Gold Industry
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Transcript of Gold Industry
Gold diggers
Institute : University Business School, Panjab University
Batch : 2013-2015
Team consists of :
1) Arjun Dixit : MBA-IB
2) Hitesh Pruthi : MBA
3) Harsh Tuli : MBA-IB
Areas of Interest : Market Research, Advertising
and Strategy.
Institutional mechanisms required for uniform governance ?
Problems1) Gold industry is fragmented , Less organized players in comparison to unorganized.
2) Absence of industry wide standards for gold refining.
3) Number of ministries controlling gold industry.
Recommendations and Solutions1) Setting up of Gold Corporation or Gold Bank in India
Functions :• It will serve range of functions i.e. protecting the interest of institutions working in
gold instruments to the selling and buying of gold itself.
Functions :• It can be a specialized organization under the RBI to work towards all functions related to
Gold.• It will serve as Central body , under which there can be separate state councils to look
gold trade of every individual state.• Gold being mined and the gold being imported, complete data should be maintained under
this council.
2) Setting up of a Gold Exchange • The purpose will be to bring all transactions to a single platform so as to take a better
control of the disorganized sector.
How can the supply constraints in gold be reduced without affecting CAD?
Problems1) Only approximately 5% of gold is supplied from Indian mines.2) Second largest import item ,with an import bill of INR 307,000 Cr.3) Buying and selling of gold is very easy as compared to any other investment .
Facts : Major employer after IT industry, foreign exchange earnings through exports, and value addition
Recommendations and Solutions4) Recycling of domestic gold • Encouraging people to recycle their gold by highlighting the premium they are bound to receive. • Also standardization of gold and its prices can help create an environment conducive to recycling.
2) Pricing needs to be regularized and standardized• Sale of only hallmarked jewelry need to be made and a comprehensive tax regime need to be followed for price
equality thus inducing confidence in consumers of no loss on resale.
3) Financial gold Instruments • Providing better financial gold instruments and propagating these to rural as well as urban consumers of India so
as to curb social habit of accumulating gold as an investment.
4) Usage of Gold Reserves • The government needs to constitute a regulatory body which can allow the usage of gold reserves held by
financial institutions through schemes such as ETF’s for lending activities rather than just sitting over it.
5) Issue Of Gold Bonds • The RBI or The Gold Bank( If constituted ) could offer gold bonds against the impounding of Idle gold so as to
meet the local demands through the reserves created.
5) Resolving Mining Issues• The government needs to look into the hurdles preventing the mining and try to solve
the issues as soon as possible to create a positive outlook.• Getting these mines accredited by LMBA is the foremost important initiative.• Gold obtained from the mining should be provided with a code bar and proper data
should be maintained until it reaches the manufacturing process.
6) Import raw gold and export gold jewelry• Only raw gold to be imported and the gold if imported in form of jewelry should have
high custom duty. • This will help in tracking the gold being imported and further it will also help in
increasing export of Gold jewelry as low custom duty on export of the jewelry.
7) Organizing local manufacturers • The manufacturers should be registered under some agency and the data how much gold
is being sold to respective local manufacturers should be obtained from them. • The organized manufactures who further are selling to other local manufacturers can
issue a statement for government agency and for the seller that this much gold is being sold to XYZ manufacturer.
8) Making buying tougher • Buying of gold is not being regulated and it has led to smuggling and other problems. • Money used for purchasing gold should be considered under tax liability.
Infrastructure and policies required to enhance industry efficiency and to ensure gold gets embedded into the financial system of Indian Economy.
Problems1) India is the largest consumer of gold without any refinery accredited by international
standards.
2) The absence of a uniform standardizing and certification authority in India at the retail level is another major challenge.
3) Gold prices are not stable.
Recommendations and SolutionsIndustrial Efficiency1) Formation Of A Regulatory Body • A central regulatory structure such as that of a Central Gold Bank/Corporation with state
units required to provide holistic understanding of gold across facets, develop specialized expertise on gold transactions across the gold market.
2) Better Implementation of Hallmark Certification • Gold is still not Hallmarked at most of the retailers thus a need to make consumers
aware of such certification and at the same time putting in a system to make sure of the purity through diligent efforts by the government towards implementation.
3)Customer complaints and grievances redressal system • The Quality and Price can be best checked through this measure.• All these measures can only be effective with an organization established so as to
provide an umbrella for the whole gold industry.
Financial Inclusion
1) Gold deposit scheme : To get the reserved gold ,consumers can be lured by the premiums on returns through deposits schemes
• Different rate of interest depending upon the amount of gold being deposited .• If it is purchased from an authorized manufacture or is a certified Gold then higher rate of
interest to be paid.• It should be applied in all the public and private banks so that the information is widespread • If private banks come in they will provide a high competition in the market and depending
on their gold deposit they should be given different incentives by central bank.
2) Educating rural Consumers on Gold loans• To make the rural consumers aware different means of communication such as radio,
fairs( one stop shop for information ), street plays etc. Through the various means of media financial literacy need to be brought.
3) More comprehensive and High Returns on Gold backed Financial Instruments need to brought into the market. E.g.- A pension Fund where gold can be the collateral for a monthly pension.
4) For resale value • Giving highest resale value of gold if sold within 1 or 2 year of being purchased. This
will stop people for reserving it for longer time.