Exporters fear India may lose $5.5 bn in gold medallion, coin exports

India is set to lose around $5.5 billion worth of gold medallion and coin exports due to the government's decision to ban shipment of gold beyond 22 carat of purity. Since gold medallions and coins contain 24 carats of gold, their export has been banned, albeit unintentionally. 

In August 2017, based on the recommendations of apex industry body Gems and Jewellery Export Promotion Council (GJEPC) and under the aegis of the Union Ministry of Commerce and Industry, the government banned the export of gold items above 22 carats of purity. The move was aimed at restricting the round-tripping of gold. The government opted to follow a broader benchmark of gold content -- with 14 carats, 18 carats and 22 carats in jewellery -- as fixed by the Bureau of Indian Standard (BIS) for domestic sales.  

Since gold medallions and coins contain 24 carats of the yellow metal, their export does not fit under BIS regulations. As a consequence, their exports started to steadily decline with new orders moving to competitors such as Dubai, Turkey and China. Thus, India's exports of gold medallions and coins declined to "nil" in June 2018, compared to $0.5 billion in the same month last year, GJEPC data showed.    

In the gems and jewellery industry, export orders are booked a few months in advance as a normal practice. Hence, Indian exporters executed their advance orders until May 2018 and denied new orders for delivery thereafter. Thus, overall exports of gold medallions and coins from India slumped by a staggering 92 per cent in both dollar and rupee terms for the quarter ended June 2018. Starting June 2018, however, India's exports of gold medallions and coins came to a standstill. In 2016-17, gold medallions and coins constituted 16 per cent of India's overall gems and jewellery exports, which were to the tune of $35.5 billion.   

For April-June 2018, exports of gold medallions and coins declined to $121 million (Rs 8 billion), compared to $1.5 billion (Rs 96.47 billion) in the corresponding period last year. Gold medallion and coin exports constituted around 16 per cent of India's overall gems and jewellery exports for the financial year 2017-18.

"India used to export gold medallions and coins to all large and small importing countries. But, the government's decision restricted their exports. So, competing countries like China, Dubai and Turkey will gain at the cost of India," said a senior official with a leading jewellery exporter. 

"Gold medallions and coins did not have much of value addition component in them. Hence, we have recommended the government to allow exports of gold artefacts with a minimum 15 per cent of value additions," said Sabyasachi Ray, executive director, GJEPC. 

The ban on exporting gold medallions and coins also has an advantage. Indian exporters will now be able to focus on the shipment of value-added items instead of pure gold products. Barring a couple of select centres in China, gold jewellery consumers across the world prefer ornaments with less than 24-carat purity.