Wedding vows become woes in cashless India
mumbai/singapore — A self-imposed cash shortage in India is creating chaos for jewellery retailers in one of the world’s biggest gold-buying countries. Sales are plunging.
Just ask Renita Ferreira. While her February 24 marriage ceremony has been set for a year, she and her fiance haven’t bought wedding rings, even after many trips to stores in Panaji, the capital of the western state of Goa. A majority of retailers aren’t equipped to accept credit cards because India’s jewellery industry runs mostly on cash, something consumers have a lot less of these days.
In November, the government banned what amounts to half the circulated cash, part of a plan to curb corruption and tax evasion. The move cut purchases of everything from cars to soap in a country where 98 per cent of consumer payments are in rupee notes. While a replacement currency was issued, the disruption further eroded gold demand already slowed by higher retail costs.
“All our plans went for a toss after demonetisation,” said Ferreira, 28. “Cash is not an option now. We can’t get married without rings.”
Gold demand in India, which trails only China, probably tumbled to a seven-year low in 2016, according to the World Gold Council, which has cut its forecasts twice. The council pegged consumption at 650 to 750 metric tonnes, down 24 per cent from 858.1 tonnes in 2015. The decline will continue in 2017, based on slowing imports that account for much of what the country buys, said Kotak Mahindra Bank. Purchases of foreign bullion will be 350 to 400 tonnes, down from 575 tonnes last year, the bank said.
Indians already were buying less gold before Prime Minister Narendra Modi enacted the world’s mostsweeping currency policy change in decades. Higher prices had kept many consumers away, and rural demand fell off when a weak monsoon season eroded farm income. Jewelleers also went on strike to protest an excise tax on locally manufactured jewellery and the government’s push for greater transparency in the financial system.
Conditions for bullion weakened further after the government invalidated old ₹500 and ₹1,000 notes, akin to the US withdrawing all currency except half its $1 bills.