Incentive scheme may boost India’s mfg: Modi
Bullish on the production linked incentive (PLI) scheme, Prime Minister Narendra Modi on Friday said that the scheme, which is aimed at boosting domestic manufacturing and exports, is expected to increase the country’s production by $520 billion in the next five years. Addressing a webinar, Mr Modi said that the Centre is continuously carrying out reforms to boost domestic manufacturing.
In this year’s Budget, about `2 lakh crore was earmarked for the PLI scheme for the next five years and “there is an expectation that the scheme would result in increasing the production by about $520 billion in the next five years”, he said.
He added that there is also an expectation that the current workforce in the sectors, which will avail the benefits of the PLI scheme, will be doubled and job creation will also increase.
The PM said the government is working to reduce compliance burden, further improve ease of doing business and cut down logistics costs for the industry.
“PLI scheme would boost manufacturing in sectors from telecom to auto to pharma. PLI is aimed at expanding manufacturing and boosting exports,” he said.
With the gold price having fallen Rs 12,000 per 10 gm from their record-high levels in August, the bullion channel is stocking up physical gold for customers who are waiting for some stability in prices to make purchases.
India had seen gold jewellery demand falling to a multi-year low of 315 tonnes in 2020. The first three quarters of the calendar year was a wash-out in terms of gold demand.
However, the pent-up demand is likely to trigger buying with the supportive movement in prices. Gold prices have dropped to Rs 44,280 per 10 gm in the Multi Commodity Exchange from the highs of Rs 56,590 in August— losing more than Rs 12,000 per 10 gm.
The correction has led to some improvement in demand, but not yet at the customer level. The gold channels have been stocking up the yellow metal expecting the demand to rise once the wedding season starts and vaccination picks up. This has been evident from the gold import figures.
Gold imports had risen 72 per cent in volume terms and 154 per cent in value terms in January. As per the latest trade figures, gold imports are up 124 per cent in value terms in February as well.
“Gold imports in 2020 had fallen substantially as the channel was blocked due to the lockdown. In the past few months there has been some re-stocking happening within the channel for replenishment purposes,” said Ashish Pethe, chairman of the All-India Gem and Jewellery Domestic Council. Further, the channel had stayed away from replenishment of stocks at higher price levels.
According to Pethe, investment demand is still robust while jewellery demand is yet to pick up. Investment demand had in fact started picking up in the fourth quarter of 2020 when the consumption was up by 8 per cent compared to Q4 2019.
According to Amit Bhandari, founder of Tezbid.com, for investors the recent downturn in prices offers a good entry point, preferably with a long holding period.
“Inflation is expected to be higher going forward and gold offers a good hedge against rising prices—the speculation on bitcoin is a good example of the kind of froth/asset bubbles building up in financial markets. Some allocation to gold is prudent,” said Bhandari.
However, jewellery buyers are still waiting for the right time. “Jewellery customers are still in a waitand-watch mode and are looking for stability in prices. Once prices stabilise, demand will pickup. Further, festivals like Gudi Padwa and Akshaya Tritiya are coming up and the wedding season too will start soon. This year, we might see more number of weddings happening. Hence the demand is expected to recover to 2019 levels,” said Pethe.
“The buoyancy in the market is tangible. People are waiting and watching with the intent to buy. The duty cut and gold price fall are favourable factors for buying,” said Somasundaram P.R., managing director, World Gold Council India.