(MENAFN- The Peninsula) India's new "gold monetisation scheme", announced by country's Finance Minister Arun Jaitley in his annual budget speech yesterday, is expected to hit hard Qatar's gold market, especially the demand for gold bars and coins (bullion, sold in 24 and 22 carats), according to trade sources.
"The scheme will definitely have an impact on Qatar's bullion market. Many Indian expatriates who used to invest in gold may now prefer to buy gold bonds or gold coins back home," Azim Abba, Managing Director of Al Sulaiman Jewellery and Watches, told The Peninsula yesterday.
However, Qatar's jewellery market is expected to remain unaffected as people will continue to buy their ornaments here rather than in India as products in the local market enjoy greater degree of trust of customers in terms of purity and genuineness, he said.
Under the new gold policy, India is aiming at reducing high demand for overseas gold by introducing products such as sovereign gold bonds and gold coins to improve its current account balance. These schemes will not only help reduce the demand for physical gold in India, but will also end up 'reusing' or 'recycling' the idle gold, including jewellery, lying in homes, bank lockers, temples, shrines and other charitable organisaitons.
According to World Gold Council, the full year world gold demand in 2014 stood at 3,923.7 tonnes, and India is its largest importer. The gold-hungry country buys some 800 tonnes to 1,000 tonnes a year, which is about one-fourth of the total global demand.
Facing huge current account deficits due to this, India's previous government took several policy decisions to curb on the imports of gold, including imposing high import duties and 80:20 scheme under Reserve Bank of India.
India's existing gold import policy restrict female Non-Resident Indians (NRIs) from carrying gold worth more than QR5,905 (Rs100,000), once in a year. The male NRI is allowed to carry gold worth QR2,952 (Rs50,000). Market experts say this has to be changed and India has to be more liberal.
Although the recently removed the 80:20 scheme that required gold importers to export 80 percent of raw gold they import as finished products. However, the new government did not announce any cut at the record 10 percent import duty on gold in the budget, which is a major setback for jewellers in India.
Commenting on India's budget announcement on gold and its possible market impact in Qatar, the Doha Bank CEO, Dr R Seetharaman, said: "It all depend on the purpose for which gold is procured whether for consumption or investment"India's import duties and consumer preferences will also have a bearing on demand for gold in Qatar."
Doha Bank is one of the bullion traders in Qatar.
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