome very soon,” he said.
The secretary also asked the industry for self-regulation, so that rules and regulations could not be violated.
Further, he said the industry needs to look at innovative ideas to exploit India's huge gold reserves to contain imports.
India imports about 1,000 tonnes of gold every year. The imports, which have a bearing on CAD, increased by 22.31 percent to $33.65 billion in 2017-18.
The country is the largest importer of gold, which mainly caters to the demand of the jewellery industry.
CAD, the difference between outflow and inflow of foreign exchange, widened to 2.4 percent of the GDP in the first quarter of 2018-19.