Back-breaking import duty and high gold prices have already put the industry into the doldrums. Notwithstanding the punitive government policies and lack of adequate bank credit, the gem and jewellery industry seems to be facing the heat with overseas buyers cancelling about 30 per cent of the orders placed at the India International Jewellery Show held in August.

The gem and jewellery industry is already in doldrums as the domestic demand is almost wiped out due to high gold prices and back-breaking import duty of 12.50 per cent on gold, said a leading jeweller. On top of it, he said many overseas buyers have either cancelled 20-30 per cent of their orders or postponed taking delivery after Diwali due to weak demand in their own markets. The demand for gold jewellery in the overseas market, he added is dampened by weak sentiment on the back of slowing US economy and the prolonged trade war between the US and China. This apart, the US economy usually slows down closer to Presidential election which is slated late next year, he said.

Somasundaram PR, Managing Director (India), World Gold Council said the mood in the jewellery sector has not been that great with a lot of negative opinions being raised by people who can influence the government policies. For the last two years, the government has been examining the draft gold policy submitted by the industry, and it has not moved an inch, he said. Reacting to the concern raised by some of the leading bankers over the increase in gold imports, he said in reality it has more than halved to 28 tonnes in August against 94 tonnes logged last August.

Similarly, in July it was down to 38 tonnes (74 tonnes). Rubbishing a banker's claim that the jewellery industry is exporting the country's savings by importing gold, Somasundaram said gold had been proven the best diversification from the financial asset, and that is precisely why Central banks world over buy gold. Though in India, he said RBI holds comparatively less gold than other countries, the country as a whole is holding 25,000 tonnes of gold valued at ₹90 lakh crore, more than the bank deposit.

Import of depreciating assets such as cars and mobile phones are much higher than gold which is used to by people to raise money in distress, he added. In fact, banks and NBFCs have a gold loan portfolio of ₹3.5 lakh crore. That is exactly why the government needs to come out with a clear cut gold policy which will give some comfort to the industry, he said.