New Delhi: India’s gold processing and manufacturing industry is expected to grow significantly by 2030, creating 25,000 new jobs and attracting Rs 15,000 crore in investment. The industry aims to increase domestic gold production, thereby boosting foreign exchange reserves, trade balances, and gross domestic product (GDP), according to a report released on 10 July by the PHD Chamber of Commerce and Industry (PHDCCI), a New Delhi-based research bureau.
The report, titled, ‘Framework to Strengthen India’s Gold Processing Industry: A Step in Building Gold Self-Reliance‘ predicts that investments in India’s gold processing and manufacturing sector will increase from Rs 1,000 crore in 2023 to Rs 15,000 crore in 2030. Similarly, employment in the sector is projected to grow from 3,000 to 25,000 workers.
Domestic gold production is expected to rise to 100 tonnes from 16 by 2030, eliminating the need for imports and saving $1.2 billion in foreign exchange reserves. The industry plans to reduce net imports by converting the value of imported finished gold to raw gold.
The domestic production estimate by PHDCCI includes domestic supply from local mine production, recovery from imported copper concentrates and disinvestment.
By 2030, the world’s gold supply is projected to increase to 1,000 tonnes from 857, growing at an average annual rate of 2.4 percent. It is anticipated that gold production’s contribution to GDP will rise from 0.04 percent to 0.1 percent.
Increasing investments will drive global alliances, infrastructural expansion, and technological advancements, promoting innovation within the industry.
“India’s deep-rooted cultural affinity for gold has fueled substantial demand, accounting for a significant portion of global gold consumption. India’s recent surge in gold demand reflects its pivotal role in the country’s economic landscape,” Sanjeev Agrawal, president of PHDCCI, said in a statement.
The report said that various government initiatives, including the Gold Monetisation Scheme (GMS) of 2015, amendments to the Mines and Minerals Development and Regulation Act (MMDR) in 2021, and the auctioning of critical mineral blocks, have bolstered growth in the gold sector.
It recommended maintaining existing customs duties on gold ore and concentrates, improving ease of doing business, providing import duty benefits on machinery, enhancing financing facilities, ensuring clarity in Harmonized System of Nomenclature (HSN) codes, establishing state-of-the-art laboratory infrastructure, and implementing shipping cost reduction policies to boost the growth of India’s gold processing and manufacturing industry.
An important factor in attracting capital and technical know-how has been the zero-rated tariff on the import of concentrates made of gold ore. By 2030, the GST paid on gold is anticipated to rise to Rs 2,250 crore from Rs 300 crore, while the government’s duty abatement is expected to increase to Rs 1,820 crore from Rs 285 crore.
Also read: Central banks on buying spree, strong retail demand — what’s fuelling the big gold price rally
India’s gold import and export trends
India produces very little gold domestically in relation to its consumption. Significant gold mining is impeded by geological constraints, environmental issues, and regulatory obstacles. Therefore, India relies heavily on importing refined gold and gold ore to meet its demand. The primary imports into India are semi-manufactured or unwrought gold, and gold ore and concentrates.
The import of gold ores and concentrates saw a significant rise to $104.79 million in FY 2023-2024 from $0.01 million in FY 2019-2020. The import of unwrought and semi-manufactured gold also increased to $45 million in FY 2023-2024 from $28 million in FY 2019-2020.
India’s primary sources of gold ore and concentrate imports include Australia, Bolivia, Taiwan, Colombia, Malaysia and Peru. Colombia has emerged as the largest exporter of gold ore and concentrates to India, with imports increasing to $94.87 million in 2023-24 from $0.36 million in 2020-21.
Exports of gold reached their peak in 2018 and 2019, totalling $11 billion and $12 billion, respectively, due to strong demand for jewellery worldwide and significant gold exports. However, 2020 saw a significant decrease in exports of gold to $5 billion, owing to disruptions caused by the Covid-19 pandemic, which impacted income levels and global trade. The following years saw a strong recovery, with exports reaching $8 billion in 2021 and $9 billion in 2022.
India’s demand for gold and investment patterns
According to the PHDCCI report, India is the second-biggest consumer of gold in the world, making up around 17 percent of the world’s total consumption, with an average annual domestic demand of over 800 tonnes. Coins, bars, jewellery, bullion, exchange-traded funds (ETFs), and other forms of coinage are the primary sources of demand for gold in India. One of the major factors contributing to this robust demand is the growth in India’s per capita income.
With more than 575 tonnes of gold jewellery purchased, India came in second to China in terms of world gold demand in 2023, accounting for 27 percent of the total. During the same period, China bought 630 tonnes.
“The jewellery consumption for India grew from more than 544 tonnes in 2019 to above 575 tonnes in 2023, representing a 5.7 percent rise over the past five years,” the report said.
Commenting on the robust demand for gold in India, Rajeev Juneja, vice president at PHDCCI, said in the statement that the demand for jewellery, investments in coins and bullion, and exchange-traded products (ETPs) continued to rise in the first quarter of 2024.
He further said there was a need to increase gold output by providing incentives to current participants and attracting new industries due to the increasing demand.
Another interesting trend the report highlighted was Indians’ rising inclination toward gold investments. In the past five years, India’s investment in gold bars and coins has increased substantially, reflecting a large investment mindset.
India had the second-highest investment in bars and coins in 2023, accounting for 16 percent of the global gold demand. From more than 145 tonnes in 2019 to 185 tonnes in 2023, Indian bar and coin investment saw an upward trajectory, reflecting a growth rate of 27 percent over the past five years.
“Gold is considered a safe haven asset, sought after for its ability to retain and potentially ‘increase in value’ during periods of economic volatility and inflation. This has propelled gold to the forefront of investment strategies, offering a reliable means of diversifying portfolios and safeguarding wealth,” Dr S.P. Sharma, chief economist and deputy secretary general at PHDCCI, said in the statement.
(Edited by Radifah Kabir)
Also read: Who’s snatching your gold, mangalsutras? RBI data says it’s Modi