India’s gold market:

evolution and innovation

About the World Gold Council
The World Gold Council is the market development
organisation for the gold industry. Our purpose is to
stimulate and sustain demand for gold, provide industry
leadership, and be the global authority on the gold market.

We develop gold-backed solutions, services and products,

based on authoritative market insight and we work with a
range of partners to put our ideas into action. As a result,
we create structural shifts in demand for gold across key
market sectors. We provide insights into the international
gold markets, helping people to understand the wealth
preservation qualities of gold and its role in meeting the
social and environmental needs of society.

Based in the UK, with operations in India, the Far East

and the US, the World Gold Council is an association
whose members comprise the world’s leading gold
mining companies.

For more information

Please contact:

World Gold Council

B-6/3, 6th Floor, Laxmi Towers
C-25 Bandra Kurla Complex
Bandra (East), Mumbai 400051, India
E: info@gold.org
T: +91 22 6157 9100
F: +91 22 6157 9199

Alistair Hewitt
Director, Market Intelligence
E: alistair.hewitt@gold.org
T: +44 20 7826 4741

Krishan Gopaul
Market Intelligence
E: krishan.gopaul@gold.org
T: +44 20 7826 4704

Louise Street
Market Intelligence
E: louise.street@gold.org
T: +44 20 7826 4765

Mukesh Kumar
Market Intelligence Group
E: mukesh.kumar@gold.org
T: +91 22 6157 9131

India’s gold market: evolution and innovation

Contents
Introduction02
Overview04
Income growth drives gold demand
Consumer demand is evolving
The gold industry is changing
India has a long history of gold-focused policies 07
1: The drivers of Indian gold demand
Understanding what drives Indian gold demand 08
India’s demographics
Income levels and savings
Import restrictions and taxes
Inflation16
Agricultural production and monsoons
Outlook17
2:  Jewellery demand 
Types of jewellery
Understanding regional, income and
demographic differences
Focus Box: The changing role of
non-resident Indians 
Outlook27
7: Bullion trade 55
Wholesale imports and importers 55
Official import trends 57
04 Focus Box: Gold pricing in India 58
05 Smuggling 60
06 Outlook 60
8: Gold refining and recycling 61
08 India’s gold refining landscape 61
Recycling trends 64
10 Outlook 67
13
14 9: Gold mining 68
Gold mining history 68
16 India gold mineral reserves and resources 70
Future of gold mining in India 71
Economic impact of gold mining 72
18
21 10: Gold policies 73
A brief history of gold policies 73
22 Recent developments 75
 Focus Box: India’s latest effort to crack down
24 on black money will have a big impact on
gold demand 78

3: Jewellery market structure 28 Appendix 1: Methodology 79

Retail market structure 28 Field research 79
Focus Box: The rise of Tanishq 31 Econometric analysis 79
Manufacturing market structure 32 Consumer insights 79
Hallmarking34 Market research 79
Outlook35 Gold demand data 79

4: International jewellery trade 37 Appendix 2: Indian gold demand:

Jewellery exports and imports 37
Developing India’s jewellery exports 40
Outlook42
5: Gold investment market 43
Bar and coin demand 43
Understanding investor motives 46
Gold investment retailing 46
Focus Box: India’s commodity exchanges 49
Outlook50
an econometric analysis 80
What drives Indian gold demand?
An econometric approach 80
Modelling the long- and short-term
dynamics of the Indian gold market 81
Appendix 3: India’s above ground stocks 86
Methodology 86
India’s gold holdings 86

6: Gold in the financial system 51

Gold monetisation 51
Gold loans 52
Outlook 54

India’s gold market: evolution and innovation 01

Introduction
India is a wonderful country. It is diverse and dynamic.
With over 500 million people under the age of 25 it is one
of the youngest countries in the world. Yet, at the same
time, India has a long and rich cultural heritage, with many
gods, deities and beliefs intertwined with the Indian way
of life.
Gold is part of this way of life. Hundreds of millions of
people across India – from large, modern cities through to
small rural villages – buy gold for themselves or loved ones
throughout the year. Akshaya Tritiya, Diwali, harvests,
weddings; gold is central to every one of these. Perhaps
its little wonder India has a huge affinity for the global
currency, given its long history as a trading nation.
But India is changing. Millions migrate from villages to
cities every year. Agriculture’s relative importance has
declined. Per capita income has increased and millions
have been lifted out of poverty. Mobile phones have
spread rapidly across the country; with over 220 million
users, India is the world’s second largest smartphone
market. Millennials think about the world differently to
their forefathers. These changes have implications for
gold demand.
India’s gold market: evolution and innovation
On top of that, India’s gold market has been subject to
huge policy changes over recent years. Sometimes this
targets the gold industry, such as the market-distorting
80:20 rule for gold imports in 2013 and 2014. But
sometimes it is an economy-wide initiative, such as the
forthcoming Goods and Services Tax or 2016’s radical
high value currency exchange (or ‘demonetisation’)
programme. While recent new policies initiatives have
been numerous and varied, they share the same objective:
to move India’s informal cash economy towards greater
transparency and into the digital age.
A challenge facing India’s gold industry is that part of it
operates in the grey market. This minority has benefited
from anonymity and a lack of transparency on price, purity,
taxes and supply sources. As India’s economy presses
ahead with its transition to transparency, its gold industry
must shed this image and integrate into the mainstream
financial system, for gold to serve as a legitimate asset
class for millions and play a dynamic economic role.
It is clear that India’s gold industry is important to its
policymakers. But effective policy needs good data and
insight as its foundation. This report aims to provide that,
by explaining how India’s gold market works across the
entire supply chain – from imports and recycling through
to consumer demand – and how it is likely to evolve in
the coming years. It also provides an overview of existing
gold-related policies and how they have evolved over
recent years.
02
Key insights
• Economic growth drives gold demand: India was one
of the world’s fastest growing economy in 2016. This is
key to the health of the gold market. Our econometric
analysis of the drivers of Indian gold demand reveals
income growth is the most significant factor: as India
becomes richer, gold demand increases.
• Urbanisation will change the shape of consumer
demand: Rural and urban India can be thought of as
two distinct markets. Rural India prefers to invest in gold
jewellery, while urban India has a greater preference for
bars and coins. Rural-to-urban migration will change the
shape of consumer demand.
• India has a young population with a strong affinity
with gold: India has over 45% under the age of 25.
And young people think about the world differently
from previous generation. But our large-scale consumer
research indicates that they do have a strong affinity
with gold: when we asked the question what you would
buy if you were given Rs50,000, a third of respondents
aged between 18–33 said they would invest in gold.
India’s gold market: evolution and innovation
• India’s gold industry is becoming more organised:
While it is still highly fragmented, the industry is
becoming more organised. Retailers with large regional
and national chains are gaining market share. These
firms have sophisticated inventory management, well-
crafted advertising campaigns and will be important in
ensuring gold meets the needs of modern consumers.
At the World Gold Council, we want to support the
development of India’s gold industry by working with
India’s policymakers to help ensure gold becomes
mainstream, and that its positive role in household
finance is better appreciated. Currently, policy
discussions tend to focus overwhelmingly on import
controls, thereby under-leveraging the strengths of a gold
culture that is widely prevalent. Policies to enable gold
to operate freely in a transparent manner, as part of the
organised financial system, are important to realise the
broader social and economic objectives. We hope this
report provides the data and insight from which effective
policies can be developed.
Somasundaram PR
Managing Director, India
World Gold Council
03
Overview

In 2015 India was the world’s fast growing economy; in recent

years millions have been lifted out of poverty and India’s
middle class has swelled. This is important because our
econometric analysis indicates income growth drives gold
demand. But India’s relationship with gold goes beyond income
growth: gold is intertwined with India’s way of life. And as we
look ahead, India’s gold market will evolve.

Income growth drives gold demand
India’s middle class, consisting of some 200mn to 250mn
people, is now one of the world’s largest. The India-based
National Council of Applied Economic Research expects
this number will exceed 500mn by 2025, while the
US-based Brookings Institution reckons India’s middle
class consumption will be ahead of the US and China
by 2030 (Chart 1).
This is important because India’s economic growth has
underpinned its gold market. Our econometric analysis of
data from 1990 to 2015 revealed that income levels are
the most significant long-term determinant of consumer
gold demand: holding all else equal, a 1% rise in income
boosts gold demand by 1%. Of course, other factors play
a role too. Rising prices, taxes and other barriers can put
consumers off, while a good monsoon can boost demand.
But income is the dominant macro-economic factor
supporting India’s gold market.

Chart 1: By 2030 India will dominate global middle class consumption

Share (%)
25
By 2030 India will have the largest middle class in
the world – this rising wealth will boost gold demand
20

15

10

0
2009 2020 2030
United States Japan Germany China India
Note: Y-axis represents percentage share of global middle class consumption.
Source: The Brookings Institution

India’s gold market: evolution and innovation 04

Consumer demand is evolving
Econometric analysis, while helpful, can only tell you so
much. India’s relationship with gold is much richer, deeper
and more complex than mere macroeconomic variables.
For large swathes of the population, gold is intertwined
with their way of life. It is deeply rooted in Indian culture:
gold purchases are driven by tradition, festivals and
other important family and societal occasions. Our 2016
consumer research conducted by TNS identified the top
three gold purchase occasions in India to be weddings
(24%), birthdays (15%) and religious festivals (12%).
Agriculture also plays a significant role in gold demand.
Although it only contributes 17% to Indian GDP, it is
integral to the rural economy, which accounts for over
two-thirds of the population. Finally, there is religion. Gold
is seen as a symbol of wealth and prosperity in the Hindu
religion. Given all of this, it should come as no surprise that
72% of survey respondents said that they owned fine gold
jewellery, 55% had bought gold in the past 12 months,
and 51% said they would buy gold jewellery in the next
twelve months.
In a country as large and diverse as India, there are
inevitably variations. The most notable difference to
emerge in the consumer research is that between rural
and urban India. While the whole of India has a strong
Chart 2: Gold ownership is higher in rural India and rises with income levels
%
100
90
80
74
70
60
50
49
40
30
20
10
0
Rs40-99,999
Rural ownership Urban ownership
Source: TNS; World Gold Council
India’s gold market: evolution and innovation
affinity with gold, this is amplified among the rural
population; levels of jewellery ownership for example, are
significantly higher (Chart 2).
And the type of jewellery rural consumers buy is subtly
different to that bought by their urban counterparts. Rural
Indians have a strong preference for plain gold jewellery,
while gold set with precious/semi-precious stones is
more popular in urban areas. In 2015, plain gold jewellery
accounted for 88% of purchases in rural India. In urban
India the figure was 57%, with gem-set pieces accounting
for 35% of gold jewellery bought. The investment
markets are also different: 22k jewellery is largely used
for investment in rural India, while in urban India bars and
coins are the preferred gold investment vehicle.
There are demographic differences, too. While rural
India’s affinity with gold is strong across all ages, it is
slightly weaker in urban India for younger generations.
If given Rs50,000 to spend, 33% of those aged between
18 and 33 would buy fine gold jewellery, compared with
42% of those aged 34 and over. The fact that a third of
young urban Indians are inclined to buy gold jewellery is
undoubtedly good; it represents a far stronger market than
many other countries. But for some young urban dwellers
gold is competing with designer and luxury fashion, and
the ubiquitous smartphone.
93
80
76
60
International comparison
of ownership levels
India – 72%
China – 70%
US – 59%
Rs100-399,999 Rs400,000+
Annual income
05
So what does the future hold for India’s consumer
demand? There are risks. For example, millennials in
urban India are increasingly tempted by goods other
than gold, particularly luxury fashion and smartphones.
But this risk is firmly at the margin: young Indians still buy
gold. And retailers are alert to their needs, developing
online strategies to engage with them, as illustrated
by Titan Industries’ acquisition of a majority stake in
CaratLane, which will allow the company to enhance its
e-commerce capabilities.
Given India’s growth trajectory, per capita income will
continue to rise, millions more will be lifted out of poverty
and its middle class will continue to grow. This will
underpin growth in consumer demand.
An exciting area of potential growth is in the bar and coin
market. Our consumer research indicates that there is
large, unmet investment demand. In the absence of any
barriers, Indian consumers would invest more in bars and
coins, jewellery, and other gold-backed financial products,
as illustrated by gold’s share of mind outstripping actual
gold investments in 2015 (Chart 3).1
This is not to say that all of the latent demand can be
converted into sales. There are barriers to purchase
around price perception and online retailing platforms,
Chart 3: There is strong latent demand for gold investments
Rural
Urban
Total
0 5 10
Share of investment Share of mind Latent demand
Source: TNS; World Gold Council
1 For more information on latent demand and share of mind, please see the Appendix.
India’s gold market: evolution and innovation
for example. But if the industry tackles these challenges,
innovatively thinks of how best to communicate with the
consumers and develops seamless purchase journeys,
some of this latent demand could certainly be realised.
The gold industry is changing
As India changes, so too does its gold industry. In 2000,
around 90% of India’s gold retailers were “unorganised.”
The industry was dominated by small, standalone
retailers, often family jewellers, with limited marketing
and advertising. Today, unorganised retailers still dominate
the market, but organised retailers have taken greater
market share. In 2015, national chains – including Tanishq
and Malabar Gold and Diamonds – accounted for around
7% of the market, while regional chains accounted for
around 23%. These organised retailers have introduced
sophisticated advertising and sales campaigns, effective
inventory management systems and domestic and
international brands, and have raised standards within the
industry. Momentum is with them and they will continue
to gain market share. By 2020, the organised share of the
market will have risen to 35%–40%.
26 +5%
31
23 +8%
31
25 +6%
31
15 20 25 30 35
%
06
This change is reflected in the manufacturing sector
too. At present 5%–10% of India’s gold manufacturing
sector could be deemed as being “organised” large-
scale facilities; 10 years ago these would have barely
existed. Nearly 65% of jewellery manufactured in India
is handmade and the vast majority of the sector is
still characterised by small workshops, each typically
employing two to four goldsmiths. But the direction
of travel is clearly towards the sector becoming more
organised. International buyers, for example, have strict
procurement policies that rule out many of the smaller
workshops. And the orders from overseas and domestic
organised retailers are often large; manufacturers need to
be a certain size to be able to process these orders.
The most significant change has been in India’s refining
capacity. India’s long-established refining sector has seen
a sharp rise in new capacity in recent years. The organised
refining landscape has grown sharply from a mere three
to four refineries in 2013 to 30 refineries in 2015, including
one which is LBMA-accredited – MMTC-PAMP. India’s
total refining capacity is now above 1,450 tonnes (t),
significantly more than India’s average annual gold imports
over the past five years.
The expansion of the organised refining sector has been
supported by a favourable government stance, including
a bullion/doré import duty differential. But much of the
additional capacity remains under-utilised, largely because
of the difficulty in sourcing doré and the limited availability
of recycled material. More recently, the government’s
favourable stance has weakened a little, with a new tax
regime squeezing refiners’ margins.
Chart 4: Smuggling increased in response to taxes and trade barriers
Tonnes
250
200
Smuggling rose in 2013 in response to increasing
import duties and the 80:20 rule
150
100
50
0
2012 2013
Source: Metals Focus; World Gold Council
India’s gold market: evolution and innovation
India has a long history of gold-focused
policies
Government policies extend far beyond India’s refining
sector. India has a long-standing affinity with gold, but
gold-policy measures have often been muddled. They
usually distort the market without achieving the policies’
aims. For example, the 80:20 rule, which required
importers of gold to re-export 20% of imports as gold
jewellery, was unwieldy and confusing. The market
clammed up. The local price rocketed to a premium
of more than US$100 over the global spot price and
smuggling boomed. Rather than controlling the flow
of gold into India, the policy drove gold into the black
market (Chart 4).
But some recent developments suggest the policy
approach is getting better: the Indian Gold Coin and
proposed hallmarking regulations will develop a trusted
standard of gold that can be traded more easily. This
matters because 86% of consumers say that hallmarking
is extremely or very important.
These policies also support the Government’s gold
monetisation scheme. This scheme is designed to draw
some of India’s 23,000–24,000t stock of gold into the
financial system. This may provide a boost to the jewellery
sector by making gold loans easier to access from banks.
The 1% manufacturing excise
duty encouraged an increase in
smuggling in 2016
2014 2015 2016(F)
07
1: The drivers of Indian gold demand

Two significant factors influence Indian gold demand over

the long-run: rising incomes have a positive effect and higher
gold prices have a negative effect. Income is the most powerful
factor, and income levels are expected to rise. The IMF has
forecast per capita GDP to grow by 35% for 2015–2020,2 and
the National Council of Applied Economic Research expects
India’s middle class to double, exceeding 500mn by 2025.
There are some interesting short-run dynamics too: gold
demand is spurred on by inflation, rises with a good monsoon,
and is dampened by higher import taxes and other restrictive
measures. By 2020 we expect Indian gold demand to average
850t to 950t per annum.

Understanding what drives Indian Long-run drivers of gold demand

gold demand
Gold demand is driven by a combination of factors
that interact with each other. These factors are often
described qualitatively, but taking a quantitative approach
can complement common wisdom and deliver additional
insights. As such, we undertook an econometric analysis
to understand gold’s demand behaviour.
Of course, an econometric analysis helps identify some
of the most salient drivers of demand, but not all. In a
country as diverse as India, other factors not captured
by simple econometric analysis play an important role in
shaping gold demand.
In this chapter we discuss the findings of our econometric
analysis of the long- and short-run determinants of
gold demand.3 We also delve into aspects of Indian
demographics and economic development that may
help us understand not only gold demand today, but
also its prospects for the future.
Our analysis, using annual data from 1990 to 2015,4
reveals two significant factors affecting gold consumer
demand – jewellery, and bar and coin combined – over the
long-term. All else being equal, gold demand is driven by:
• Income: gold demand rises with income levels.
For a 1% increase in income per capita gold demand
rises by 1%
• Gold price level: 5 higher prices deter gold purchases.
For a 1% increase in prices, gold demand falls by 0.5%.
This is intuitive. One would expect gold demand to rise
with income and fall with price. But it also highlights
the respective strength of these two forces. Demand
responds more to income than it does to price. This helps
explain why gold demand increased from around 700t in
2000 to around 1,000t in 2010, despite a dramatic increase
in the gold price over the period. The impact of the 137%
increase in the rupee gold price was outweighed by the
78% increase in per capita income.6

2 IMF World Economic Outlook. April 2016. Forecast in constant prices.

3 For more detail, please see Appendix.
4 Prior to the 1990s, government regulation made gold imports illegal. This changed in 1992, resulting in a structural change in the gold market dynamics.
We concentrate on the period starting in the 1990s for three reasons: 1) to have consistent models across the various demand categories; 2) to avoid
difficulties modelling the structural shift; and 3) because econometric models using series for which the pre-1990s data is available and seemingly reliable
(e.g jewellery) delivered results consistent with those using only post-1990 data.
5 Gold price level refers to the absolute gold price, rather than changes in that price.
6 IMF WEO.

India’s gold market: evolution and innovation 08

Factors affecting Indian gold demand

Long-term factors

1.5
Rising incomes have a positive effect on Indian gold demand and
higher gold prices have a negative effect
Gold demand and household income Gold demand and gold price
billion
Forecast for Indian population
by 2030 +1 %

-0.5%

The Indian middle class

is expected to rise to
For a 1% increase in income, 1% increase in prices,
For a
gold demand rises by 1% gold demand falls by 0.5%
547 million by 2025

The rise of the young, Indian, middle-class worker

is expected to lead to increased gold demand

Indian culture supports gold As the population becomes more Higher household incomes
demand across religions urbanised, earning power increases boost gold demand

Short-term factors

Inflation Gold price Excess

changes rainfall
For a 1% increase in inflation, demand For a 1% increase in the gold price, A 1% increase in monsoon rainfall
increases by 2.6% demand will decrease by 0.9% above the long-run average, boosts

2
gold demand by 0.5%
1

GOLD DEMAND CHANGE (%)

-1

Investors around the world turn to In the first half of 2013 Rupee gold A good monsoon can increase crop
gold to protect against inflation. ‘13 price fell 20%, while consumer yields, sweep money into the rural
India is no different. demand leapt 37% year-on-year. economy and boost gold demand.

India’s gold market: evolution and innovation 09

Short-run drivers of gold demand
There are some very interesting factors that affect
gold demand in the short term, too. Holding everything
else constant these are:
• Inflation: For a 1% increase in inflation, gold demand
increases by 2.6%. Investors around the world turn to
gold to protect against inflation. India is no different
• Gold price changes: For a 1% fall in the gold price,
demand will increase by 0.9%. As well as having an
effect over the long run, the gold price also affects
short term dynamics. When the gold price falls sharply,
consumers respond quickly. This is best illustrated by
the events of 2013. Between 31 December 2012 and
28 June 2013 the rupee gold price fell 20%. Over the
same period consumer demand leapt 37% year-on-year.
Two other factors affect gold demand, although
statistically they are not as significant as the factors
described so far:
• Excess rainfall: A 1% increase in excess rainfall, as
measured by the amount of rainfall compared to the
long-run average rainfall, boosts gold demand by 0.5%.
The monsoon is important for India’s agricultural sector.
A good monsoon can increase crop yields, sweep
money into the rural economy and boost gold demand
• Tax regime: Holding everything else constant, the
higher rate of import duties since 2012 have depressed
demand by 1.9%.
This analysis is heavily skewed by the factors affecting
jewellery demand; it accounted for around 80% of Indian
gold demand between 1995 and 2014, after all. The factors
affecting bars and coins are similar, but subtly different.
We touch upon them in more detail in Chapter 5.
7 Hindustan Times, July 2013.
8 Census 2011.
India’s gold market: evolution and innovation
This econometric analysis uncovers just some of the
fundamental factors that drive Indian gold demand over
the long- and short-term. But these should not be viewed
as prescriptive; the relationships should be used as a
framework for people to understand the broad trends.
Greater insight is required to form a more rounded picture.
For example, too much rain during a monsoon can be bad
for crops; heavy rains in 2013 damaged crops and reduced
yields, rather than boosting incomes.
The rest of this chapter provides more detail on the
drivers of gold demand uncovered by the econometric
analysis, as well as some of the other macroeconomic
and demographic factors which may affect India’s gold
demand in the coming years.
India’s population
is expected
to reach
1.5bn by 2030.
India’s demographics
India is a diverse country, home to more than 700 7
languages and dialects, and a plethora of faiths and beliefs.
While 80%8 of the population follow Hinduism, India is
the birth place of Buddhism, Jainism and Sikhism too.
This diversity is not captured in the econometric analysis,
although market research indicates that levels of gold
ownership and consumption patterns do not tend to differ
by religion. This suggests that the cultural aspect of gold,
which underpins Indian demand, cuts across religious
differences. For large swathes of India’s population, gold is
intertwined with their way of life.
10
 It has a large population which continues to grow
India’s population has grown rapidly. In 1900, its
population was 238mn. By 2011 this had increased
more than four-fold to over 1.2bn.9 It is the second most
populous country in the world and the largest democracy.
To illustrate its size, Uttar Pradesh is the most populous
state with more than 199mn residents (Chart 5); this is
more than Russia. If we add Uttar Pradesh to the second
most populous state, Maharashtra, it totals 312mn, similar
in size to the US.
India’s economy is expected to benefit from a
demographic dividend
India’s population is relatively young. More than 45% are
below the age of 25 (Chart 6). In China and the United
States the figure is closer to one third.10 According to the
United Nations, the number of people within the working
age population (15–64) will increase as the people within
the 0 –14 age range transition to the working population.
The UN estimates that by 2050 India’s working population
will total 1.1bn.

The rate of population growth, however, is slowing.

Between 1991 and 2001 the population grew by 21.5%;
this dropped to 17.6% between 2001 and 2011. But it is
growing nonetheless and the United Nations Population
Fund expects India’s population to reach 1.5bn by 2030.

Chart 5: Top ten states by population Chart 6: India's population distribution reveals an
abundance of youth
Millions Millions
250 300
These two states
are equal to the US More than 45%
250 of people are under
200
the age of 25; this
demographic dividend
200 will boost India's
150 economy

150

100
100

50
50

0 0
0-14 15-24 25-54 55-64 65+
h

ra

at
ga
ha

ak
es

es

es

ad

ha
ht

ar

Age group
en
Bi

at
d

ad

ad

st

uj
as
ra

rn
tB

ja

G
il
Pr

Pr
ar
rP

Ra

Ka
ah

es

ra

Ta

Male Female
tta

hy
M

dh
U

ad
An

Source: Ministry of Home Affairs Census 2011; World Gold Council Source: CIA World Factbook 2015; World Gold Council

9 Census 2011.
10 CIA World Factbook, 2015.

India’s gold market: evolution and innovation 11

It is likely that India’s youthful population will spur on its
economy. There is a wealth of research suggesting that
economic growth increases as the number of productive
people in the workforce increases – economists refer
to this as the demographic dividend.11 This is not just an
academic theory. Many economists put the East Asian
growth miracle down to the large swell in working-age
population between the 1970s and the 1990s.12
India is becoming increasingly urban
India’s population is skewed towards rural areas, with
67%13 of Indians residing there. The Central Statistics
Office agricultural census estimates that the number of
people employed directly in farming totals 263mn.
The World Bank, however, estimates that some
600mn people rely on farming crops or rearing livestock
for their income.14
But this is changing. Although the majority of Indians still
live in rural areas, an increasing number choose to live in
cities (Chart 7). With economic growth centred in larger
conurbations, many people – mostly young – have migrated
to cities in order to earn better incomes. Urbanisation has
also led to an increase in the number of large cities. Cities
with a population greater than one million people increased
from 35 to 53 between 2001 and 2011.

Chart 7: Urbanisation has accelerated over the last few decades

Millions
1,400

1,200

Cities with a population greater than 1 million

1,000
increased from 35 to 53 between 2001 and 2011

800

600

400

200

0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Rural population Urban population
Source: World Bank; World Gold Council

11 The Handbook for the Indian Economy, Chetan Ghate, Oxford University, 2012.
12 East Asia was one of the world’s fast growing regions during the 1980s and 1990s, in terms of GDP and GDP per capita.
This is often referred to as the East Asian miracle.
13 World Bank.
14 www.worldbank.org

India’s gold market: evolution and innovation 12

This matters because cities generate wealth. No country
in the industrial age achieved significant growth without
urbanisation. Workers in urban areas are more productive
and earn more than rural workers. Cities offer large,
diversified labour pools and, by having a concentration
of educated workers, are more likely to generate new
ideas and technologies.15 Urbanisation in India is likely to
continue to support economic growth.
Against this backdrop, in 1991 the government started
to introduce policy measures that led to the liberalisation
of the Indian economy. Red tape was cut away, import
tariffs reduced and markets deregulated. This laid the
foundations for future economic growth, with GDP growth
averaging 7.3% from 2001 to 2010, up from an average of
5.6% in the 1990s.

Yet there is a subtle nuance to India’s urbanisation. It is

not just a migration from the countryside to the cities.
India’s middle class
Rural India has changed too. There has been a growth in
semi-urban towns, as well as a rapid development in rural

15–20%
India itself. Population growth in smaller towns and
semi-urban centres has outstripped that in metros,
supported by better infrastructure, stronger road and rail of population
connectivity, and improved communications.

Income levels and savings

individuals earning
In 2015 India was the fastest growing country in the
world; at 7.3% its GDP growth was ever-so-slightly ahead
of China’s and comfortably ahead of Western markets.
Rs240k–720k pa
The IMF described it as “the bright spot in the global
landscape.” 16 As the econometric analysis identifies, this total middle class
economic growth underpins India’s gold demand.

Liberalisation in the 1990s laid the foundation for

economic growth
India’s economic history can be divided into two distinct
phases: pre- and post-liberalisation. The former covers
1947–1991 when the government followed policies which
were bureaucratic, laden with red tape and inward looking.
Corruption was rife. India’s annual GDP growth averaged
3%–3.5%.17
Poor economic policies were compounded by droughts
and famines. The government had to borrow to finance
its deficit to the extent that its debt to GDP ratio hit 75%18
in 1990. The following year India suffered a balance of
payment crisis.
200–250mn
Household incomes have increased
The reforms of the 1990s led to better job prospects and
higher incomes for millions of Indian households. GDP
per capita rose and millions of people were lifted out of
poverty. According to the World Bank, the percentage of
the population living on less than US$2 per day fell from
around 46% in the early 1990s to around 21% in 2011.19
The combination of a large population and rising incomes
means India has one of the world’s largest middle
classes. Up to date information on the size of India’s
middle class is hard to find. In 2010, the National Council
of Applied Economic Research (NCAER) estimated that
India’s middle class would reach 267mn by 2015–16. The
market research group TNS defines India’s middle class
as individuals earning Rs240,000–Rs720,000 a year. It
estimates that this captures 15%–20% of the population,
putting India’s middle class between 188mn and 250mn in
2015. Based on these estimates, it is probably safe to say
India’s middle class is between 200mn and 250mn.

15 David Bloom et al, Urbanisation and the wealth of nations, 2008.

16 http://www.imf.org/external/pubs/ft/survey/so/2015/car031115a.htm
17 Ministry of Finance.
18 IMF World Economic Outlook.
19 World Bank.

India’s gold market: evolution and innovation 13

Given India’s demographics and economic trajectory, this
large middle class is set to grow. NCAER forecasts that
it could reach 547mn by 2025. The Brookings Institution
thinks that by 2030, India’s middle class could be the
world’s largest, ahead of both the US and China.20
Savings rates are high
As income levels have increased, so too has the amount
saved. From 1980 through to 2014 the savings rate
increased from 18% to 32%, peaking at 37% in 2007.
The IMF expects it to stay around 30% up until 2020.21
Thereafter it will likely be bolstered by the swelling ranks
of the working-age population.
Import restrictions and taxes
In 2013 the Congress government began to ratchet up
gold import restrictions, starting with import duties before
moving on to a complex set of rules governing gold
imports and exports. (For more information on India’s
gold related policies, please see Chapter 10.) Why did
these restrictions come about? To understand we need to
consider India’s trade balance and current account deficit.
India’s current account deficit increased from the
1990s onwards
Prior to economic liberalisation in 1991, the country
suffered from inward-looking policies. India had very
little trade with the world during the early 1990s, instead
focusing on protecting its domestic industry. In sharp
contrast, post-liberalisation has seen the share of exports
double in overall GDP terms, whilst imports increased
even further. The trade balance in the early 1990s
was less than Rs100bn, but it has since increased to
Rs8,423bn in 2014–15, peaking at over Rs10,000bn in
2012–13 (Chart 8).

Chart 8: India’s trade deficit increased following trade liberalistion in the 1990s
Rupees bn
2,000

-2,000

-4,000 Economic liberalisation in

the early 1990s boosted
-6,000 economic growth and trade

-8,000

-10,000

-12,000
1988-89 1994-95 2000-01 2006-07 2012-13
Total trade balance Oil Non-oil
Source: Director General of Commercial Insights and Statistics; World Gold Council

20 Bookings Institution,The Emerging Middle Class in Developing Countries, 2011.

21 IMF World Economic Outlook, April 2016.

India’s gold market: evolution and innovation 14

One of the biggest components of India’s imports is crude
oil. Given the need to import more than 90%22 of its crude
oil consumption, oil contributes nearly one third of
India’s import bill. The second largest part of the import bill
is gold. Imports of gold increased to Rs2,107bn in 2014–15
from a low of Rs24bn in 1996–97.23 Between these two
dates gold accounted for, on average, 8% of total
imports (Chart 9).
Despite the high dependence on imports the current
account deficit (CAD) was typically under control. This
changed during the late 2000s: the economic slowdown in
Europe, spiralling oil prices and rising gold imports caused
the CAD to balloon. It increased to Rs4,796bn in 2012–13
from less than Rs116bn in 2000–01.24 The current account
deficit rose to 4.7%25 of GDP in 2012–13 (Chart 10).
Misplaced government policies tried to reduce the
CAD by restricting gold imports
The government was forced to take action. A raft of import
restrictions were imposed, including on gold. Duties on
gold imports were steadily increased, rising from
2% to 10% between January 2012 and August 2013.
Soon after, the government implemented the unwieldy
and market-distorting 80:20 rule, whereby those importing
gold were required to export 20% as jewellery.26
These gold-specific import restrictions had a few effects.
First, as highlighted in the econometric analysis, gold
demand eased a little. This was largely because the import
duties and 80:20 rule pushed up the premia in the local
market, created uncertainty and, at the margin, deterred
some potential gold buyers.

Chart 9: Gold imports in India Chart 10: India's current account deficit
Rupees bn % Rupees bn % of GDP
3,000 20 1,000 2

Gold imports have accounted for

2,500 0 0
an average 8% of total imports
15

2,000 -1,000 -2

1,500 10 -2,000 -4

The current account deficit peaked at

1,000 -3,000 4.7% of GDP in 2012 –13 -6

500 -4,000 -8

0 0 -5,000 -10
1996-97 2002-03 2008-09 2014-15
5

3
1

5
-0

-1
-0

-0

-0

-0

-1

-1
04

12
00

02

06

08

10

14

Gold imports % of total imports (rhs)

20

20
20

20

20

20

20

20

Source: Department of Commerce; World Gold Council Current account deficit, Rupees bn
Current account deficit as % of GDP (rhs)
Source: RBI; Economic Survey 2015-16; World Gold Council

22 Ministry of Commerce, Ministry of Finance, 2015.

23 Department of Commerce, Ministry of Commerce and Industry.
24 Reserve Bank of India.
25 Ibid.
26 The 80:20 rule came into effect on 22 July 2013 and was in force until 28 November 2014.

India’s gold market: evolution and innovation 15

More importantly, the restrictions drove parts of the gold
supply-chain underground. Smuggling increased sharply.
Between Q3 2013 and Q4 2014 around 335t of gold was
smuggled into the country. So while official imports into
the country fell, unofficial imports increased. It is true that
the current account deficit narrowed (Chart 10) during this
time, but with huge inflows of gold being smuggled into
the country, the efficacy of the import restrictions must be
called into question. (Please see Chapter 7 for more detail
on gold smuggling.)
Agricultural production and monsoons
Agriculture is a key component of the national economy,
especially the rural economy. As mentioned previously,
the World Bank estimates some 600mn people rely on
farming crops or rearing livestock for their income. The
econometric insight that the monsoon has an impact
on gold demand in the short-run comes as no surprise.
But these factors are probably not as significant to gold
demand as they once were.

The importance of agriculture has waned a little

As India has urbanised, agriculture’s share of GDP has
Between Q3 2013 and Q4 2014 steadily declined from 45% in the 1970s to 17% in 2015.

c335t In recent years, services, especially IT, have come to the

fore (Chart 12).
of gold was smuggled
into India. 600mn people rely
on farming for
Inflation their income and
Inflation has been a problem for India, regularly spiking there is a deep
to 10% and above since 1980 (Chart 11). Industrial
expansion and high food prices have led to inflationary
rooted tradition of
pressures, which have caused economic uncertainty. investing in gold
Given its attributes as an inflation hedge, Indians have
turned to gold in order to protect their wealth, and that
for this sector.
of future generations.

Chart 11: Indian CPI% change per annum Chart 12: Agricultural sector declining contribution
to GDP (value added, % of GDP)
YoY% change % of GDP
16 50

Industrial expansion and volatile 45

14
food price underpin high inflation
40
12
35
10
30

8 25

20
6
15 In 2015 agriculture accounted for
4 just 17% of GDP, but supports some
10 600mn livelihoods
2
5

0 0
1980 1985 1990 1995 2000 2005 2010 2015 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Source: IMF; World Gold Council Source: World Bank; World Gold Council

India’s gold market: evolution and innovation 16

Nor is rural India completely reliant on agriculture. In recent
years, rural areas have developed better infrastructure
and transport links, which have allowed manufacturing
to become a more important part of the rural economy.27
According to a 2012 Credit Suisse report, between 1999
and 2009, 70% of all new manufacturing jobs and 55% of
India’s manufacturing GDP came from rural India.28
There are support mechanisms in place to protect
farmers from weak monsoons
But agriculture is still important and the monsoon plays a
key role in the economy. Even though India is no longer
an agrarian economy, the lack of proper irrigation in many
areas means large parts of agriculture are still dependent
on monsoon rains. In the absence of modern farming
techniques a deficient monsoon can have adverse
effects on the Indian rural economy and, consequently,
its gold demand.
Politicians are aware of the impact a deficient monsoon
can have on large numbers of farmers and there are
mechanisms in place to protect rural incomes in such an
event. The government-owned Food Corporation of India
aims to protect farmers from sharp drops in food prices,
via the Minimum Support Price (MSP). This long-standing
scheme provides a price-floor for a number of key crops.
In early 2016, Narendra Modi’s government introduced a
re-vamped crop insurance scheme, which aims to reduce
premium charges and increase payouts to farmers in the
event of natural disasters such as drought.
27 Indian Council for Research on International Economic relations, Is manufacturing moving away from India’s cities, 2012.
28 Credit Suisse, India Market Strategy, The great Indian equalisation, 19 April 2012.
India’s gold market: evolution and innovation
Outlook
The outlook for gold demand is good. Our analysis
indicates that per capita income is one of the most
significant factors underpinning gold demand and will
increase over the coming years: the IMF expects growth
of 35% from 2015 to 2020. More generally, India’s
middle class will grow. The NCAER expects it to reach
547mn by 2025.
India’s economic growth will be supported by strong,
structural factors. The first is demographic. India’s
economy will receive a boost as its youthful population
enters the work force. The slow, but steady trend of
urbanisation will continue to support economic growth by
offering higher incomes than rural areas and fostering
an environment in which workers can create new ideas
and technologies.
There will inevitably be short-term fluctuations.
Consumers will respond quickly to changes in the gold
price and the vagaries of the monsoon will continue to
play a role: a good drenching will boost demand, while a
disappointing drizzle might cause the rural economy
to sputter.
And of course there are risks. Any tightening in
gold-related policies, such as the measures that have
recently been implemented to regulate and formalise
the gold industry, are disruptive and will stifle demand
in the short to medium term (please see Chapter 10 for
a discussion of gold policy).
But given that income is the most significant factor
affecting Indian gold demand, and the outlook for income
growth is good, we expect India’s gold demand to remain
robust at between 850–950t by 2020.
17
2: Jewellery demand

India is one of the world’s largest gold jewellery consumers,

outstripping the combined jewellery demand of the Middle
East, Europe and the US. Demand typically peaks in October
and November, when the marriage season, harvest and
Diwali overlap. India’s diversity is reflected in its jewellery
consumption, with rural India accounting for around 60% of
jewellery demand. The outlook for jewellery demand is good.
Consumer research indicates latent demand and a healthy
interest from the younger generation of Indian consumers.

Jewellery demand Beyond its sheer size, India’s jewellery market is

India is the second largest jewellery market in
the world
In 2015, India bought 663t of gold jewellery, second to
China, but comfortably ahead of the US, Europe and
the Middle East combined. Over recent years, it has
consistently been one of the world’s largest gold jewellery
consuming countries (Chart 13).
incredibly diverse: heavy, chunky 22k chains are
common in Kerala while lighter, bejewelled pieces are
popular in Rajasthan. As well as the diversity in taste,
appetite for purchasing gold jewellery also varies, with
southern regions accounting for around 40% of all of
India’s demand.

Chart 13: India is one of the largest jewellery consuming nations in the world
Tonnes
1,000

900 In recent consumer research 79% agreed

with the statement that gold will never
800 lose its value over the long term

700

600

500

400

300

200

100

0
2010 2011 2012 2013 2014 2015
India Middle East, US and Europe China
Source: Metals Focus; GFMS, Thomson Reuters; World Gold Council

India’s gold market: evolution and innovation 18

For all this diversity, one thing is clear: 22k gold jewellery
is prominent in the nation’s jewellery box. In our 2016
consumer insight study 72% of respondents said they
owned fine gold jewellery. Silver came a close second at
70%, with diamond and platinum jewellery a lowly 24%
and 14% respectively. Among people who had bought
gold jewellery in the past 12 months there was a strong
preference for plain gold jewellery, which made up 74% of
all gold jewellery bought.
This, however, is a snapshot in time, and does not capture
the changing dynamics of India’s jewellery market. With
rising disposable incomes over recent years, consumers
have become more adventurous. Although platinum and
diamond jewellery have low penetration rates, pieces set
with diamonds or other precious stone are more popular
than they were in the past, especially in urban India. The
increasing popularity of high-end gold jewellery – such
as designer or gem-set jewellery – is also testament to
changing tastes.
Seasonality: the importance of marriages, religious
festivals, and agriculture
Gold is deeply rooted in Indian culture. Gold purchases
are driven by tradition, festivals and other important family
and societal occasions. In a 2014 ICE360º survey, the
two most important motives for buying gold were gifting
(46%) and a child’s future wedding (27%). It is likely that
many of those identifying gifting as a motive would gift
gold at weddings other than that of their children. This
assumption is supported by the TNS consumer research
in 2016, which identified weddings (24%), birthdays
(15%) and religious festivals (12%) as being the top
three purchase occasions in India. It should come as no
surprise, therefore, that between 40% and 50%29 of gold
purchases in India – either jewellery or bars and coins – are
for marriages, and that gold jewellery demand tends to
peak in the run up to marriage seasons (Table 1).

But why does India have such a large and vibrant jewellery
market? There are several reasons. Most important are
the long-standing cultural traditions, which intertwine
gold with the Indian way of life. This includes weddings,
religious events – such as Diwali – and agriculture and
harvest seasons.

Crucially, over and above other metals, gold jewellery

is viewed as an investment as well as an adornment.
Of those surveyed in our proprietary 2016 TNS consumer
survey, 79% agreed with the statement that gold will
never lose its value over the long term and 76% agreed
with the statement gold makes me feel secure for the
long term. When we looked at India’s investment market,
38% of respondents invested in gold via 22k jewellery,
illustrating the dual role of 22k jewellery in India.

Contemporary bridal choker in 24k gold made with a combination

of traditional nakashi (repoussage) work, filigree and bezel set
kundan work.

29 Metals Focus.

India’s gold market: evolution and innovation 19

Agriculture and the monsoon also play an important role
in gold demand.30 Although agriculture only contributes
17% to India’s economy, it is highly significant for the
rural economy, which accounts for over two thirds of
the population.31 For a large percentage of crops, the
harvesting season lasts from September to November.
Once rural Indian communities have harvested and sold
their crops, a portion of the proceeds are invested in gold,
typically jewellery: in rural India 46% of respondents to the
TNS survey said they had invested in 22k gold jewellery
and just 11% had invested in bars and coins. The picture is
different in urban India, with bar and coins being the more
popular method of gold investment (please see Chapter 5
for more detail).
cloths with gold coins flowing from her hands. Many
Hindus consider gold an auspicious metal, which they
like to buy or give to loved ones during religious festivals.
The most important of these is Diwali, which marks the
beginning of the Hindu New Year, and usually takes place
in October or November.
Akshaya Trithiya is another important event. This is one of
the most auspicious days in the Hindu calendar – usually
late April/early May in the Gregorian calendar – and
gold purchases on this day are considered propitious.
Many retailers use Akshaya Trithiya to promote gold via
increased advertising and promotional discounts on
labour charges.

Finally, there is religion. Gold is seen as a symbol of wealth
and prosperity in the Hindu religion. Lakshmi, the goddess
symbolising fertility, productiveness and prosperity, is said
to have been bathed by elephants that carried pure water
in golden vessels. Visually she is golden: she has a golden
complexion and she is dressed in gold-embroidered red
As shown in the heatmap below, the combination of the
wedding season, harvests 32 and festivals 33 means that
gold jewellery buying tends to be concentrated in
April–June and September– January (Table 1).

Table 1: Jewellery demand peaks between September and November

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Gold buying:

Festivals

Marriages

Harvests Rabi crops Kharif crops

Indian jewellery segmentation

30 For more information on the role of agriculture and the monsoon, please see Chapter 1.
31 World Bank.
32 Ugadi/Gudi Padwa (late April/early May) marks end of Rabi crop harvesting and start of sowing of kharif crops.
Onam (late August/early September) is Kharif crop harvest festival celebrated in Kerala.
33 Makara Sankranthi (January), Akshaya Tritiya, Dassera (October) and Diwali/Dhanteras are gold buying festivals in India.

India’s gold market: evolution and innovation 20

Types of jewellery
Jewellery consumption falls into three distinct types:
bridal, daily wear and fashion. Each market boasts its own
characteristics, as well as different products, sizes and
designs. When measured by number of sales, bangles and
chains are the most popular items, but when measured in
gold content, necklaces are most important (Table 2).
The importance of bridal gold jewellery
If we analyse the gold jewellery market by purpose,
the importance of weddings and bridal wear is clear
(Table 3). Around 40%–50% of gold jewellery and bars
and coins bought in India is for weddings. Although
there are no official figures for the number of weddings,
it is likely to be between 8mn and 10mn per annum.34
Whatever the exact number, we should expect it to
increase. India has an extremely young population, many
of whom have yet to be married. According to the CIA
Factbook, 28% of the population is under the age of 14,
while 18% are between 14 and 24. That translates to more
than 500mn people under the age of 25. With the average
marrying age for females at 22, the number of weddings
per annum should grow.35
Buying gold jewellery for an Indian bride is based on the
concept of streedhan – loosely translated as property
that a woman obtains at the time of marriage, given
to the bride as security, which is hers to keep. An
additional, albeit much smaller, element of wedding-
related gold jewellery demand comes from jewellery
gifted to the immediate family of the bride and groom, as
well as jewellery that wedding guests may buy to wear
themselves to the wedding.
Given bridal jewellery’s dominant market share, gold
jewellery demand tends to be concentrated in the months
and weeks approaching the marriage season and during
the season itself. However, the behaviour of wedding
purchasers has changed over recent years. With gold
prices having risen over much of the past 15 years, it
has become increasingly common for families to make
regular purchases of gold bars and coins, which are then
converted into bridal jewellery as the wedding nears. This
‘exchange’ activity is not captured as jewellery demand
because it does not represent new gold demand, rather a
transformation of gold from one form to another.

Table 2: Retail sales by jewellery type

Category % of retail sales Range of weights (gm) Most common weight sold (gm)
Necklaces 15%-20% 25gms-250gms 30gms-60gms
Bangles 30%-40% 8gms-25gms 10gms-15gms
Chains 36 30%-40% 10gms-50gms 10gms-20gms
Earrings 5%-15% 2gms-30gms 3gms-8gms
Finger rings 5%-15% 2gms-15gms 3gms-7gms

Source: Metals Focus; World Gold Council

Table 3: Segmentation of jewellery

Bridal Daily wear Fashion jewellery
Market share by weight 50%-55% 35%-40% 5%-10%
Caratage 22k, 23k, 18k 22k, 18k 18k, 14k
Size 30gms-250gms 5gms-30gms 5gms-20gms
Small sets: 30gms-60gms Chains: 10gms-20gms Chains: 8gms-15gms
Large sets: > 60gms Necklace: 20gms-30gms Pendants: 1gm-3gms
Earrings: > 15gms Earrings: 5gms-8gms Earrings: 3gms-5gms
Bangles: > 30gms Bangles: 10gms-25gms
Waist bands: > 40gms Pendants: 5gms-10gms
Bindi chains: > 40gms

Source: Metals Focus; World Gold Council

34 In our report An introduction to the Indian gold market published in 2001 we estimated there to be eight million weddings per
annum. More recently, some commentators have estimated it to be around 10 million per annum.
35 Ministry of Health and Family Welfare.
36 Chains, usually considered daily wear and worn by men and women, are lightweight. In contrast, necklaces are heavier pieces,
which can be studded or intricately carved, worn by women during marriages and festivals.

India’s gold market: evolution and innovation 21

In a country with such a rich and diverse culture, Mumbai, Chennai and Kolkata. Nevertheless, this category
wedding jewellery tastes vary considerably Table 4 is not expected to gain a meaningful foothold in the gold
provides a granular assessment of wedding jewellery jewellery market.
tastes by region.

The growth in gold plated jewellery demand
Demand for gold plated jewellery, or “gram gold,” is
very small. But it has increased over the past 10 years.
The steep rise in gold prices encouraged low income
consumers, especially those in Tier two or three cities,
to shift towards alternative daily wear. In recent years the
category has expanded to include bridal jewellery. And
there has been a steady increase in the number of shops
offering these products in more prominent cities, such as
Understanding regional, income and
demographic differences
Regional demand
Around two-thirds37 of Indian gold demand is concentrated
in rural areas – a fact that is largely a reflection of India’s
demographics. According to the World Bank, in 2015, 67%
of India’s population lived in rural areas, down from 72% in
2010 and 74% in 1990.38

Table 4: Wedding jewellery tastes by region

Gross weight
(Average upper
Small middle class
Bride Bangles Earrings Chains necklace Large sets Others consumption)
Uttar Pradesh Kundan Kangan, Anguthi, Nathn, Baju
Bride Ancia Kangan Kaan Matti Mangal Sutra Choker Choker Band, Benda 200gms
Maang Teeka, Nathni,
Sindhi Bride Kundan Kangan Vala Mangal Sutra Diamond Haar Bajo do Kado 190gms
Maharashtrian Chapla Haar, Aangathi, Haath Pan,
Bride Tode, Patli Jhumke Mangal Sutra Tushi Laxmi Haar Nath, Baju Band 250gms
Bangdi, Kundan Nath, Baju Band,
Gujarati Bride Bangdi Kundan Butti Mangal Sutra Chandan Haar Damani, Pocha 180gms
Plai Bala, Mugh Kamar Chavi, Tikloy,
Bengali Bride Bala, Chitra Bala Jhumkaa Gola Chik Sita Haar Kamar Band 210gms
Rajasthani Bangdi, Kada, Rakhdi, Haath Phool,
Bride Rajputi Bangdi Kundan Butti Thewa Rani Haar Baju Band, Anguthi 190gms
Aravanki, Nakshi
Andhra Bride Kangan, Gajalu Buttalu Sutaru Golusu Kandabaranam Nakshi Haram Vaddanam, Jada 300gms
Lakshmi Bale,
Mangalore Coorgi Bale, Mangal Sutra, Akki Sara, Bandhi, Odiyanam,
Bride Kembina Bale Jhimki Mohan Sara Malliga Sara Kemp Ungila 280gms
Muthu Valayal, Ottiyanam,
Lakhsmi Valayal, Kempu Kal Vella Kal Lakshmi Haram, Nethichutty,
Tamilian Bride Kemu Valayal Jhimkki Mangal Sutra Mookhuthi Muthu Haram Jadai Billai 300gms
Kolkata Bangle, Kazuthulia, Kasu
Machine cut Bangle, Kurumulaka Kingini Mala, Mala, Lakshmi
Kerala Bride Thoda Bangles Jhimki Mala, Patthakam Manga Mala Mala, Mulla Motu Toe Ring, Minnu 320gms

Source: Malabar Gold and Diamonds; Metals Focus; World Gold Council

37 Metals Focus.
38 www.worldbank.org

India’s gold market: evolution and innovation 22

Southern India dominates India’s gold jewellery
consumption, accounting for nearly 40%39 of the total
volume, and it is likely that per capita gold consumption is
highest in southern India too. This is supported by the TNS
consumer research, which revealed that southern India
had the highest gold-ownership rates (76% of survey
respondents said they owned gold jewellery) and the
highest rate of purchase in the past 12 months (60% had
purchased gold jewellery in the previous 12 months).
Demand in the southern states is supported by relatively
high levels of wealth. Kerala and Tamil Nadu, for example,
have lower than average poverty levels.40 They also have
higher than average per capita income 41 and both benefit
from strong non-resident Indian demand. (Please see
Focus Box). Southern India is predominantly a 22-carat
traditional, handmade market, and remains the most
homogenous marketplace in the country.
Eastern India has an estimated 15% market share.
Unlike the south, however, the eastern part of the
country remains economically under-developed. It has
higher levels of poverty, lower levels of per capita income
and lower levels of literacy. Given the traditional nature of
gold consumption in southern and eastern India, there is
limited demand for anything beyond plain 22k jewellery.
In contrast, northern and western India, with 20% and
25% of demand respectively, have quite diverse markets.
Unlike southern India, there is a larger market for 18k and
14k gold, especially north of the Vindhyas.
Rural and Urban India
As well as regional variations there are quite stark
differences in consumption behaviour between rural
and urban India. While the whole of India has a strong
affinity with gold, it is amplified in rural India. Levels of
ownership, for example, are significantly higher in rural
India (Chart 14).
While the whole of India has a strong intention to buy,
rural Indian consumers are far more likely to buy gold in
the next 12 months than their urban counterparts. And
the type of jewellery they buy is subtly different. In the
past 12 months plain gold jewellery accounted for 88%
of purchases in rural India. In urban India the figure was
57%, with gold set with precious/semi-precious stones
accounting for 35% of gold jewellery bought.
This matters because as India changes, so too will its
jewellery market. As outlined in Chapter 1, India is
becoming increasingly urban. The differences highlighted
here might give an indication of what India’s jewellery
market will look like in the coming years.

Table 5: Regional tastes in gold jewellery Chart 14: Gold ownership is higher in rural India and
rises with income levels
South East West North
Market share 40% 15% 25% 20% %
100
Caratage 22k 22k 22k, 18k, 23k, 22k, 93
14k 18k, 14k
90
Important Chennai, Kolkata Mumbai, New Delhi,
centres Hyderabad, Ahmedabad Jaipur 80
Cochin, 74 80
76
Bangalore 70

Source: Metals Focus; World Gold Council 60

60
50
49
40
Plain gold jewellery accounted for
30 88% for gold purchases in rural
India in 2015; in urban India the
20
figure was 57%
10

0
Rs40 – Rs99,999 Rs100 – Rs399,999 Rs400,000+
Annual income
Rural ownership Urban ownership

Source: TNS; World Gold Council

39 Metals Focus.
40 According to the RBI in 2012, 22.9% of the population lived in poverty in India. In Kerala it was 9.1%, in Tamil Nadu, 15.8%.
41 According to the Central Statistics Office, Tamil Nadu’s per capital income in 2013–14 was Rs112,664; Kerela’s Rs103,820.
This compared to a nationwide average of Rs74,380.

India’s gold market: evolution and innovation 23

Focus: The changing role of Non-Resident Indians in the jewellery sector
The role of Non-Resident Indians (NRIs) has changed
dramatically since the abolition of the Gold Control
Act (GCA) in 1990 and the opening up of Indian gold
bullion imports.42 Prior to its abolition, NRIs were the
main carriers of gold into the country, both officially
and otherwise. Broad estimates put the supply of gold
from NRIs during the 22 years of the GCA regime
at around 1,000t.
The NRI scheme, introduced in 1992, permitted returning
NRIs to import up to 5kg of gold bars and other approved
gold items, as long as they had been away for at least
six months. After 1997, the allowance was increased
to 10kg. Between 1992 and 1997 NRIs brought in
around 1,300t.
The dependence on NRIs fell dramatically following the
introduction of the Open General Licence (OGL) scheme
in 1997. This allowed 20 banks and four public sector
bodies to import gold. By 2001, 99% of gold imported into
India was through the OGL scheme.
Smaller pieces of 22k and 24k jewellery are popular for everyday wear.
(Copyright World Gold Council)
42 A Non-Resident Indian – NRI – is defined as an Indian national who has lived outside of India for at least six months.
43 Ramzaan is the Hindi name for Ramadan.
44 Metals Focus.
India’s gold market: evolution and innovation
Following these regulatory changes, NRIs morphed into
gold consumers. India’s global diaspora and the rise in
incomes earned in countries like the US, UK and the
Middle East, makes them an important driver of gold
demand. Many NRIs prefer to come to India to buy gold,
attracted by better designs and more competitive pricing
due to lower labour charges and taxes.
Jewellers in states with large NRI populations – Punjab,
Gujarat, Maharashtra, Telangana, Andhra Pradesh,
Karnataka, Tamil Nadu and Kerala – believe that NRIs make
up between 10% and 20% of their sales. Gold buying
by NRIs is concentrated during the periods of Diwali,
Ramzaan43 or Christmas, as many of them return home to
celebrate these festivals with their families.
Higher taxes levied on gold during 2013–2014 hit this
market, with many NRIs deciding to buy elsewhere.
For example, in the UK there was a rise in 22-carat
hallmarking reflecting NRIs choosing to buy in the UK
rather than India.44
24
Buying patterns across income levels
Gold consumption differs across income levels. As
outlined in Chapter 1, India has one of the largest
middle classes in the world. We estimate it to be around
250 million and, given India’s demographics and likely
economic trajectory, it is set to grow. Through field
research and conversations with the jewellery trade,
Metals Focus estimates that around 50% of gold jewellery
purchases are accounted for by this cohort. Consumer
research backs this up. A recent ICE360º survey found
that while three-quarters of households purchased
gold less than once a year, financially well-off, highly
educated and regular income-earning households
bought gold more frequently (Chart 15).
The extension of this trend is that those with higher
incomes remain very active gold buyers, accounting
for around 30% of gold jewellery sales. Again, this
is supported by consumer research. The 2016 TNS
research found that around half of respondents with an
annual income between Rs40,000 –Rs99,999 (52%) and
Rs100,000–Rs399,999 (47%) said they intend to purchase
gold jewellery in the next 12 months. This increased
to 57% for those with an annual income in excess of
Rs400,000. And a piece of research Kadence executed on
our behalf in 2013 and 2014 found that the highest earners
– those earning more than Rs500,000 per annum – were
most likely to buy gold in the next 12 months: 41% said
they definitely would, compared to an average of 24%
across all income levels. They are also the least likely to
sell gold jewellery. Interestingly, the jewellery tastes of the
higher earners are slightly different to those of the middle
class. Diamond and studded jewellery find favour, and
they are more likely to buy high-end and imported
branded jewellery.

Chart 15: Consumers who are most confident in their household income buy gold more
%
18

16 Households more confident in their income are more

likely to buy gold at least once a year
14

12

10

0
Most confident Confident Less confident Least confident
Percentage of households who purchase gold annually or more frequently
*Confidence about stability in major source of household income.
Source: People Research on India's Consumer Economy (PRICE); World Gold Council

India’s gold market: evolution and innovation 25

Finally, we look at lower income levels – India’s largest
contingent. Even though this segment has a limited
potential to buy gold, there is a still a strong inclination
to do so. In rural India, 58% with low annual incomes
(defined as between Rs40–Rs99,999) said they intended
to buy gold in the next 12 months. Because of their limited
resources, they are more likely to buy smaller articles,
such as bangles, chains or earrings, or gram gold.
Buying patterns across age groups
At a high-level there is remarkably little difference in
attitudes towards gold jewellery across age ranges.
Our 2012 Usage and Attitudes study indicated that gold
dominates the jewellery boxes of young and old alike, and
attitudes – such as consumers’ perception of gold and
commitment to continue to purchase it – are similar across
life stages. The 2013–14 Kadence survey supports this
assessment. Those surveyed in the 18–34 age group were
just as likely to buy gold in the following 12 months as
were older generations.
We can try to understand this by considering what
influences consumer purchase decisions. One of the
revealing insights from the Usage and Attitudes study
was that across key events – such as marriages, birthdays,
anniversaries and engagements – two of the top three
factors which influenced a consumer’s purchase were:
It is likely that these factors reinforce the cultural and
traditional aspects of gold. The third influence was more
spontaneous: rather than seek advice, people saw gold
jewellery in a shop and bought it.
But this doesn’t paint the whole picture. The younger
generation in urban India has subtly different tastes.
When offered Rs50,000 for a discretionary purchase,
42% of consumers over the age of 34 in urban India said
they would buy gold jewellery. This dropped to 33% for
millennials aged between 18–33. The fact that around
a third of younger consumers would choose to buy gold
jewellery if they were given Rs50,000 is still very positive
(Chart 16), but it suggests that the younger generation
of potential consumers have temptations other than gold
to consider.
What is the competition for gold amongst the younger
generation? As with higher-income earners, the answer
lies partly with diamonds and gem-studded jewellery.
But it also includes other luxury items, such as designer
clothes, handbags and shoes, silk sarees, and the
ubiquitous smartphone.

i) Family tradition; and

ii) Receiving advice from friends and family.

Chart 16: Percent of respondents in urban India who would buy gold jewellery if given Rs50,000
%
45
42%
40

33% 33%
35

30
A third of millenials
would buy gold
25
jewellery if given
Rs50,000. The
20
comparable figure
in the US is 6%
15

10

Young millenials (18-25) Older millenials (25-33) Older (34+)

Source: TNS; World Gold Council

India’s gold market: evolution and innovation 26

This potential threat should not, however, be overstated.
The competition for gold spend remains firmly at the
margin, although retailers are alert to the risk. As explained
in Chapter 3, many retailers are targeting younger, urban
consumers by promoting lighter weight jewellery products,
including specific ranges designed to appeal to teenagers
– for example, Malabar’s Starlet range. Others are targeting
internet users and selling lighter pieces online.45
Outlook
What does the future hold for Indian gold jewellery
demand? There are clearly some uncertainties.
Changing demographics are cited as potential risks.
Younger generations of consumers may be tempted by
other products, be that different styles of jewellery or
luxury fashion accessories. But this risk should not be
exaggerated. It is only at the margin that other, competing
products may tempt a prospective jewellery customer.
Gold ownership continues to be deeply entrenched in
Indian customs and traditions: after all, a third of people
under the age of 33 would buy 22k gold jewellery if they
were given Rs50,000.
When considering the consumer, there is room for the
market to grow, led by latent demand in urban India. Our
consumer research, in which more than 2,000 Indian
Chart 17: Latent jewellery demand in urban India offsets slight weakness in rural India
Rural
9 +3%
Urban
12
Total India
0 5 10
Share of purchase Share of mind Latent demand
Source: TNS; World Gold Council
45 For example, please see www.bluestone.com, www.jewelrybazaarinc.com, www.wearyourshine.com
46 According to IMF data, between 2015 and 2018 per capita GDP is expected to grow by 18% in rupee terms at constant prices
and by 23% in dollar terms at constant prices.
India’s gold market: evolution and innovation
jewellery consumers were asked about their attitudes
towards gold jewellery, assessed gold jewellery’s ‘share
of mind’ – that is, what luxury and fashion items would
consumers choose to buy in the absences of any barriers
– and compared it to what was actually bought in the
previous twelve months.
The research revealed that there is strong latent demand
in urban India, which jewellery firms should focus on
converting into sales. It also revealed slight weakness in
rural India, but the margin was negligible (Chart 17).
And at a macro level, there are powerful forces that should
support and boost demand. As a lower-middle income
country, India is on a steady trajectory of income growth.
Per capita GDP is expected to increase by around 35%46
by 2020, while India’s middle class is set to swell to over
500mn by 2025. Millions are being drawn out of poverty.
According to the previous government’s Finance Minister,
P Chidambaram, the Congress government’s greatest
achievement was lifting 140mn people out of poverty
between 2005 and 2014. Rising income levels will support
gold demand. The middle class is the most significant gold
consumer and India’s middle class is set to become the
world’s largest by 2030.
20
19 -1%
14 +1%
15
15 20 25
Percent
27
3: Jewellery market structure

India’s gold jewellery retail industry is highly fragmented.

There are a few regional and national chains, but small,
independent retailers take the lion’s share of the market.
Slowly, this is changing. Over the coming years, organised
retailers will increase their market share. The country’s
manufacturing industry is fragmented, too; most are small
goldsmiths employing just a few people. They are highly
skilled though. Cities often specialise in crafting jewellery out
of specific materials, be that gold, silver, diamonds or pearls.
But the sector faces challenges. Small gold manufacturers
often struggle to access gold loans, the jewellery industry
struggles to access bank finance, and the industry suffers
from poor infrastructure.

Retail market structure Chart 18: Jewellery market landscape in India 48

India’s retail jewellery industry is highly fragmented, 7%

but this is changing
Industry participants recognise that there are two parts 5%
to the market: organised and unorganised. Organised
retailers are typically characterised by having a chain
of stores with a regional or national presence47 and a 23%
strong brand, courting largely urban customers through
Outer ring: 2015
sophisticated advertising campaigns. Some, such as
Inner ring: 2000
Amrapali Jewels, also have international brands. Retailers
in the unorganised sector are usually smaller, standalone
entities, such as small goldsmiths, family jewellers or
designers focusing on high-end products. The majority 70%
95%
– around 70% – of India’s jewellery industry can be
categorised as unorganised (Chart 18). 38%

Stand alone jewellers and medium sized retailers

Regional chains
National chains
Source: Metals Focus; World Gold Council

47 National chains are jewellers who have pan-India presence and differentiate on the basis of trust and brand name.
Regional jewellers form chains that are situated in particular regions such as north or south, but focus on
branding as well as personalised service.
48 Metals Focus.

India’s gold market: evolution and innovation 28

It is difficult to accurately quantify the number of jewellers
across the country. The industry’s highly fragmented
nature and very long tail of small retailers make it quite
opaque and hard to gain full visibility. Even estimates by
trade associations can vary considerably on a state-by-
state basis.
In order to form our own estimate we undertook a
granular, bottom-up approach reviewing data on Justdial,
a pan-India search services company. Based on this
analysis, we estimate there are between 385,000 and
410,000 jewellers in India.49 This figure resonated with
the industry during the round table discussions held in
Mumbai, Kochi and Delhi.50 In contrast, there are only
125,857 bank branches.51
Table 6: Organised retailers‘ presence 52 they fulfil several roles, including in some instances acting
Name Stores Cities/towns
Tanishq (Including Zoya) 195
GOLDPLUS 32
PC Jewellers 58
Shubh Retail 80
There are signs that the shape of the market is changing.
Between 2000 and 2015 we have seen the emergence
of more organised participants, with their market share
rising from 5% to 30%. By 2020, it is likely that this share
will have risen to between 35% and 40%. This trend is
concentrated in cities, supported by growing urbanisation
and increasing awareness of branded jewellery among
younger consumers. Regional chains have taken the lead
in increasing market share, but some national retailers
have also emerged (Table 6). For an example of the rise of
organised retailers, please see Focus Box: The rise
of Tanishq.
But the unorganised sector remains the major force in
jewellery retailing across India. Local standalone family
jewellers continue to dominate rural centres, not least as
as banker. This role aside, there is also a clear demarcation
111 
between the market segment catered for by standalone
retailers and that catered for by regional and national
31
chains (Table 7).
48
N/A*

30%
Malabar Gold and Diamonds 80 69
Kalyan Jewellers 68 59 Only of Indian
Joyalukkas 58 53
jewellery retailers are
*Not available
national or regionally
Source: Metals Focus; World Gold Council
branded chains

Table 7: Size of retail shops, stocks and employees 53

Stand alone/
Independent retailers Medium sized retailers Regional chains National chains
Organised  
Unorganised  
Distinctive feature Caters to the market This can include family The focus is on local The focus is on brands
where customers make retailers. The focus is on trends and designs. and purity. Typically,
purchases based on price   the traditional market The differentiator is these chains have high
purity and trust making charges.
Shop size in sq ft 150-500 300-1,000 500-3,000 4,000-25,000 
Inventory 5-20kgs 25-50kgs 30-150kgs 150-500kgs
Display in store (% of total stock) 40-50% 60% 80% 90%
Employees per store 4-5 10-15 20-35 40-60

Source: Metals Focus; World Gold Council

49 This includes organised and unorganised retailers.

50 For more detail on the round table discussions, please see the methodology box.
51 Handbook of Statistics on the Indian Economy, RBI, 2015.
52 Company websites and investor presentations, correct as at April 2016.
53 Metals Focus.

India’s gold market: evolution and innovation 29

The growing importance of advertising
As organised jewellers continue to grow and compete
for business, they are embracing advertising to broaden
their appeal. As explained in Chapter 2, while tradition
and advice from friends and family are strong influencers
on purchase behaviour, spontaneity and self-direction
also play a role – some people buy a piece of jewellery
simply because they see it and like it. Advertising can tap
into that. Retailers view advertising campaigns as vital in
targeting young, urban consumers.
The evolution of retailers' advertising activity is interesting.
In the past, more traditional means – such as print media
– were used. Now, despite the cost, electronic as well as
outdoor media are much more prevalent. On average, it
can cost Rs9,000 per square centimetre to advertise in a
leading Indian newspaper. By comparison, advertising on
a national television channel during peak time may cost
between Rs30,000 – Rs40,000 for a 10-second spot,
and this can rise to Rs60,000 – Rs100,000 during major
sporting events. Regional entertainment channels are
cheaper, often by at least 30–50%.54 These often attract
regional chains that prefer to advertise in local languages.
The large organised retailers take marketing very seriously,
allocating significant budgets. Television advertising
spending by jewellers was consistently between
Rs3400mn and Rs3700mn (US$56mn to US$58mn)
during 2013–2015.55 To give a sense of individual company
spend, top branded jewellery chain, Titan Company
Limited, increased its advertising expenditure to Rs380mn
(US$6mn) in 2015 from Rs240mn (US$4mn) in 2013.
Similarly, Kalyan Jewellers spent Rs700mn (US$11mn) in
2015, up from Rs610mn (US$10mn) in 2013.
Online market
India has embraced online retailing. Flipkart, Snapdeal
and Amazon are battling it out to gain market share in the
broad consumer market. Some jewellery retailers have
also ventured into this market place. At present retailers
are largely focused on selling lighter pieces at lower price
points online. Consumers have a strong preference to
touch and feel larger or more intricate jewellery before
purchasing – in our 2016 consumer research, 55% of
consumers said they prefer to touch the product before
buying it, and that was why they bought in-store
rather than online.
54 All costs are 2015 averages.
55 Maxus India.
56 The remaining 20–30% of transactions are made by cheque, credit or debit card.
India’s gold market: evolution and innovation
Although online jewellery retailing is at present a very
small part of the market, it is growing. Traditional retailers
are showing increasing interest in entering this space. In
May 2016, Titan Industries acquired a majority stake in
CaratLane, a move that will allow the company to enhance
its e-commerce capabilities significantly and help target
younger customers. Those close to the market believe that
in 10 years online sales could account for between 7% and
10% of total sales by value. Whether or not this happens
is dependent on the consumer – their preferences will
shape how the online jewellery market grows.
While the growth of online jewellery sales may take
several years, online, digital and social activity already
plays an important part of the purchase journey. In urban
India 40% of consumers said that they browsed online
before purchasing their jewellery. And around a quarter
of urban consumers said that they used online blogs and
social media for ideas and inspiration. For millennials –
those aged between 18–33 years old – the figure is closer
to a third.
Gold jewellery transactions: cash buying vs exchange
Cash is the most common method of purchasing gold
jewellery. It accounts for 70%–80% of all transactions.56
But consumers often exchange bars and coins for
jewellery. Why?
There are two drivers which can influence whether
bars and coins, or older jewellery, is exchanged for new
jewellery or bought for cash: the time of year and gold
price trends.
Although gold is bought throughout the year, as discussed
in Chapter 2, there are certain months when purchases
accelerate, such as festive or marriage seasons. This
affects how people buy gold jewellery. For example,
during Diwali, the ratio of cash buying is much higher.
This is because harvests have been reaped and cash has
flowed into households’ coffers, especially in rural areas.
This is in contrast to the marriage season when exchange
rises as consumers exchange bars and coins, which they
have accumulated over many years, for bridal jewellery.
The Indian consumer is very savvy when it comes to
the gold price. During periods of high and rising prices,
a consumer is more likely to exchange gold for new
jewellery, saving cash to buy gold when prices are at
levels they are more comfortable with.
30
Focus: The rise of Tanishq
The early years
India’s jewellery industry started to change in 1995
when Titan Industries,57 one of India’s leading watch
manufacturers, launched its own jewellery brand,
Tanishq. Its aim was to target a different type of jewellery
consumer. Rather than focus on traditional 22-carat
designs it developed a stylish portfolio of contemporary
18-carat jewellery and watches. Up until this point, the
Indian jewellery market had been largely unorganised and
fragmented, with few recognised brand names.
Tanishq found trading challenging at the start. Domestic
consumers did not readily accept a modern concept in
what was such a traditional jewellery market. By contrast,
exports performed well. Sales to key jewellery markets
such as the UK, US, Australia and the Middle
East flourished.
Re-working its strategy for the home market
Tanishq revised its strategy. With an initial emphasis on
exports, its designs were predominantly Western oriented,
but similar product lines were also offered at home. For
many consumers, the designs were too contemporary.
Given India’s diversity, Tanishq realised that it should cater
to the tastes across the country. Its emphasis shifted from
modern to more traditional design, including 22k and 24k
ornaments inspired by designs from various states.
It incorporated traditional styles into its more contemporary
designs. The company also began seasonal and localised
promotions based on Indian festivals, and embarked on an
overhaul of its retail stores.
The second step involved enhancing its brand and
reputation by building trust. To do this it focused on purity.
In 1999, Tanishq introduced the concept of Karatmeters
in its retail boutiques. The Karatmeter used X-rays to
provide an accurate reading, within three minutes, of the
constitution of gold in an ornament. As part of its strategy,
Tanishq also conducted tests on 10,000 ornaments
selected at random. In many cases, the pieces were found
57 Titan Industries is a subsidiary of Tata Group.
India’s gold market: evolution and innovation
to be under carat. Over time, this focus on purity proved
to be a key selling point for Tanishq. And to bolster trust
further it decided to use a standard gold price across all
its showrooms from March 2000.
This emphasis on trust led to a sharp jump in sales and
helped the firm expand. By 2001, Tanishq had nearly
50 stores located in metros and Tier 1 cities.
Tanishq further built its market by highlighting its
connection with Tata, a trusted brand in the Indian
corporate world with businesses ranging from steel to
airlines. Its marketing budget expanded to encompass
national-level spending (both electronic and print media),
regional budgets, direct mail and research.
Second push for penetration
Having built its brand and established itself as a leading
jeweller, Tanishq started to branch out. In 2005 it explored
the corporate gifts and vouchers market and began to
provide financing for the purchase of gold jewellery.
In 2007, the company started focusing on higher-end
jewellery with the introduction of Zoya, a chain of
luxury jewellery boutiques encompassing designer and
international designs.
It also expanded its geographic coverage. After
establishing Tanishq among the large and growing middle
class in urban centres, Titan Industries decided to venture
into rural India. To do so, it launched Gold Plus, a brand
aimed at semi-urban and rural locations.
Tanishq and Gold Plus delivered approximately Rs87bn
(US$1.29bn) of combined net sales in 2015. Tanishq has
over 190 stores and Gold Plus has over 30 stores, with
a combined retail space of more than 800,000 sq ft.
Tanishq is now one of the largest retail jewellery chains in
India, with an excellent reputation for its combination of
traditional and contemporary designs.
31
Manufacturing market structure
Jewellery manufacturing also highly fragmented,
but this is changing
Even though India is one of the foremost jewellery
fabricators in the world, its manufacturing facilities are
largely unorganised. Barely 5%–10%58 of units operate
as organised, large-scale facilities – ten years ago these
would have hardly existed. The vast majority of the industry
is characterised by small workshops, each typically
employing two to four goldsmiths. This is reflected
in the fact that between 60% and 65% of jewellery
manufactured in India is handmade. This figure was much
higher a decade ago – the rise of manufactured jewellery
has led to the drop in share of handmade jewellery.
One of the key reasons that jewellery manufacturing
remains largely unorganised is the relatively low capital
requirements of small workshops. Rarely do they own the
gold on which they work. Instead, they carry out what the
industry calls job work for others.
Regions specialise in producing different types
of jewellery
Jewellery manufacturing in India is highly concentrated.
Around 60%59 of the gems and jewellery industry is
centred around Mumbai, Kolkata and New Delhi. The
majority of jewellery manufactured in these locations is
sold outside these cities, either nationally or internationally.
As jewellery tastes and preferences differ across the
country, so do manufacturing skills and expertise
(Map page 33). Regions specialise in producing specific
types of jewellery. Jaipur in Rajasthan has a world-class
reputation for producing jewellery with semi precious
stones and gems; Hyderabad has a tradition in pearls
going back centuries, so much so that it is known as the
City of Pearls; similarly, Surat in Gujarat is known
as Diamond City.

60%–65%
of jewellery manufactured
in India is handmade

This is both a strength and a weakness. The artisan,

bespoke nature of the handmade jewellery allows the
karigars to produce beautiful, intricate pieces which are
not possible with machine-made jewellery.

But it also means the sector suffers from a lack of

transparency. This makes it difficult for banks to lend and
goes some way to explaining the lack of readily available
capital, which would be required for a manufacturer
to develop its workshop or factory and recruit more
employees. The majority of manufacturing facilities in India are small workshops
of two to four employees.
Growth in organised manufacturing over recent years has
owed much to the growth in exports and the requirements
of the organised retail sector. International buyers, for
example, have strict procurement policies which rule out
many of the smaller workshops. Orders from overseas
and domestic organised retailers are often large and
manufacturers need to be of a certain size in order to
fulfil them. Therefore, growth in the organised retail
sector and in India’s jewellery exports – as outlined in
Chapter 4 – has supported the development of the
organised manufacturing sector.

58 Metals Focus.
59 Metals Focus, World Gold Council: an introduction to the Indian gold market.

India’s gold market: evolution and innovation 32

 Major Jewellery manufacturing centres and hallmarking centres in India60
The map shows the number of BIS-approved hallmarking centres in each Indian state.
Major jewellery manufacturing centres and hallmarking centres in India

king centres in India

Jammu and Kashmir

North 1
20%

Himachal
Pradesh
3
1
Chandigarh

Jaipur Punjab Uttarakhand

Delhi/Agra East
Kundan stones and 7
Silver jewellery 15%
Delhi/Agra East
semi precious
Haryana
1

Silver jewellery 15% 5

Delhi
23 Sikkim Arunachal
Pradesh
58 58 58 58 58 58
Sikkim Arunachal
Pradesh Uttar Pradesh 58 58 58 58 58 58
Rajasthan 13 Assam
58 58 58 58
Nagaland
9 58 58
sh
West Bihar 1
58 58
Assam Nagaland 3
58 58 58Meghalaya
58
25%
Bihar 1
Meghalaya Manipur
3
Jharkhand 22 Tripura
Gujarat
Madhya
Manipur Pradesh 1 West
28 Bengal Mizoram
Jharkhand 22 Tripura 4
1 West
Bengal Mizoram Chhattisgarh
3
Maharashtra Odisha
hattisgarh
36 6 Kolkata
3 Daman and Diu Dadra and
Odisha Handmade jewellery
Nagar Haveli
6 Gujarat Kolkata
• Rajkot – coloured
Handmade jewellery
stones and gold Telangana
jewellery 2
• Surat – diamond
polishing hub

Mumbai
• Machine made
jewellery Goa
Karnataka
26
Andhra Pradesh
26
Hyderabad
Semi-precious
South
• Largest wholesale studded jewellery 40%
derabad
mi-precious
South
market

dded jewellery 40% Coimbatore

Casting jewellery
mbatore Puducherry
Tamil Nadu
ting jewellery 38
Kerala 58
herry Andaman and Nicobar Islands
Lakshadweep
Andaman and Nicobar Islands
Thrissur
Lightweight
jewellery

Key
% = Regional share of Indian jewellery demand.
60 BIS. 58 = The number of BIS-approved hallmarking centres in each Indian state.

India’s gold market: evolution and innovation 33

Hallmarking
It is odd that there has been little consumer
protection in a country with such a strong
relationship with gold
The Bureau of Indian Standards (BIS) is the national body
of standards in India. In 2000, it launched a long-term
scheme to encourage the voluntary hallmarking of gold
jewellery. The objectives of the BIS certification of gold are
to protect consumers, support the export of gold jewellery
and to develop the country as a reliable gold centre.
BIS has made huge strides in this area. Over 300
hallmarking centres61 have been rolled out across the
country (Map page 33), 13,000 jewellers have been
accredited, and a supervisory structure has been
established for both hallmarkers and retailers.
But more needs to be done. Despite 15 years of
hallmarking, gold jewellery is still routinely under-carated.
According to research by the consultancy, Oliver Wyman,
under-carating of gold jewellery weight has fallen from
between 20%–40% to somewhere around 10%–15%,
although the true percentage may well be far higher given
there are limited number of BIS certified jewellers.62
This is an important issue for the consumer. In urban India,
5% of consumers say they do not know the caratage
of the jewellery they bought in the past 12 months; this
increases to 18% in rural India. Furthermore, 86% of
respondents in India said that hallmarking is extremely or
very important. Tackling this issue is key to ensuring the
health of the gold industry.
Consumer protection can be improved in the short
and medium term
More rigour in the hallmarking process would benefit
India’s consumers and gold market. Trust in the industry
would increase. This would benefit consumers, retailers
and exporters.
61 As of Jan 2017, there are 431 hallmarking centres.
62 World Gold Council, Developing Indian Hallmarking, a road map for future growth.
India’s gold market: evolution and innovation
What needs to be done? In our report Developing Indian
hallmarking, a roadmap for future growth, we advocate
six short-term measures to improve the efficiency and
effectiveness of hallmarking:
• Strengthen governance around hallmarking processes
• Drive customer awareness of hallmarking
• Incentivise and facilitate expansion of hallmarking
centres
• Use BIS data to develop a ratings system for jewellers
• Pilot Unique ID or other technology solutions to support
hallmarking
• Pursue membership of the International Hallmarking
Convention, or develop an Asian alternative.
Over the longer-term, we suggest:
• Moving to a mandatory hallmarking regime
• Placing the onus of hallmarking on manufacturers
• Developing mechanisms to monitor the flow of gold
across the supply chain.
Mandatory hallmarking of jewellery with
BIS Act, 2016
Recent developments herald further improvements, with
the approval of a new BIS Act 2016. A detailed overview
of the Bill is discussed in Chapter 10, but its primary aim
is to make the hallmarking of gold jewellery mandatory and
allow the government to enforce it. This could largely wipe
out the malpractice of gold jewellery and ornaments of
inferior purity being sold as 22-carat.
Hallmarked bangle.
34
The hallmarking process explained Outlook
In accordance with BIS procedures, hallmarking is applied
to all parts of the item that can be easily detached or Challenges…
replaced, except for bangles and light weight items where Despite its huge importance to the economy, the jewellery
hallmarking is only applied once. A hallmark is made up industry is one of the most heavily regulated industries
of five different symbols which should be inscribed to in India. Take how difficult it has been to secure its raw
illustrate the following: material; gold. No other industry has had to endure rules
as complex and market-distorting as the 80:20 rule.
• BIS mark Encouragingly, the policy approach seem to be improving.
• Fineness In November 2014 the 80:20 rule was repealed. And in
the 2015 Union Budget a policy framework – including
• Assaying and Hallmarking Centre mark
the gold monetisation scheme and Indian gold coin – was
• Year of marking established to support India’s gold industry.
• Jeweller’s mark.

BIS
Focushallmarks for gold
box: BIS hallmarking jewellery consist of several components
components

916 J ABC
The BIS A three digit number Logo of the A code denoting Logo/code of
logo (out of a set of six assaying centre the year of the jeweller
predefined values) hallmarking
indicating the purity of
the gold in part-per-
thousand-format viz;
958, 916, 875, 750,
585, 375

India’s gold market: evolution and innovation 35

But the industry still faces some challenges. For a start,
small and medium sized manufacturers struggle to obtain
gold loans to purchase material. This may change given
the introduction of the government’s gold monetisation
scheme, which may make it easier for manufacturers to
obtain gold loans.
More generally, smaller participants in the industry
struggle to access credit. For FY2015–16, only Rs727bn
was made available to the industry by the financial sector,
accounting for just 2.7% of total bank credit.63 This is
unlikely to change any time soon. The fragmented nature
of the industry means that some parts lack transparency,
which makes it hard for banks to complete the due
diligence necessary to advance loans. The opacity also
hides some shady practices. Stories of banks falling foul of
devious jewellery firms who fraudulently obtain loans, and
subsequently default, are rife.
The gold jewellery industry also suffers from poor
infrastructure, largely as a result of it being unorganised
and dominated by small, independent retailers and
manufacturers. Transport, vaulting, technology and
training are weak by international standards. As the sector
becomes more organised this will improve.
63 Industry-wide deployment of Gross Bank Credit from RBI, published on 10 May 2016.
India’s gold market: evolution and innovation
… and opportunities
India’s gold jewellery industry is highly fragmented:
70% of retailers and 90%–95% of manufacturers are
small, independent firms. But we have seen slow and
steady progress in this area. Large regional and national
retailers have taken a greater share of the retail market.
They seem to have the momentum behind them. By
2020 their share could rise to 35%–40%. And as India’s
jewellery export market grows, organised manufacturers
should grow too.
By 2020, large regional and national
retailers could have become
35%–40% of the market
India’s gold jewellery industry can look to other sectors,
and indeed other countries, for inspiration. The Bharat
Diamond Bourse (BDB) in Mumbai, which opened in 2001,
supports industry sourcing, transportation and vaulting.
In 2006 a complex in Istanbul, Turkey, called Kuyumcukent
– Goldsmiths’ City – began making gold jewellery.
Kuyumcukent is the world’s largest integrated goldsmith
centre and houses around 2,500 production units and
shops, as well as the Istanbul Gold Refinery. We see no
reason why India’s gold industry cannot emulate either
of these.
36
4: International jewellery trade

India is one of the largest gold jewellery exporters in the

world. In FY2015–2016, Indian gold jewellery shipments came
to US$8.6bn, with around half delivered to India’s largest
jewellery export destination, the UAE. The government has
increasingly lent its support to the export industry over recent
years, not least through the Special Economic Zones that have
been set up around the country. Looking ahead, vocational
opportunities in the gems and jewellery sector are set to grow
noticeably, with local trade bodies targeting employment
growth of 0.7mn–1.5mn by 2020, many of which will be in the
import/export sector.

Jewellery exports and imports Chart 19: Gold accounted for over a third of gems and
jewellery exports in FY15 –16
The Indian gems and jewellery sector plays an
Exports value (in %)
important role in India’s export economy
Gems and jewellery exports cover a range of product
segments, namely: cut and polished diamonds, gold
jewellery, gold medallions, rough diamonds, gemstones,
C&P diamonds 52%
pearls, synthetic stones and fashion jewellery (Chart 19).
Gold jewellery 22%
Cut and polished diamonds account for the lion’s share of Gold medallion 14%
exports, with gold taking second spot. Silver jewellery 8%
Rough diamonds 3%
The gems and jewellery export industry makes a big Gemstones 1%
Others* 1%
contribution to the country’s finances. Since 2004, it has
earned over US$369bn (Rs19,024bn) of foreign exchange.
And this is likely to increase by a compound annual growth
rate of 5%–7%64 over the next 10 years.65
*Others includes pearls, synthetic stones, fashion jewellery and
It also makes a sizeable contribution to employment. sales to foreign tourists.
38%
According to a 2013 report by consultants, AT Kearney, Source: The Gems and Jewellery Export Promotion Council;
commissioned by the Federation of Indian Chambers of World Gold Council
Commerce and Industry, the gems and jewellery industry
employs over 2.5 million people, and has the potential of
adding a further 0.7–1.5 million by 2020.66

64 Metals Focus.
65 GJEPC.
66 AT Kearney, Federation of Indian Chambers of Commerce and Industry, All that glitters is gold.

India’s gold market: evolution and innovation 37

 Exports

Gold jewellery exports from India

50% 30% 20%

Precious and semi-

Plain gold jewellery Diamond jewellery
precious gem jewellery

Exporting around the world Exporting to expatriates

In 2015-16, gold jewellery was exported to nearly 90 countries and regions, including: India largely exports to countries with
sizeable Indian populations, with
UK 50% of exports going to the UAE
USA

UAE
Hong Kong
Singapore

Value of exports The 80:20 rule

$

The value of exports was $8.6bn The rule required importers of refined gold to export
in 2015-16, still some way off the 20% of their imports as gold jewellery, which led
2012-13 peak of $13bn to a slump in imports and was disruptive to the market

India’s gold market: evolution and innovation 38

 India is one of the largest jewellery exporters in
the world
Indian jewellery exports have grown over the past
decade to reach 160 countries. In FY2004–05,
India exported gems and jewellery worth a total of
US$15.6bn(Rs.618.3bn). This almost trebled over the
following six years, peaking at US$43.2bn (Rs2,048.2bn)
in FY2011–12. Exports dropped to around US$39.1bn
in FY2012–13 due to sluggish demand from Western
markets, for diamond jewellery in particular, but has been
relatively stable since (Chart 20).
Plain jewellery accounts for the lion’s share of gold
jewellery exports
In FY2015 –16, gold jewellery was exported to nearly
90 countries and regions, including Hong Kong, the US,
the UK and Singapore, although the UAE accounted
for around 50% of the total. The value of exports was
US$8.6bn in FY2015–16, still some way off the 2012–13
total of US$13 bn.
Around 50% of gold jewellery exports are plain gold
jewellery sets or chains. These are typically made in
Mumbai, Kolkata and cities across southern India, and
shipped to the UAE, Hong Kong and Singapore. Around
30% of gold jewellery exports are in the form of diamond
jewellery manufactured in Mumbai and flown to the US,
UAE and Hong Kong. Precious and semi-precious gem
jewellery make up the remaining 20%, predominantly
manufactured in west Indian states such as Rajasthan
and Gujarat and exported to the UAE and UK. India largely
exports to countries with sizeable Indian populations, such
as the UAE, US, UK and Hong Kong.
Indian gold jewellery imports are small
Gold jewellery imports are modest compared to jewellery
exports (Chart 21). Most of the jewellery imported is
high-end (either branded or non-branded) or machine-
made, especially chains. Machine-made jewellery
usually comes from the Middle East or South East Asia.
Virtually no jewellery imports are handmade; this is India’s
area of expertise.

Chart 20: Gems and jewellery exports doubled Chart 21: Indian gold jewellery exports dwarf gold
in ten years jewellery imports
US$ bn US$ bn
50 14

45
12
40

35 10

30
8
India exports jewellery to
25
over 160 countries
6
20

15 4

10
2
5

0 0
6
5

5
)
5

(p

1
0

00

01

01

01

01

01
00

00

00

00

00

01

01

01

01

01

01

20
20

20

20

20

20
6

-2

2
-2

-2

-2

-2

-2

-2

-2

-2

-2

-2

-2

-
-

0-

1-

2-

3-

4-

15
04

05

06

07

08

09
20
04

05

06

07

08

09

10

11

12

13

14

20
20

20

20

20

20

20

20

20

20

20

20
-
20

20

20

20

20

20

20

20

20

20

20

15
20

Gold jewellery exports Gold jewellery imports

Note: p = provisonal data.
Source: The Gem and Jewellery Export Promotion Council; World Gold Council Source: GJEPC; World Gold Council

India’s gold market: evolution and innovation 39

Developing India’s jewellery exports
Gems and Jewellery Export Promotion Council’s
role in developing the market
The Gems and Jewellery Export Promotion Council
(GJEPC) was set up by the Ministry of Commerce in
1966 to boost the country’s jewellery exports and help it
gain prominence in international markets. The GJEPC is
headquartered in Mumbai, with regional offices in Delhi,
Kolkata, Chennai, Surat and Jaipur, and today represents
more than 6,000 exporters. Gold jewellery exporters form
the largest contingent of GJEPC membership, closely
followed by diamond exporters (Chart 22).
GJEPC activities involve industry promotion through local
as well as international trade shows, most notably the
India International Jewellery Show (IIJS) and Vicenzaoro
Dubai. As a pivotal body of the Indian gems and jewellery
export sector, the GJEPC liaises with the government,
providing industry representation. It is also involved in
industry initiatives, including training, developing industry
benchmarks and conducting research.
Special Economic Zones (SEZ) initiative to boost
jewellery trade
India introduced the SEZ policy in April 2000 as an
initiative designed to boost trade. The government allowed
companies to set up units in SEZ to manufacture goods
and provide services that help facilitate exports. The SEZ
Act 2005 laid the regulatory framework for setting up and
running SEZs. This was largely carried out to promote
manufacturing and subcontracting of jewellery. Under the
Act, these units enjoy a tax holiday of 15 years, and are
exempt from customs duties and central excise duties on
capital goods and raw material as well as consumables.
The Santacruz Electronics Export Processing Zone
(SEEPZ) is one of the largest export zones in India. Many
leading jewellery manufacturers are based there as it is
one of the few SEZs to export not only gold jewellery
but also silver and diamonds. Gold jewellery accounts for
by far the largest share: 84% (US$1.8bn) of all jewellery
exports from the zone are gold.

Chart 22: Membership of GJEPC by business segment (%) Table 8: Operational or approved SEZ in India67
Name of SEZ Location State
Santacruz Electronics Export Mumbai Maharashtra
Processing Zone (SEEPZ)
Gold jewellery 38% Gitanjali Gems Ltd Panvel Maharashtra
Diamonds 37%
Coloured gemstones 13% Navi Mumbai SEZ Navi Mumbai Maharashtra
Other precious metals 7% Gitanjali Gems Ltd Nanded Maharashtra
Pearls 1%
Synthetic stones 1% Gitanjali Gems Ltd Aurangabad Maharashtra
Fashion jewellery 1% Gujarat Hira Bourse Surat Gujarat
Others* 2%
Sitapura SEZ Jaipur Rajasthan
MP Audyogik Kendra Vikas Indore Madhya Pradesh
Nigam Ltd
Chattisgarh Infrastructure Ltd Raipur Chattisgarh
*Others include Sales to foreign tourists and Not indicated.
Delhi State Industrial Delhi Delhi
Source: GJEPC 38% Information Development
Corporation
Planetview Mercantile Verna Goa
Company
Manikanchan SEZ Kolkata West Bengal
Hyderabad Gems SEZ Hyderabad Telangana
Goldsouk International Gems Gurugram Haryana
and Jewellery SEZ

Source: Metals Focus; World Gold Council

67 Ministry of Commerce and Industry.

India’s gold market: evolution and innovation 40

Round tripping
In promoting gold exports the Indian government
faces a challenge: to finely balance the interests of the
domestic manufacturing sector with the need to control
round tripping.
Round tripping is the act of exporting gold, be it jewellery,
bars or coins, with the sole purpose of melting it down
before re-importing it back to the original exporting
country. The process results in a circular flow of gold
between different countries, serving to inflate trade
statistics. The levels involved can be significant and this
is one reason why trade statistics should not be taken at
face value (Chart 23).
The underlying motive behind round tripping varies.
It can be to arbitrage between differences in tax rates or
exploit loopholes. Or it can be to exploit differences in
interest rates or exchange rates. In the case of India,
round tripping is commonly used so firms can artificially
boost their trading volumes in order to secure less
expensive finance.
Round tripping has been a long-standing feature of the
Indian market and is largely visible in the jewellery trade
with the UAE, Hong Kong and Singapore. This can involve
crude jewellery, which is close enough in form to be
exported as jewellery, but crude enough so that making
charges are negligible. After it arrives at its destination it
is promptly melted down and shipped back to India in the
form of bars, through official or unofficial channels.

Chart 23: Estimated levels of round tripping, 2010-2015

Tonnes
140

120

100

80

60

40

20

0
2010 2011 2012 2013 2014 2015
Source: Metals Focus

Round tripping
Gold is exported At the destination,
from India, often the gold is melted
in the form of down into bars
crude jewellery
...which are
then exported
back to India

Round tripping is used by firms to boost trading volumes and

secure cheaper finance; one reason why trade statistics should
not be taken at face value.

India’s gold market: evolution and innovation 41

Value addition norms are employed to control
round tripping
A measure often employed by the government to control
round tripping is the use of value addition norms. Value
addition is defined as the difference in value between the
raw material input and the final output – i.e. the difference
in value between a finished piece of jewellery and the raw
materials used to manufacture it. Government-imposed
norms (decided by the Ministry of Commerce and
Industry) place a minimum level of value that the jeweller
must add, thus making round tripping less profitable.
The government faces a balancing act in setting value
addition norms at an appropriate level. If they are too high,
round tripping is discouraged but jewellery exporters find
it difficult to sell jewellery at competitive prices. Set them
too low, and exports become more competitive but round
tripping becomes much more attractive.
The authorities are very mindful of round tripping. The
size of these flows, as shown in Chart 23 on the previous
page, contributed to the decision to end the “80:20”
system (details in Chapter 10). The increase in value
addition norms announced as part of the new 2015–2020
foreign trade policy were also designed to curb this
activity. In particular, the focus for deterring round tripping
is squarely on items such as medallions and machine-
made jewellery. These low mark-up items are not labour-
intensive to produce and can be easily recycled at the
point of destination. Although value addition norms on
medallions were maintained at 1.5% under the new policy,
the minimum value addition requirement for machine
made jewellery was increased from 1.5% to 2%. The
government needs to closely monitor these levels to
avoid the unintended consequence of adversely impacting
genuine gold jewellery exports.
68 Ministry of Commerce and Industry.
India’s gold market: evolution and innovation
Outlook
India’s jewellery exports have thrived over the past
10 years. Exports have been on an upward trajectory;
bumpy, but upward nonetheless. The industry has
made significant contributions to India’s foreign
exchange earnings.
This sector has the potential to grow. India’s expertise
in handmade jewellery gives it a unique opportunity.
The intricate designs produced by its karigars – expert
craftsmen – give it an edge over much of the global
competition. If managed correctly, we believe exports
could increase to US$40bn by 2020. This is an ambitious
target, but one that could be achieved if industry
bodies and government work together to formulate
supportive policies.
Innovation, creativity, new ways of marketing and
transparency in gold jewellery will be key to achieving this
vision. The creation of jewellery parks, along with common
facility centres with a focus on the revival of existing
manufacturing centres, would be a positive step. A more
active marketing strategy for Indian handcrafted jewellery
would boost jewellery exports. This could be supported by
Gold Heritage Tourism,68 which could become a key driver
of India’s socio-economic progress by creating interest and
demand for India’s heritage arts and crafts, by providing
employment opportunities and by ensuring that the skills
of millions of artists and artisans around the country
are preserved, encouraged and stay relevant in the
modern world.
42
5: Gold investment market

India is one of the world’s largest bar and coin investment

markets. At a macro level, income and inflation are key drivers
of demand. But how consumers perceive gold also plays an
important role. Our consumer research reveals that, for many
investors, bars and coins are considered a safe investment and
rank alongside deposit accounts as a preferred savings vehicle.
Bar and coin demand may, however, face growing competition.
Some view the government’s plans to improve banking
penetration, especially in rural areas, as a threat.

Bar and coin demand Economic drivers of gold investment demand

A large and growing market
Over the past 25 years, bars and coins have accounted
for just over one fifth of total Indian consumer demand for
gold. This statistic, however, masks how the market has
evolved. In 1995, bar and coin demand was less than 100t,
accounting for 18% of total consumer demand. In 2015,
it was 195t and 22% of India’s total consumer demand.
India now ranks alongside Europe and China as one of the
world’s largest bar and coin markets (Chart 24).
Some of the factors supporting bar and coin demand
are similar to those that have supported jewellery
demand. Weddings and religious events, such as
Diwali, are important. There are economic factors, too.
As we discussed in our analysis of consumer demand in
Chapter 2, these can be broken down into long- and
short-run factors.

Chart 24: India is one the world's largest bar and coin markets
Tonnes
300

Indian bar and coin demand

250 has gone from less than 100t
in 1995 to almost 200t in 2015

200

150

100

50

0
India Europe China Middle East US
2015 10 year average

Source: GFMS, Thomson Reuters; Metals Focus; World Gold Council

India’s gold market: evolution and innovation 43

Over the long term, investment demand is determined The short term factors driving bar and coin demand are
by income. All else being equal, for a 1% increase in similar to those for jewellery: inflation, monsoon rainfall
gross national income per capita, bar and coin demand and import barriers. Our econometric work shows that,
rises 1.1%. Rising incomes have allowed households to holding everything else constant:
save more and households’ allocation to financial assets • a 1% increase in inflation boosts demand by 4.4%
(including bank deposits, insurance funds and mutual
funds) and physical savings (real estate and gold) has • a 1% fall in the gold price increases bar and coin
increased (Chart 25).69 demand by 0.9%
• a 1% increase in excess rainfall boosts demand by 0.8%
Interestingly, price does not emerge as a factor influencing
bar and coin demand over the long term. A possible • the import duties and other restrictive measures
explanation could be that the role of price is overpowered reduced demand by 4.5% during the period in which
by other, more significant factors. Indian families often they were in place.70
make regular purchases of bars and coins in order to
Bar and coin demand is generally more responsive to
accumulate gold, often to be converted into jewellery
these short-term factors than jewellery demand.
at a later date, which may make it relatively resistant
to changes in the price. The trend of urbanisation may
also have played its part, as city dwellers have a greater
inclination to purchase bars and coins than those in rural
India. Both these points are explained below.

Chart 25: Rising incomes have allowed households to save more

Rupees bn
25,000

Physical investment in, for example,

20,000 real estate and gold, is preferred to
financial investments

15,000

10,000

5,000

0
E
91

93

05

07

09

11
7
95

3
9

0
-9

-1

5
-

8-

0-

2-

4-

6-

8-

0-
-
90

92

-1
96
94

12
9

14
19

19

19

20

20

20

20

20

20
19
19

20

20

Financial savings Physical savings Total household savings

Source: Reserve Bank of India

69 The steady increase in physical savings dipped from 2013–14. FY2014–15 saw household savings shift from physical assets towards financial savings in
response to a cooling in property prices as banks trimmed lending to developers in the real estate market. The shift is also reflective of the headwinds faced
by gold in 2014, with restrictions on the import and sale of gold coins, and the decline in gold price over this period.
70 Coin imports were banned on 15 August 2013. Banks and nominated agencies were prohibited to import coins and medallions. The ban was lifted
on 18 February, 2015.

India’s gold market: evolution and innovation 44

Bars and coins increased their share of
consumer demand
Other factors mean that the share of consumer demand
allocated to bars and coins has grown. One such factor is
the role of bars and coins in helping families accumulate
gold for future weddings. Small denomination bars
and coins allow households to gradually build up their
gold investment to be exchanged for gold jewellery
as an important occasion approaches. This is known
as a Systematic Investment Plan in gold (SIPs). Some
consumers invest in SIPs run by jewellers, whereas others
start their own SIP. The popularity of SIPs grew as the
gold price increased between 2000 and 2012.

Urbanisation has played a role too. Proprietary consumer

research conducted in 2016 indicated that consumers in
urban India are more inclined to invest in bars and coins
than those in lower-tier cities and rural areas, who have a
greater preference for gold jewellery (Chart 26).

Allied to this, between 2001 and 2011, India’s share of

urban population rose from 28% to 31% and the
number of cities with more than one million inhabitants
Gold coin shopping.
grew from 35 to 53.71

These two factors – SIPs and urbanisation – may explain

why bar and coin demand is less responsive to price
than jewellery.

Chart 26: Rural India mainly invests in gold via jewellery

%
50

45

40

35

30

25

20

15

10

0
Total Urban Rural
Gold bars/coins Fine gold jewellery at least 22k

Sources: TNS; World Gold Council

Question: Which of the following types of investments do you currently have? Sample size: 2,055 – 1,000 urban India and 1,055 rural India.

71 Census 2011.

India’s gold market: evolution and innovation 45

Understanding investor motives
The data clearly demonstrates the importance of gold,
especially bars and coins, in meeting individual investment
needs. But what exactly are those needs? Why do people
invest in bars and coins? The econometric analysis of
the drivers of gold demand only tells part of the story.
Investors do not slavishly follow inflation rates and gross
national income per capita before making investment
decisions. Other factors play a role too.
One factor is that gold is viewed as a safe asset. Many
Indians make a distinction between safe and risky assets,
and gold is viewed as safe. When asked about their
current investments in our 2016 consumer research,
investors ranked gold just behind savings accounts and
insurance products (Chart 27). And when asked why they
invested in gold jewellery and bars and coins, the most
common responses were: ‘to protect my wealth’ and ‘to
make good returns in the long term’. Of those surveyed,
73% of respondents agree with the statement that
‘owning gold makes me feel secure for the long term’.
Chart 27: Gold features prominently in people's investments
%
80
70
60
50
40
30
20
10
0
Savings Insurance Fine gold Gold bars/
account jewellery coins
Source: TNS; World Gold Council
Question: Which of the following types of investments do you currently have? Sample size: 2,055 – 1,000 urban India and 1,055 rural India.
India’s gold market: evolution and innovation
Gold investment retailing
Jewellers are the preferred point of purchase
The majority of bar and coin sales take place at jewellery
stores. This preference for buying investment products
from jewellery retailers is due not only to the sheer
geographic coverage of these stores, but also to the
jeweller’s expertise and the degree of trust consumers
place in them. In the ICE360º survey conducted in 2014,
93% of respondents said jewellery shops were their
preferred point to buy bars and coins.
The bar and coin retailing landscape is changing, albeit
slowly. Some refineries, such as MMTC-PAMP and
the Bangalore Refinery, have started selling direct to
the consumer through their distribution channels and
representatives. Online retailing has also increased. Both
Flipkart and Snapdeal, two of India’s largest online retailer
platforms, have entered this space and the recently
launched Indian Gold Coin (discussed in more detail
in Chapter 10) is sold through banks. This may help to
raise the profile of banks in the minds of consumers when
they buy gold, especially in rural India.
Stocks and Real estate Gold financial Collective Government Corporate Collectibles
shares products investment bonds bonds
plan
46
Gold bars favoured for investment, coins for gifting
Investors prefer bars to coins, with bar demand
consistently recorded at several multiples of coin
purchases (Table 9). Popular bar sizes include the 8g
Guinea or 10g and 50g, each of which is bought for
investment purposes (and commonly used for the purpose
of converting into jewellery at a later date). Smaller
weights, by contrast, are used for gifting purposes.
The most popular coin denominations are 5g, 8g, 10g
and 20g, although higher denominations, including
50g and 100g, resonate with wealthier retail investors.
Denominations of coins less than 10g, however, account
for some 60% of the market. Coins are especially popular
during the festive season, notably at Diwali or on the
auspicious day of Akshaya Trithiya, so much so that
30–40% of annual coin sales take place during these times.
Coins with the inscription of gods and goddesses sell well,
particularly those with the goddess Lakshmi and elephant
headed god Ganesha. Coins are also used for gifting
purposes and for special occasions such as marriages and
the birth of a child.
The newly minted Indian gold coin may change
the market
It seems strange that up until recently, India, one of the
world’s largest bar and coin markets, did not have its own
national coin. The launch of the Indian Gold Coin means it
now keeps company with countries such as South Africa,
the US, Canada and China.
In February 2015, Finance Minister Arun Jaitley unveiled
plans for the official coin, in hallmarked, 24-carat gold,
carrying the image of the Ashoka Chakra on one side and
Mahatma Gandhi on the other. This project dovetails with
Prime Minister Modi’s Make in India campaign and, in a
country rife with under-carating, will be a coin in which
investors can have confidence. If supported by the right
marketing strategy, this could be a further fillip for the
coin market.72
Table 9: Indian physical demand 2010–2015 (tonnes) 73
Year Bars
2010 238.1
2011 248.4
2012 227.3
2013 243.9
2014 144.4
2015 135.6
Source: Metals Focus; World Gold Council
72 Unlike the US Eagle and Canadian Maple Leaf, the Indian Gold Coin is not a legal tender.
73 Metals Focus, Gold Focus 2015.
74 Department of Financial Services.
75 World Bank Gallup Findex Survey 2014.
India’s gold market: evolution and innovation
Increasing banking penetration – a competitive
threat?
India’s low penetration of traditional financial products,
especially in rural communities, is an oft-cited threat to
gold consumption. Households turn to gold because they
do not have access to other banking and savings products,
or so the argument goes. Some suggest this affects not
just bars and coins, but also the element of jewellery
purchases which double up as investment. As banking
penetration increases and households have access to
more savings products, gold may play less of a role.
It is true that banking penetration is low. According to the
government’s 2011 Census, just 59% of households had
access to banking services.74 This figure was lower in rural
India (Table 10).
But banking penetration has been steadily increasing
over the past 15 years. In 2001, banking penetration
stood at 36% overall, but only 30% of rural households
had access to banking. The ten years from 2001 to 2011
saw tremendous banking growth: an additional 76mn
households gained access to banking services. Up to date
data is limited, but the World Bank Gallup Global Findex
Survey 2014 indicated that since 2011 bank account
penetration continued apace.75
And what happened to gold demand over this period? It
grew from around 705t to 974t, or in value terms, from
Rs289.8bn to Rs2,300bn (US$6.14bn to US$49.23bn).
Bar and coin demand went from 107t to a record 355t in
2011, and was 195t in 2015. Jewellery demand remained
steady, hovering around 600t. So while the expansion of
India’s banking network may be a competitive threat to
an element of investment-related purchases of gold, it
would seem that gold is not in immediate danger. This no
doubt partly reflects the different, non-economic motives
for buying gold – banking is not a substitute for gold as
it cannot effectively meet the variety of needs that gold
fulfils for Indian consumers. Jan Dhan Yojana accounts
have increased banking penetration in households to near
100% in 2014–2015.
Coins
Table 10: Households with access to banking services (%)
102
106.3 2001 2011
91.7 Rural households 30% 54%
98.8 Urban households 50% 68%
62.4 Total households 36% 59%
59.0  Source: Census 2011; World Gold Council
47
Indian gold-backed exchange traded funds – a small
market with an uncertain future
In a country where gold is so revered, it is not surprising to
see exchange traded funds (ETFs) receive less attention
than more tangible bars and coins.76 Coupled with that,
despite growing over recent years, India’s banking and
financial services penetration remains weak. Only 68%
of urban households have bank accounts. And it is likely
that many of those with access to banking only use basic
services, such as current and deposit accounts. Few will
have ventured into the broader world of ETFs.
Despite this slow start, ETF providers should not lose
hope. Our consumer research reveals that those that do
invest in ETFs are typically earning regular salaries and
are highly educated. They are tech savvy and live in major
urban centres. As the longer term macroeconomic and
demographic trends – of an expanding middle class and
rural-to-urban migration – continue, the retail market for
ETFs may grow.

The domestic ETF market is still in its relatively early

stages. The first – and currently largest – gold-backed
ETF was launched by Benchmark in 2007.77 Since then
other banks and financial service providers have followed
Benchmark’s lead. At the end of June 2016, there were
13 ETFs in the county, with only 23.4t – or almost
Rs66.5bn (US$1.2bn) – under management (Chart 28).

Chart 28: Indian gold-backed ETF holdings remain modest

Tonnes
50

45

40

35

30

25

20

15

10

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goldman Sachs Gold Exchange Traded Scheme R*Shares Gold Exchange Traded Fund
SBI-ETF Gold HDFC Gold Exchange Traded Fund
Kotak Gold ETF Other

Source: Bloomberg; Respective ETP providers; World Gold Council

76 These vehicles are open-ended funds that trade on a stock exchange in a similar fashion to shares of an individual company.
In terms of gold, these funds closely track the price of physical gold; the minimum investment is just one gram. The Indian ETFs that
we track are backed by physical gold, although some may allow for a small (maximum 10%) allocation to cash.
77 Benchmark Mutual Fund has since been taken over by Goldman Sachs and renamed ‘Goldman Sachs Gold Exchange Traded Scheme.’

India’s gold market: evolution and innovation 48

Focus: India’s commodity exchanges
Although commodity exchanges have a long
history in India, it is only recently that they have
started to grow
The first commodity exchange in India – the Bombay
Cotton Trade Association – was launched in 1875, but the
market’s development was stifled by heavy government
intervention in the agricultural sector, following
independence in 1947. It is only recently that forwards and
futures trading have been selectively introduced, along
with stringent regulatory controls.
The Indian commodities futures market landscape is
divided between national exchanges, such as MCX and
NCDEX, and regional exchanges, including the Indian
Pepper and Spice Trade Association (in Kochi) and the
Rajkot Commodity Exchange. National exchanges have a
greater market share of the total futures volume. Overall,
more than 40 commodities are traded on nationwide
exchanges. Gold comfortably accounts for the largest
market share (Chart 29).
During the latter part of the last decade, more than
26 commodity exchanges were operating across India.
More recently, tighter regulations have stifled trading.
Know-Your-Customer requirements, position limits,
the imposition of taxes (such as the 0.1% Commodity
Transaction Tax (CTT) on non-agricultural commodities
introduced in 2013) and the National Spot Exchange scam,78
have seen some exchanges close. In 2015 there were
just four national exchanges and 18 regional exchanges in
Chart 29: Gold takes the largest share of
exchange trading
Bullion 43%
Base metals 17%
Agricultural
commodities 16%
Energy 24%
*Trading value in Rs crore, FY 2013-14.
Source: Forward Markets Commision
78 In July 2013, the National Spot Exchange limited – a recognised commodity exchange – defaulted on its obligations
to its members, totalling Rs56bn. Nearly 13,000 investors were affected, but the impact was more far-reaching.
A scandal of this magnitude shook the confidence of investors and the participation of retail investors on domestic
commodity exchanges dropped sharply.
79 Forwards Market Commission Annual Report 2015.
India’s gold market: evolution and innovation
India.79 MCX is India’s largest commodity exchange, with a
market share of more than 80%. Along with the NCDEX, it
is one of the leading gold futures exchanges.
Tax burden undermined gold futures trading but
opportunities exist for growth
Gold futures trading in India peaked in 2012 when it
reached Rs37.5tn, but trading activity fell sharply following
the introduction of the CTT in 2013 (Chart 30). As with
many well meaning government regulations, the CTT has
had unintended consequences, with some traders shifting
towards unofficial trading channels, often referred to as
dabba trading. Here, traders pay brokerage fees, but avoid
taxes and regulatory oversight.
But the future looks promising for Indian commodity
exchanges. Despite rapid growth in trading volumes in
the past, the penetration of Indian commodity
exchanges remains fairly low. This affords a tremendous
opportunity for the exchanges to grow. The majority
of trading volumes generated on exchanges are from
individual investors and traders. Banks, financial
institutions and foreign investors are not allowed to
participate in the market. If this were to change, trading
volumes could flourish.
Chart 30: Gold trading value across exchanges has
declined in recent years
Trillion Rs
50
45
40
35
30
25
20
15
10
0
2011-12 2012-13 2013-14 2014-15
Source: Forwards Market Commission Annual Report 2015
49
Outlook
It is likely that bar and coin investment will remain strong
and maintain – if not increase – its share of consumer
demand. The slow but steady shift of people from rural
to urban areas, coupled with the expanding middle class,
underpins this expectation.
Gold investment demand is also strengthened by latent
demand 80 (Chart 31). Analysis undertaken by
TNS reveals that ideally – in the absence of any barriers
– Indian consumers would invest more in bars and coins,
jewellery, and other gold-backed financial products than
they do at the moment.
This is not to say that all of this latent demand can be
converted into sales. There are barriers to purchase
around price perception and access via online retailing
platforms, for example. But if the industry tackles these
challenges, thinks innovatively of how to communicate
with consumers and develops more seamless purchase
journeys, it can certainly convert some of this latent
demand into sales.
Chart 31: There is strong latent demand for gold investments
Rural
Urban
Total
0 5 10 15
Share of investment Share of mind Latent demand
Source: TNS; World Gold Council
80 This is calculated by comparing gold’s “share of mind” to consumers’ actual purchases over the past 12 months. Share of mind
is based on pure attitudinal preference: what share of their investable income consumers invest in each option in the absence
of any barrier. This is then compared to what they actually invested in.
81 Between the launch of the scheme in August 2014 and May 2016, around 218mn new accounts had been opened with
Rs376bn of deposits.
India’s gold market: evolution and innovation
The optimistic outlook for bar and coin demand is not
without risk. Gold’s accessibility through the nationwide
network of jewellers, in both urban and rural areas, is
one of its strengths. Some argue that the corollary is that
gold demand is supported by low banking penetration. As
banks become more accessible – which, through Pradhan
Mantri Jan Dhan Yojna (loosely translated as banking for
all), is one of PM Narendra Modi’s strategic goals – gold
may face more competition.81
But despite the accessibility of bank accounts increasing
over the past 15 years, bar and coin demand has
continued to grow. Banking is not a perfect substitute for
gold demand and while the expansion of India’s banking
network may be a competitive threat to an element of
gold demand, it would seem that this is not an immediate
danger and is unlikely to seriously dent gold demand.
By 2020, we expect bar and coin demand to be between
250–300t. India’s rising incomes and steady saving rates
should support investment across a range of assets,
including gold. We see the growth in urban dwellers as
supporting this demand and the newly launched Indian
Gold Coin as providing a welcome boost to the sector.
26 +5%
31
23 +8%
31
25 +6%
31
20 25 30 35
%
50
Latent demand
6: Gold in the financial system

At over US$800bn,82 India’s private stock of gold is a significant

resource. In the late 1990s, the Government tried and failed
to draw some of this gold into the financial system. The latest
monetisation scheme proposal, however, could be successful.
Lowering the minimum deposit size from 500g to 30g is a
significant step forward and more households use banks now
than they did in the late 1990s. But only a modest amount has
been monetised and more still needs to be done. In contrast,
the gold loan market has flourished. In total, around 1,250t is
used as collateral, largely with informal lenders, such as
pawnbrokers. Since 2008, however, the formal sector has
developed, and banks and gold loan companies have grabbed
a share of the gold loans market.

Gold monetisation
India’s gold stock – bigger than Apple
India has a huge stock of gold; some 23,000–24,000t in
total, the majority of which is with households. And it is
incredibly valuable. Based on the 2015 average price it was
worth US$800bn. To put this in context, Apple’s market
capitalisation at the same time was around US$600bn;
two of India’s largest listed companies, Reliance Industries
and Tata Consultancy Services, were quoted at around
US$50bn each.
This scheme could be more successful, not least because
the minimum deposit size has been reduced to 30g, which
opens the scheme up to large swathes of the population.
In addition, there are more bank branches in India and
more households using banking services than there
were in 1999 when the GDS was launched. This should
make the marketing and distribution of gold monetisation
services easier for banks.
For the scheme to be a success, however, some hurdles
still need to be overcome. These include:

In the late 1990s, the Government tried to capitalise on
this gold – to draw it out from households and into the
financial system – with the launch of the Gold Deposit
Scheme (GDS). This allowed individuals to deposit gold at
banks in return for interest. In addition, the scheme was
exempt from capital gains, wealth and income tax.
But it did not work. Between 1999 and 2015 only around
15t was mobilised. The big stumbling block was the
minimum deposit, which at 500g, prevented many
individuals and households from accessing the scheme.
Gold monetisation v2.0
In the 2015 Union Budget, Finance Minister Arun Jaitley
announced plans for a new, updated monetisation
scheme, the structure of which is covered in detail in
Chapter 10.
• Trust: It is vital that consumers, banks and jewellers
have trust in the quality of gold flowing around the
monetisation ecosystem
• Ease of use: transactions must be simple. If they are
not, it is unlikely savers will deposit their gold at banks
• Incentives: each market participant – from the depositor
to the bank to the refiner – must be incentivised to use
and develop the scheme
• Infrastructure: it will take time for refineries, assayers
and banks to develop the infrastructure, processes and
products to meet customers’ needs.
If the mechanics of the scheme take these issues into
account, the chances of it being a success are increased.
If any one of these is not considered, the scheme
may struggle.

82 Approximate value as at end 2015.

India’s gold market: evolution and innovation 51

Gold loans
Growth of the gold loan industry
While the original GDS may not have been a success, the
gold loans market has boomed. Because of the emotional
connection with gold, people rarely sell. If they need
funds, most would rather pledge it as collateral and
secure a gold loan. This is a big market. It is likely that
around 1,250t of gold is pledged across the gold loan
industry in India.
There are two types of gold loan providers: formal (banks
and non-bank financial companies) and informal (money
lenders and pawnbrokers). Pledging gold as collateral has
been an ever-present feature of India’s gold market. For
generations, farming communities and rural households
have used gold as a means of financing, often pledging
it as collateral to raise funds to plant the following year’s
crops. This lending has mostly been informal; even now,
although there is no hard data available, the informal sector
probably accounts for around 60–70% of the market.
The government, however, was uneasy with rural
communities being in debt to pawnbrokers and money
lenders, as well as being concerned about the extortionate
rates charged. In 2008, government agencies looked to
steer households away from the informal sector towards
the formal sector, including banks and non-bank financial
companies (NBFCs). Their efforts have met with some
success. For example, designating agricultural bank loans
as ‘priority sector’ lending has supported the growth in
formal gold loans for such purposes.83 Consequently,
the State Bank of India now plays an important role in
providing gold loans in rural India.
In recent years, gold loans have become popular in the
cities as well as the rural areas. A key reason for this is that
gold loan rates compare favourably with those available on
personal loans.
These factors have supported the growth of the industry.
According to an RBI working group report,84 the gold loan
market was worth about Rs1.2tn in 2011 (US$25.5bn),
a six-fold rise in less than five years.85
83 Priority sector refers to those sectors of the economy that may not get timely and adequate credit in the absence of this special dispensation.
Typically, these are small value loans to farmers for agriculture and allied activities, micro and small enterprises, low income people for housing,
students for education and other low income groups and weaker sections.
84 Report of the Working Group to Study the Issues Related to Gold Imports and Gold Loans NBFC’s in India, 6 February 2013.
85 Latest RBI estimate for the informal and formal gold loan market.
India’s gold market: evolution and innovation
But this growth has not been without challenges. After a
period of rapid expansion, the gold loan sector suffered
a setback during FY2013–14 as the market witnessed
several corporate failures. This led to fundamental
changes across the gold loan industry. In particular, a
loan to value (LTV) cap of 60% was applied to gold loans
offered by NBFCs. Gold prices also started to fall during
this period, which led to a significant decline in the level
of activity of NBFCs. NBFCs lost significant market share
to commercial banks (which did not have an LTV cap), as
well as to the unorganised sector. The trend was reversed
to some extent in 2015, when the LTV cap was revised
to 75%, levelling the playing field between NBFCs and
banks. During this phase, the gold loan NBFCs (Muthoot,
Muthoot FinCorp, and Manappuram) focused on
consolidating and stabilising their operations, while
the new NBFC entrants (Shriram City Union Finance,
Magma FinCorp, Capital First) reduced their exposure to
the segment.
For now, the era of regulatory uncertainty appears to have
passed and the gold loan NBFCs have been able to lay the
foundations for healthy growth over the coming few years.
Gold loan companies: drivers of growth
In the formal sector gold loans are provided by public
and private sector banks, Co operatives and gold loan
companies (NBFCs). While public banks have taken the
lead, the NBFCs have gained a sizeable share, capturing
almost 40% of the market in FY2014–15 (Chart 32).
Chart 32: Share of organised market in gold loan
against jewellery in FY2014-15 (%)
NBFCs 36%
Private sector banks 15%
Public sector banks 44%
Co operatives 5%
Source: Manappuram Finance; World Gold Council
38%
52
There is no official data on the amount of gold monetised
by gold loan companies. But an assessment of the
company reports of the two large southern India-based
gold loan companies – Muthoot Finance and Manappuram
Finance – reveals that in 2015 their combined gold
collateral totalled around 200t.86 Perhaps more important
than the amount of gold being pledged as collateral, is
how quickly these gold loan companies have developed
(Chart 33).
Their success is partly due to a stronger customer value
proposition than some of their competitors; they typically
process loans quickly. Banks, with a broad range of
financial products, have generally found it difficult to
compete with NBFCs, which focus on a narrow product
range. The success of these gold loan companies is
certainly not because of pricing; their interest rates are
significantly higher than banks, although much lower than
in the informal sector (Table 15).87

Table 15: Comparative analysis as at February 2016 88

Interest rates LTV
Banks Base rate + 2.5% to 5% Up to 80%
Gold loan companies 12% to 24% Up to 75%
Money lender/ 30% to 50% Depends on the amount
Pawn broker of loan and security

Source: Company websites; World Gold Council

Informal gold loan providers have a large market share.

Chart 33: Outstanding NBFC gold loans have grown rapidly since 2007
Rupees bn
700

600

Lower rates than the informal sector and better

500 customer service than the banking sector have
supported gold loan companies’ growth

400

300

200

100

0
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Source: RBI; Manappuram Finance; Metals Focus

86 The gold loan industry is mostly centred in Southern India.

87 NBFC interest rates can vary between 15%–25%, banks rates are typically base rate plus 2–4 percentage points,
while pawnbrokers and money lenders’ rates are typically 30%–50%.
88 Company websites, Metals Focus.

India’s gold market: evolution and innovation 53

A low default rate is another factor underpinning gold
loan companies’ growth. Defaults typically hover around
1%–2%.89 This is low compared with other loan products.
For example, nationwide non-performing loans account
for 4.3% of total Indian bank lending.90 A significant factor
here is that people are loathe to relinquish their gold. While
they are prepared to pledge it as collateral, they will often
want it back, especially if it is a piece of jewellery or an
ornament. Rising gold prices also made it quite lucrative
for borrowers to settle their debt and take receipt of their
gold. The corollary is that when the price falls, defaults
rise. In 2013, the default rate shot up to 3%. Still low
compared to other assets, but quite striking given the
usually lower default rates for gold loans.
Regulations for gold loan companies
By early 2011, the gold loan companies’ strength in this
market became an increasing cause for concern for the
RBI. The central bank was worried about their rapid
growth and the financial stability implications should gold
prices tumble.
The RBI took several steps to limit their presence in the
gold loan market:
• In March 2012, priority sector lending was removed
from bank credit provided to gold loan companies.91
This pushed up their cost of financing
• Later the same month, the RBI reduced the LTV gold
loan companies could offer from 75% to 60%92
• In September 2013, they were only allowed to provide
a loan by cheque 93 for loan amounts above Rs1 lakh
(US$1,700) and they had to ensure they carried out full
due diligence on the borrower
• Finally, NBFCs were required to provide RBI-approved
gold storage infrastructure.
These measures made writing new gold loans more
expensive and difficult: so the volume of business
dipped. But in 2014, after a period of lobbying, gold loan
companies succeeded in persuading the government
to restore the 75% LTV limit and business has since
recovered.94
89 Metals Focus, Company Reports.
90 World Bank.
91 https://rbi.org.in/Scripts/NotificationUser.aspx?Id=6248&Mode=0.
9 2 In 2014, after a period of lobbying, the RBI increased the LTV to 75%.
93 This was a move designed to encourage gold loan recipients to open bank accounts, if they did not already have them.
9 4 Muthoot Finance, Financial Results Q1 FY2016 presentation.
India’s gold market: evolution and innovation
Outlook
The outlook for gold monetisation is interesting. The flaws
associated with the first gold monetisation scheme – most
significantly the minimum deposit size – are not present
in the latest iteration and there are certain structural
developments that may help this latest scheme flourish.
First, there are more bank branches and more people
have bank accounts than they did when the first scheme
was launched.
Second, India’s infrastructure has improved. It has
an LBMA-accredited gold refinery, which can play an
important role in this scheme by promoting trust in the
gold flowing through the monetisation ecosystem. And the
launch of the Indian Gold Coin and the New Hallmarking
Act will provide a trusted gold product and standard for
use by the banking system.
But it still faces significant challenges. For the scheme
to be a success it needs to address the key issues we
have highlighted: trust, ease of use, incentives and
infrastructure. If any of these are overlooked, the
scheme may struggle.
It is important that realistic expectations are set. Despite
the significant stock of gold in India, our view is that
little of it will be monetised anytime soon. It will take
time to build the necessary infrastructure, for banks to
develop and market the right products, and for customers
to respond. Once that infrastructure is in place greater
volumes of gold can be monetised; we envisage up
to 25t being monetised within the next two to three years.
We expect gold loans to continue to play a significant role
in India, especially in rural communities. The make-up of
the sector will evolve as the government presses ahead
with its financial inclusion policies and the formal sector
plays a greater role. Money-lenders and pawnbrokers
could lose market share to banks and gold loan companies.
Within the formal sector, because of tighter regulations
governing gold loan companies, we can see a subtle shift
in favour of banks.
54
7: Bullion trade

Between 2000 and 2015 India officially imported 10,345t of

gold bullion. Following the removal of the 80:20 rule a diverse
range of Indian operations can now import gold, including
banks, star trading houses, premier trading houses and export-
oriented units (EOUs). Despite growth in shipments from
a range of countries, Switzerland remains by far the most
important source for official bullion imports, with its share rising
from around 50% in 2005 to 55% in 2015. Gold doré imports
have also grown sharply in recent years. In 2014, doré imports
accounted for around 10% of total official imports; by 2015 the
share increased to 24%. But changes to imports duties in 2016
cloud the outlook for doré inflows.

Wholesale imports and importers
Imports account for the lion’s share of India’s
gold supply
India is one of the largest consumers of gold in the world.
But jewellery and industrial manufacturers remain heavily
reliant on gold imports (Chart 34).
Over the past 40 years, gold has made its way into the
country via a number of routes. Between 1963–1990,
the Gold Control Act regulated the domestic market.
Owning bars was illegal and jewellery fabricators and
retailers needed licences to operate. Bullion dealers
stopped trading. To meet demand, the gold industry
was obliged – theoretically – to recycle existing
gold stocks.95

Chart 34: Indian official imports of gold (fine gold content)

Tonnes
1,200

1,000

800

600

400

200

0
2000 2003 2006 2009 2012 2015
Source: Indian Customs; Metals Focus; World Gold Council

9 5 World Gold Council, An Introduction to the Indian Gold Market, 2001.

India’s gold market: evolution and innovation 55

As we discuss in detail in Chapter 10, this Act was Table 16: Companies importing gold in India
repealed in 1990 and in 1992 the Non-Resident Indian
Banks Trading houses/agencies
(NRI) programme 96 was introduced. This became the
Axis Bank Metals and Minerals Trading
preferred route for bullion imports; upwards of 1,000t of Corporation Ltd (MMTC)
gold was brought in by NRIs between 1992 and 2000.97 Bank of Baroda Handicraft and Handloom Export
Corporation (HHEC)
In 1997, as part of its programme to liberalise the
Bank of India State Trading Corporation (STC)
economy, the government introduced the “Open General
Bank of Nova Scotia Project and Equipment Corporation of
License” (OGL) scheme. Under this arrangement, banks India Ltd (PEC)
were allowed to import gold into the country. The scope Corporation Bank STCL Ltd
of participants allowed to import bullion has widened Federal Bank Ltd MSTC Ltd
over the years and NRIs now officially bring only trivial HDFC Bank Ltd Diamond India Limited (DIL)
quantities of gold into the country.
ICICI Bank Ltd Gems & Jewellery Export Promotion
Council (G&J EPC)
A range of companies can import gold
Indian Overseas Bank EOU and SEZ gems and jewellery units,
Although shipments are no longer restricted, various for their own consumption 
government agencies, including the Reserve Bank of India IndusInd Bank Ltd Premier Trading Houses 
(RBI), the Director General of Foreign Trade (DGFT) and
Kotak Mahindra Bank Ltd Star Trading Houses
the Ministry of Finance, control who can import gold into (only for the gems and jewellery sector) 
India. Banks are authorised by the RBI, while agencies Karur Vysya Bank Ltd
are covered by foreign trade policy (FTP) and are licensed Oriental Bank of Commerce
by the DGFT. As of mid-2016, bullion can be imported by PNB
nominated agencies (including banks) and trading houses;
South Indian Bank Ltd
nominated agencies account for the largest share of the
State Bank of Hyderabad
bullion import trade.
State Bank of India

Aside from the companies named specifically as Union Bank of India

nominated agencies there are two larger groups of Yes Bank Ltd
importers: Premier Trading Houses (PTHs) and Star Trading The Ratnakar Bank Limited
Houses (STHs).98 PTH/STHs are firms that have excelled in
Source: Metals Focus; World Gold Council
international trade and have successfully contributed to the
country’s foreign trade. Under the new Foreign Trade Policy
2015–20, Premier Trading Houses and Star Trading Houses
have been re-classified as Five Star Export Houses and
Four Star Trading Houses. Each are defined by their ‘export
performance’: specifically, the value of their exports during
the current and previous two financial years. According
to the new Foreign Trade Policy, Four Star Export Houses
should have an export performance of US$500mn in at
least two of the previous three years, rising to US$2bn for
Five Star Export Houses.

There are clear differences in how these entities are

allowed to execute gold imports and for what purpose.
Banks import gold on a consignment basis,99 whereas
nominated agencies, STHs and PTHs are only allowed to
import on a direct payment basis.
Bullion bars.

9 6 This was an initiative of the Ministry of Commerce and Industry, which enabled large quantities of gold bullion to be imported officially.
Under this scheme, NRI’s were allowed to bring in up to 10kg of gold bars and other approved gold items if they had been away from the
country for a minimum of six months.
97 World Gold Council, An Introduction to the Indian Gold Market, 2001.
9 8 STH and PTH are import and export houses, some of which are also manufacturers. All exporters of goods, services and technology with
an import-export code (IEC) are eligible for recognition as a STH/PTH. Recognition depends on export performance. In 2015, the government
amended the nomenclature of these entities to One Star, Two Star, Three Star, Four Star and Five Star Export Houses.
99 Trade on a consignment basis involves payment being made to the exporter only once the imported goods have been sold to the local
customer. The exporter remains the owner of the goods until they have been sold.

India’s gold market: evolution and innovation 56

Up until the RBI lifted the restriction in February 2015,
PTHs and STHs were prohibited from delivering imported
gold to firms serving the domestic market, while banks
and nominated agencies were not. Now, as their name
would suggest, only export oriented units – EOUs – are
prohibited from selling gold into the domestic market.
Key importing cities
All of the gold officially shipped into India is by air, with
11 points of entry into the country. These airports are
typically close to key manufacturing and trading hubs,
namely:
• North: New Delhi
• West: Mumbai, Ahmedabad, Jaipur
• South: Bengaluru, Chennai, Cochin, Coimbatore,
Hyderabad, Trivandrum
• East: Kolkata.
In 2015, 85% of gold imports came through airports
located in northern and southern India, with the remaining
15% coming through airports in the East and West.
The imported gold flows from these airports into the
country’s network of storage facilities. India is home
to 11 bonded customs warehouses, one at each of the
11 points of entry, and around 30 gold vaults.
Official import trends
There has been little change in the main countries
shipping gold bullion into India
In 2015 India imported around 939t 100 of refined gold bars
and doré (officially) from over 30 countries; 101 60% came
from just two countries – Switzerland and the UAE. The
top five exporters to India have remained largely constant
in recent years, even though new sources have emerged
(Chart 35).102
In the main, these countries export 1,000g cast, 995 and
999 fineness bars from refineries such as: Asahi Holdings
(US and Canada), Rand Refinery (South Africa), Valcambi,
PAMP, Metalor, Argor-Heraeus (all Switzerland) and the
Perth Mint (Australia).103

Chart 35: Top gold exporting countries to India during 2005-2015

Tonnes
1,200

1,000

800

600

400

200

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Switzerland United Arab Emirates South Africa Australia
United States Ghana Dominican Republic Others

Source: GTIS; Metals Focus

100 Of which around 710t is refined gold and 229t is gold dore (fine gold content).
101 GTIS.
102 Indian Customs, GTIS.
103 Gold Bars Worldwide, Grendon International Research.

India’s gold market: evolution and innovation 57

Gold doré imports have undergone significant Table 17: Top countries of origin of gold doré
change in recent years imported by India104 (tonnes)
An interesting development in recent years has been
Country 2012 2013 2014 2015
the rapid growth in gold doré shipments (Table 17). One
Ghana 0 1 13 73
factor that triggered this growth was the import differential
USA 9 21 38 50
between refined bullion and gold doré. Up until 2016 the
Dominican Republic 0 0 5 44
import duty on refined gold was 10% whereas headline
Tanzania 3 5 11 17
import duty on doré was 8%, creating a duty differential
of 2%. Although importers also end up paying other taxes, Peru 1 1 3 12

making the net duty differential less than 1%, there was a Other 10 9 5 33

clear incentive to import doré. The path to expanding doré Total 23 37 75 229

imports has, however, faced a series of challenges. Source: Metals Focus; World Gold Council
(For more detail on the tax incentives to import doré,
please see Chapter 8).

Focus: Gold pricing in India

Price discovery in India is less transparent and efficient than
other markets, such as London or Shanghai, which have
either a formal gold exchange (SGE) or a structured OTC
market. One reason is that, unlike London, India does not
act as a global trading hub. The market is relatively closed:
trading entities and refineries based in India are not allowed
to export bars. Equally important is the fact that the Indian
gold market is heavily regulated by the government.
The illustration below shows how the landed cost of gold
was determined on 1 March 2016, using the prevailing
gold price and custom rates:
Table 18: Gold price in India
Stages in determining landed cost of gold
a LBMA AM Price (US$/oz) for 995 purity 1,240
b Bank Charge (US$/oz) assumed at 0.25% (a*0.0025) 3.1

Two important factors help determine the gold price at c Total 995 price (US$/oz) (a+b) 1,243.1

which bullion is sold in the domestic market. The first is d Conversion to US$/kg (c*32.1057) 39,910.6

the landed cost of gold and the second, the premium or e RBI Referrence Rate (USD/INR) 68.2
discount prevailing in the local market. f Conversion to Rs/kg (d*e) 2,720,226.7
g Custom Tariff in Rs/kg 2,751,105
The landed cost is determined by spot dollar gold prices, h Custom duty (g*Custom duty rate at 10%) 275,110.5
the US$INR exchange rate, and the custom tariff rate. The i Landed Price in Rs/kg (f+h) 2,995,337.2
custom tariff is set by the government every fifteen days
Landed Price in Rs/10g 29,953.4
depending on the price of gold in the global market. The
customs duty should not be confused with the tariff rate Source: Metals Focus; World Gold Council
– the customs duty is levied on the tariff rate. This is to
help maintain the uniformity of the duty value and to avoid
under-invoicing.

104 GTIS, Indian Customs, Metals Focus.

India’s gold market: evolution and innovation 58

Focus: Gold pricing in India – continued
The final selling price is the landed cost plus the premium
or discount in the local market, which can lead to some
large variations. There are several factors that can
determine premiums and discounts. Most important is
the interplay between international prices and domestic
demand. For example, weak demand can push the
market into discount. Premiums and discounts are also
affected by factors such as inventories held by bullion
dealers, manufacturers or retailers, and changes in the
tariff rates (Chart 36).
India’s diversity plays an important role, with each region
characterised by different seasonal patterns of demand
and consumer tastes. And taxes vary across states. As
a result, it is hardly surprising that India does not have a
uniform gold price, with different trading centres each
capable of creating their own gold price at any given time.
For example, it would be a rare event to find that the gold
price in Mumbai, New Delhi, Kolkata and Chennai were
the same on any given day. The prices for 22k and 24k
gold are usually notified by the local bullion association in
each major trading hub, e.g. the local gold price in Kolkata
(the capital city of the state of West Bengal) usually comes
from the price published by the West Bengal Bullion
Merchants and Jewellers Association (based in Kolkata),
and the price in Chennai comes from the price published
by the Madras Jewellers and Diamond Merchant’s
Association.

Chart 36: India's gold price can differ greatly from the LBMA Gold Price (previously the LBMA fix)
US$/oz
200
21 January 2013 13 August 2013
Import tax increased Import tax increased
to 6% from 4% to 10% from 8%
150
22 July 2013 28 November 2014 Period of
Introduction of Removal of 80:20 weak
80:20 policy policy demand
100 1 January 2016
PAN card mandatory on
jewellery purchases
above 2 lakhs
50

-50 5 June 2013

Import tax increased
to 8% from 6%

-100
13

13

14

14

15

15

15

6
01

01

01

1
20

20

20

20

20

20

20

20

20

20
r2

r2

r2
h

ne

ch

ne

ne

ch
be

be

be

be

be

be
c

c
ar

ar

ar

ar
Ju

Ju

Ju
em

em

em

em

em
M

M
e
pt

ec

pt

ec

pt

ec
Se

Se

Se
D

Source: World Gold Council

India’s gold market: evolution and innovation 59

Limited availability and competition are key
roadblocks to sourcing gold doré
According to Metals Focus, in 2015, globally, only around
1,600t of gold doré was available on the open market
for export and refining, well below what was needed to
satisfy demand. Of total global gold mine production of
3,211t, some 15% of this was recovered to concentrate,
leaving around 2,600t mined in doré or gravity
concentrate form.105
But an important share of global doré can be defined as
captive – it does not reach the international market.106
This covers doré mined in China (460t), Russia (263t),
South Africa (166t) and Ontario in Canada (73t).107 This
leaves around 1,600t of doré on the open market;
significantly less than 2015’s global mine supply total.
The second challenge facing Indian refineries concerns
the growing competition in sourcing this limited amount
of doré. Global refining capacity has grown in recent years
through a combination of new plants and upgrading of
existing installations. And global recycling has declined
sharply, from a record total of 1,728t in 2011 to an
estimated 1,127t in 2015. Competition for doré is fierce.
As is the 2016 change in import duties
Beyond the challenges of sourcing the raw material, in
the 2016 Budget, duties on doré imports were changed.
This narrowed the differential between bullion and doré,
thereby reducing the incentive for refineries to spring
up and import gold doré. Indeed, the pressure in India’s
refining industry is such that some refineries are now
shutting up shop and doré imports have already
started to shrink.
Smuggling
Bullion import regulations have, at times, encouraged
unofficial flows into India
Given India’s insatiable appetite for gold and the
restrictions the government has placed on imports,
unofficial flows have often been an important, if
problematic, source of gold supply for the Indian market.
The Gold Control Act created a lively market in smuggled
gold, but its repeal in 1990 saw unofficial imports collapse
as the market liberalised. Fast forward to 2013 and the
government introduced several measures in an attempt
to control gold imports, which had ballooned. This began
with a gradual rise in the import duty which eventually
reached 10%. This was followed by a ban on coin and
105 Metals Focus.
106 Where the export of doré is prohibited, such as in China or Ontario, or where an export duty makes it
uneconomic to export the doré, such as in South Africa.
107 Metals Focus, Gold Focus 2015.
108 Metals Focus.
India’s gold market: evolution and innovation
minted bar imports, and the 80:20 rule, under which
20% of imported gold had to be re-exported as
finished jewellery.
These measures created significant market distortions,
which resulted in a surge in domestic gold premiums –
at times during early 2014 exceeding US$100/oz. All of a
sudden it became very profitable to smuggle gold
into India (Table 19).
Table 19: Unofficial gold bullion imports in India (tonnes)
2012 2013 2014 2015 2016F
8 150 225 119 120-135
Source: Metals Focus; World Gold Council
A variety of routes are used to smuggle gold into India.
The majority – around 65–75% – comes in by air, around
20–25% by sea, and 5–10% by land.108 Most of the gold
flown into India comes from the Middle East, notably
the UAE. Smuggling is usually carried out by low income
workers returning home; they receive carrier fees as well
as a sponsored air ticket. Smuggling via land or sea routes
tends to occur through the relatively porous borders that
India shares with its neighbours, notably Pakistan, Nepal,
Bangladesh and Sri Lanka. In the first half of 2016, in
response to the newly imposed 1% manufacturing excise
duty, smuggling activity from Thailand also increased.
Outlook
Imports will remain the critical source of supply to India’s
gold market for many years. In the short-term, the removal
of some import restrictions will have two main benefits.
First, nominated agencies will be better able to source
bullion with which to meet the apparently ceaseless
appetite for gold in India. Second, this increased flow of
gold will likely make the environment less attractive for
unofficial gold imports. That said, for 2015 our estimate for
gold smuggled into India is not insignificant: we estimate
119t of gold landed in India through unofficial channels.
And we expect 2016 gold smuggling to be higher, because
of the 1% manufacturing excise tax.
The outlook for doré imports is less certain. Indian
refineries already face challenges in sourcing doré, and
the reduction of the doré/bullion differential in the 2016
Budget has reduced the incentive for refineries to source
doré. The huge excess refining capacity in India will come
under further pressure in years to come, and we may see
closures and consolidation in the industry.
60
8: Gold refining and recycling

Indian gold refining capacity jumped in recent years,

encouraged by a favourable import duty framework.
There are now 30 organised refineries, with a combined
capacity in excess of 1,450t. Looking ahead, the refining
industry faces some challenges and is likely to enter a
period of consolidation.

India’s gold refining landscape
India is reliant on imports and recycling to meet
gold demand
India is dependent on gold imports, either in refined or
doré form, to meet its needs. Gold imports account for
around 85% of total supply, and the refining sector plays
an important role in taking these imports and putting them
in a form suitable for India’s gold industry. For example,
either re-casting imported 1kg bars into smaller bars for
onward delivery to jewellers, or refining doré into purer
gold. The refining industry also recycles old gold jewellery,
which accounts for around 15% of supply.
gold refining production. But this is just one criterion that
must be achieved to become LBMA-accredited. Others
include: a net worth of at least £15m; a minimum of five
years of operations, three of which must have achieved
the minimum production output; satisfying Know Your
Customer (KYC) tests and, finally, the ability to implement
the LBMA’s Responsible Gold Guidance.109
The informal sector accounts for a sizeable volume
of capacity. By definition, this is extremely difficult to
estimate, but we would not be surprised if the informal
sector had a further 100–200t110 of refining capacity, taking
India’s refining capacity overall to 1,600–1,700t.

The refining sector has grown in recent years Chart 37: India’s refining landscape
India’s long-established refining sector has seen a sharp
rise in new capacity in recent years. The organised refining
landscape has grown sharply from a mere three or four
refineries in 2013 to 30 in 2015, taking the total capacity Number
of refiners
above 1,450t. The majority of refineries have an annual >50t 19
capacity of less than 50t (Chart 37). 51-150t 6
151-250t 3
While Rajesh Export’s refinery, with a capacity of 350t, is >250t 1
India’s largest, MMTC-PAMP is India’s only gold LBMA-
accredited refiner, gaining its certification in 2014. It is
likely that other refineries in India will follow MMTC-
PAMP’s lead, especially as the gold monetisation scheme
develops. It is also likely that a small number of operations
will soon reach the minimum threshold of 10t of annual Source: Metals Focus; World Gold Council
38%

109 London Bullion Market Association.

110 Metals Focus.

India’s gold market: evolution and innovation 61

Tax incentives have encouraged doré imports
The expansion of the organised sector has been supported
by a favourable government stance, including the bullion/
doré import duty differential. But much of this additional
capacity remains under-utilised, largely because of the
difficulty in sourcing doré and the limited availability of
recycling material. It is likely Indian refineries are operating
at only 15%–20% of their capacity and although some
26 refineries imported doré in 2015, over 90% of imports
were concentrated among just six refineries.
Today, the Indian refining landscape can be divided
between two distinct zones: the Domestic Tariff Area
(DTA) and the Excise Free Zone (EFZ). Refineries based in
DTAs are liable to pay countervailing duty (CVD), as well
as excise duty, whereas those operating in EFZs just pay
the CVD; they do not pay excise duty.

Figure 1: A stylised illustration of the doré/bullion import differential

Ghana Switzerland

Tanzania USA UAE USA

Doré imports Bullion imports

Tax: 8.75% (8%) CVD Tax: 10% BCD

Refineries in EFZ (Excise Free Zone) Refineries in DTA (Domestic Tariff Area)
Bullion banks, trading houses and nominated
agencies (trading houses include Rajesh
Exports, Zaveri & Co. Ltd; nominated agencies
include MMTC, PEC Ltd., STCL)
No excise duty 9.35% (9%) Excise duty, CVD rebated

Refined bars sold to bullion dealers, Refined bars sold to bullion dealers,
jewellery manufacturers and jewellery manufacturers and Refined bars sold to bullion dealers,
jewellery retailers jewellery retailers jewellery manufacturers and
jewellery retailers

Effective Tax: 8.75% (8%) Effective Tax: 9.35% (9%)

Tax differential between refined bars Tax differential between refined bars
from EFZ and imported bullion bars: from DTA and imported bullion bars: Tax: 10%
1.25% (2%) 0.65% (1%)

Key:
Tax: Percentages within brackets refer to pre-February 2016 union budget tax rates,
percentages outside the brackets refer to the current, post-2016 union budget tax rate

India’s gold market: evolution and innovation 62

Spurred on by these tax incentives, around half of new
capacity since 2014 has been concentrated in EFZs; as of
2015 just 16 refineries operate outside of the EFZ. This is
explained by the headline import duty differential between
refined gold and doré. Until early 2016, this differential
was around 2%: basic custom duty (BCD) on refined
gold of 10% compared with 8% CVD for doré. As a
result, refineries were able to import doré at 8%, in
contrast to the 10% rate at which permitted banks or
nominated agencies could import refined gold. Since the
FY2016–17 union budget (in which the import duty on
doré was increased to 8.75%), that differential has shrunk
to 1.25%. Nevertheless, the incentive remains.
When assessing the margins made by refiners, excise
duty must be considered (Figure 1). All products
manufactured in India attract excise duty, which for gold
is 9.35%. This means that a refinery in the DTA is liable
to pay 9.35% on its finished product. The government,
however, allows the excise duty to be offset against
the 10% import duty and so refineries in the DTA pay
9.35% as the import duty, giving them a differential of
0.65%. In contrast, refineries in the EFZ are exempt from
the excise duty and so pay an 8.75% import duty, thus
maintaining a 1.25% differential. In order to rationalise
the duty differential between the DTAs and the EFZ,
the government has levied an entry tax of around 0.2%
in Uttrakhand – the region where most of the refineries
under the EFZ operate. The duty differential, along with
the extremely low cost of refining (of around US$2–3
per ounce), leaves refineries with a margin of between
0.65%–1.25%, depending on the zones in which
they operate.
India’s legislative landscape: controls on growth in
refining and responsible sourcing of doré
The government has two legislative areas that are
designed to protect and enhance the reputation of Indian
refiners and the country’s jewellery export industry.
The first concerns the rules for setting up a refining
operation. These include, but are not limited to: pollution
control licences; a charter engineer certificate of capacity
justification; and registration with the appropriate bodies,
e.g. State Department of Industries/Small Scale Units and
recognised trade bodies. If the refinery wants to import
doré, it needs approval from the Director General of
Foreign Trade.
India’s gold market: evolution and innovation
The second relates to guidelines that must be followed
when sourcing doré for refining. These include, but are
not limited to: ensuring the goods are sourced directly
from the country where the doré is produced; a minimum
weight of 5kg per bar; the inclusion of both a packing
list and an assay certificate, to be issued by the mining
company and the latter to be provided to the Deputy
Commissioner of Customs and an assay certificate issued
by the mining company and provided to the Deputy
Commissioner of Customs by importers.
The aim of this legislation is to help the industry establish
a chain of custody. For refiners, the aim is to ensure that
the imported doré is genuine rather than, recycled gold or
manufactured doré. Many in the industry believe that in
time this legislation could increasingly reflect international
standards. This would benefit those Indian refineries that
choose to apply for LBMA accreditation. The government
is also mindful of the potential reputational issues that
jewellery exporters may face in the future if they use
gold that is not responsibly sourced. The legislation
aspires to protect against this.
Products offered by Indian refineries
Product offerings by global refineries can be distinguished
between speciality products (such as precious metals
chemicals including gold potassium cyanide and other
salts) and general products, including kilo bars, minted
bars and investment bars. Very few refineries in India offer
speciality products.
The majority of Indian refineries produce larger bars or
100g cast bars for use by jewellers and other precious
metal manufacturers. Some also offer 100g minted bars
to jewellers.
Over the years, Indian consumers have become
increasingly aware of a growing range of investment
products available globally. This in part reflects high profile
promotional campaigns by banks, e.g. ICICI, HDFC, Indian
Bank, which – before the restrictions were imposed –
offered imported minted and investment bars. This in
turn has encouraged Indian refineries to enhance the
quality of their minted bar offering, both in terms of
purity and packaging.
63
Some of the most common investment products offered
by these refineries include 2g, 5g, 8g, 10g and 50g bars
and coins. The premiums on these bars and coins can vary
from 2%–8%, depending on the refinery and the product
offering. But in general, the higher the denomination, the
lower the premium. Premiums also vary depending on
the distributor; direct purchase from the refiner attracts a
lower premium than when buying from a bullion dealer.
Premiums are higher still when gold is purchased through
a financial intermediary.
Finally, refineries can also offer minted bars and
investment bars made available as blanks. Blanks are
basically round or rectangular shaped gold or silver coins
and bars, to which the seller adds their name.
Recycling trends
Recycling is an important source of supply
for jewellers
Recycled gold plays an important role in India’s gold
supply, fulfilling around 15% of Indian jewellery fabrication
needs since 1990.
Payout rates offered by retailers differ according to the
type of old gold jewellery being sold. A customer would
typically receive 100% of the weight of the gold content
for hallmarked 22k jewellery. The payout rate used by
the jeweller, however, will not be the gold price itself.
It will typically be around 5%–7% below the jeweller’s
selling rate.
If the gold being sold back by the consumer is not
22k purity the payout rate will fall as the caratage
decreases:111 21k typically receives 85% of the weight of
the gold content; 20k 82%; and 18k 75%. These rates vary
across the country, according to the type of jeweller and
the bargaining power of the seller. Consumers in rural India
sometimes receive lower payout rates, usually between
80%–85% for 22k. This is largely because awareness of
caratage in rural India is relatively low; 18% of rural Indian
respondents to a consumer survey we conducted in early
2016 said they did not know the caratage of their jewellery.
Consumers may get a better deal in the not too distant
future. Developments in hallmarking – as outlined in
Chapter 10 – will provide consumers with greater
certainty over the caratage of their jewellery. Refineries
such as MMTC-PAMP and Bangalore Refinery, as
111 Metals Focus, discussions with a cross section of prominent retail jewellers across the country.
India’s gold market: evolution and innovation
Indian recycling
Recycled gold has
15%
accounted for around
of Indian jewellery fabrication
since 1990
well as the gold loan company Muthoot, have set up
recycling collection centres in major towns, sometimes
in conjunction with jewellers. If successful, recycling
collection may become more organised, efficient and
higher profile. Increased transparency in this part of the
market could see consumer payout rates rise.
Recycling definitions
Before we delve into the detail, a distinction needs to be
made between two types of recycling: gold sold for cash
and gold exchanged for gold. In many price-sensitive
markets – such as China, Turkey and India – consumers
often exchange their gold jewellery, bars or coins, for
new pieces of gold jewellery. The only cost to them is the
making charge. This can provide a significant flow of gold.
For example, in Chapter 2, we discussed how in the run
up to the wedding season many families will exchange
gold that has been accumulated over many years for new
pieces of wedding jewellery.
Gold sold for cash, on the other hand, is the recycling
estimate we report in Gold Demand Trends. This
represents the supply of gold to the market as a result of
people selling their gold, and plays an important role in
understanding supply and demand dynamics.
In this section we touch upon both types of recycling
to provide as complete a picture of the recycling market
as possible.
Jewellery is the largest source of recycling
There are three sources of gold recycling: jewellery,
manufacturing scrap, and end-of-life industrial products.
Jewellery scrap is the largest segment, accounting for
90%–95% of all recycled gold. This is sourced from
individuals (either selling gold for cash or exchanging it
for new gold), or pawn brokers and gold loan companies
selling gold used as collateral for defaulted loans.
64
While some major cities have a small number of gold
scrap aggregators that collect from the public, individuals
wishing to recycle their gold typically use their local
jeweller for these transactions. As the majority of
jewellers run their own melting shops, they often take old
jewellery from pawn brokers or money lenders as well.
Although pawn broker default rates are extremely low by
international standards, we estimate they may be as high
as 10%–15%.112 Gold loan companies also auction gold
jewellery that has been pledged, but on which customers
have subsequently defaulted – usually between 1%–2%
of their total assets (see Chapter 7). This can be bought
either by jewellers or by refiners.
Manufacturing, or process, scrap113 is largely the
wastage that occurs from manufacturing gold jewellery
or investment products. Since most jewellery is
manufactured either by standalone or organised
manufacturers, or by retail jewellers themselves, and is
typically high carat, the wastage is often recovered and
processed by jewellery manufacturers. Rarely does it
flow to refineries.114
Industrial recycling accounts for a very modest share of
total Indian gold scrap supply. Even so, three points are
worth making. First, in keeping with other markets, Indian
collectors have experienced a decline in the grade of
material being processed, as the precious metal content
in, for example, old mobile phones and printed circuit
boards, continues to fall. Second, the bulk of this material
is treated overseas and tends not to re-enter the Indian
gold market. Finally, where precious metals are recovered
from old industrial products domestically, it is largely an
informal industry.115
Chart 38 captures all three of these types of recycling.
It is a broader definition for recycling than we use in
Gold Demand Trends; it also includes old gold that is
exchanged for new gold and subsequently refined, as
well as imported jewellery due to be recycled. This
broader definition gives a better sense of the total volume
of recycled gold flowing through India’s refineries and
manufacturers, rather than just the call on the market
as measured by our narrower, Gold Demand Trends’
definition.116

Chart 38: Total Indian old gold recycling,* 2010-2015

Tonnes
350

Recycling peaked in response

300
to high prices in 2012

250

200

150

100

50

0
2010 2011 2012 2013 2014 2015
* This is a broader definition of recycling than that used in Gold Demand Trends. This includes recycling of imported jewellery scrap,
recycling generated by manufacturing and also scrap sourced from the retail trade where old jewellery is exchanged for new jewellery
(where the customer, therefore, pays only a labour charge, as well as any difference in the weight between the two pieces).
Source: Metals Focus; World Gold Council

112 Metals Focus.

113 See Glossary in Appendices.
114 Metals Focus.
115 World Gold Council and the Boston Consulting Group, The Ups and Downs of Gold Recycling,
Understanding Market Drivers and Industry Challenges, March 2015.
116 Recycled gold as defined in Gold Demand Trends measures gold sourced from fabricated products that
have been sold or made ready for sale, which is refined back into bullion.

India’s gold market: evolution and innovation 65

Key drivers of gold recycling in India But what else affects the level of recycling? Our
Despite being the fourth largest recycler in the world, econometric analysis revealed that a 1% increase in GDP
India recycles remarkably little of its stock of gold pushes Indian recycling down 0.5%. It is intuitive that as
(Table 21). In 2015 recycling represented less than people become richer they are less inclined to sell their
1% of total household gold stocks. But the above-ground gold. In other words, the volume of ‘near market’ jewellery
stock of jewellery plays an important role in the level of stocks diminishes. We also see this in consumer research.
recycling. We know India has a huge stock of gold – Between 2013 and 2014 we surveyed over 10,000 Indian
some 23,000–24,000t. This will only increase over time consumers and those with the highest level of income
and as it does so we can expect the level of recycling to were the least likely to sell their gold (Chart 39).
slowly rise too. We see this at a global level: over the past
35 years, as the global stock of jewellery has increased so Higher prices, however, boost recycling: a 1% price
too has the level of recycling. increase pushes up recycling by 0.7%. While this may
be intuitive, we can delve into the topic in a little more
Table 21: Top six gold recycling countries* detail. Prices can be broken down into three inter-related
2010–15 (tonnes)117 areas: prevailing price levels, the rate of change in prices,
and consumer price expectations. At any given time,
2010 2011 2012 2013 2014 2015 Total
there are key price points which will act as buy or sell
United States 229 306 224 161 104 85 1109
signals for consumers, although these will change as price
Turkey 140 105 156 92 123 166 782
expectations change. This in turn will be affected by price
China 129 127 140 98 118 107 719 volatility. For example, recycling may not rise in line with
India 82 84 118 96 93 80 553 gently rising prices, as consumers may expect prices to
Italy 95 119 120 105 86 83 608 continue rising. But when prices jump, recycling will often
Iran 63 45 66 43 57 38 312 jump too, as consumers take advantage of an unexpected
* This is the same definition of recycling used in Gold Demand Trends. price increase. When prices fall and are expected to
It captures scrap generated in the country of origin, irrespective of weaken further, people sell gold in order to raise cash.
where the material is refined. It excludes scrap generated as a result of
They then use that cash to re-enter the market at a time
the exchange of old for new jewellery at the retail level. It also excludes
production/process scrap. This metric is therefore designed to capture the they believe prices have bottomed out.
call on each respective gold market.
Source: Metals Focus; World Gold Council

Chart 39: Higher income households are less likely to sell gold jewellery
% of respondents who had sold gold in the past 12 months
45

40

35

30

25

20

15

10

0
<59,999 60,000-179,000 180,000-299,999 300,000-419,999 420,000-499,999 >500,000
Rupees
Source: Kadence; World Gold Council

117 Metals Focus, Gold Focus 2016.

India’s gold market: evolution and innovation 66

Outlook
India’s refining industry has gone through a remarkable
period of change since 2010. Its capacity has increased
by 750t over the past two years and the country has its
first LBMA-accredited gold refinery; it is likely others will
follow suit. This new-found capacity has generated a huge
appetite for doré, from almost nothing in 2013 to just over
300t in 2015. This is a remarkable change in the dynamics
of Indian imports. However, the latest change in duty
structure will likely reduce this inflow of doré, as it is now
more difficult for smaller refineries to source the material.
There is overcapacity in the refining industry and we
believe the sector will likely enter a phase of consolidation.
A number of policies will continue to support recycling and
refining. Another pillar of support is Prime Minster Modi’s
“Make in India” campaign. The aim of this programme
is to attract overseas investment and make the country
a global manufacturing hub. One of the proposals from
the jewellery industry is to develop a gold policy which
includes, among other things, gold recycling. Finally,
there is the gold monetisation scheme. Initially, we believe
it will mobilise only a modest amount of gold. But over
time, if the scheme is well structured, this could grow.
Increased recycling levels will also, at the margin,
support the refining industry.

The threats to the industry are two-fold: sourcing

sufficient doré to utilise the industry’s capacity, and
protecting India’s refining and recycling reputation. The
government is keenly aware of the threat to India’s
reputation, and has put in place legislation and processes
to protect and improve it. Over time, it is likely these will
edge ever-closer to international standards.

Refining sector

2013 to 2015
Capacity in the industry increased by 750t

India’s gold market: evolution and innovation 67

9: Gold mining

India has a long history of gold mining, but current

production levels are very low; in 2015 India mined less
than 2t. The industry does, however, have potential. Mineral
reserves and resources total 71.9t and 574.3t respectively.118
Over the coming years mine production is expected to grow
modestly as new mines enter the production phase. But the
industry faces significant challenges. For mining to develop
in India, regulations need to be reviewed and the industry
needs investment.

Gold mining history Southern India has gold-favourable geology

India has a rich heritage of gold mining, albeit on

a small scale Hutti Gold Mines
Although gold mining dates back to the first millennium (Raichur District) Andhra Pradesh

BC, in the twentieth century the sector was dominated by

the Kolar Gold Field, near Bangalore. The field is hosted
within the Kolar Greenstone Belt, a 3km to 6km wide by Dharwar-
Shimoga
80km long band of greenstone geology – a terrain similar Basin
to that which hosts many of the world’s most significant
gold discoveries. The Belt predominantly lies along the Kolar
Gold Belt
southeast edge of the state of Karnataka, but also under
parts of Andhra Pradesh and Tamil Nadu.119 Bengaluru 100km

Kamataka
The Kolar Gold Field produced more than 800t
of gold during its 120 year history before its closure in
2001.120 During the first two decades of mining N

(1884–1904) the average grade of ore produced from the 0 100km

Kerala Tamil Nadu
shallow underground mine was an impressive 45g/t,
while over its total 120-year life span the average ore Geology legend
grade was 15g/t.121 In comparison, gold grades from
Gold locations Late archean granulite
South Africa’s prolific Witwatersrand Basin have averaged facies terrain
Pan-African granulite
around 9g/t over a comparable time frame.122 facies terrain Archean-early proterozoic granitoids
with enclaves of archaean and early
Proterozoic volcano-
proterozoic greenstone belts
sedimentary fold belts
(Neliore) Archean greenstone belts

Deccan flood basalts Peninsular gneiss and migmatites

Proterozoic and younger

sedimentary basins
Eastern ghats mobile belt

Source: Kolar Gold

118 Ministry of Mines, Government of India – Annual Report 2014–15; in terms of gold metal content.
119 Kolar Gold (www.kolargold.com.au)
120 Geological Survey of India (www.portal.gsi.gov.in)
121 Kolar Gold (www.kolargold.com.au)
122 South African Chamber of Mines (www.chamberofmines.org.za)

India’s gold market: evolution and innovation 68

During the latter years of the Kolar Gold Field, gold was
primarily extracted from three mines (Champion, Mysore
and Nandydroog) within the East Kolar region. Mining
became uneconomic in the late 1990’s due to poor
management, a lack of exploration, under-investment and
a misplaced focus on labour-intensive deep underground
mining. The Kolar operations were finally abandoned
in 2001. By this time, the mine had reportedly reached
a depth of 3,200mn, while workings stretched along a
7.3km strike and included 100 shafts and 1,400km of
underground development.
The other significant gold producer in India has been Hutti
Gold Mine,123 located in the Raichur district of Karnataka.
The operation initially entered production in 1902, although
it subsequently closed in 1918. Since its restart in 1947,
through to 2014, it has produced some 90t of gold, and
is currently the only gold producer in India. Ore from the
main Hutti mine is now supplemented by satellite feeds
from the Uti (open pit) and Hira-Buddinni (underground)
deposits, and the company currently has reserves for
another 50 years of mining124 (Chart 40).
Historically, gold has also been produced from a number
of other deposits, including as a by-product of domestic
copper production. These additional sources have
been limited in volume. The other main source of gold
production in India is from Birla Copper’s125 copper
smelter at Dahej, Gujarat, which processes imported
copper concentrate. The plant has an installed gold
capacity of 15t/yr,126 although is currently only producing
around 8 –9t/yr.

Chart 40: Indian mine production from primary source* 1970-2015

Tonnes
4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
*Mine production includes production from primary sources only and does not include gold output
from secondary sources e.g. Birla Copper Smelter which processes imported copper concentrate.
Source: Indian Bureau of Mines; Metals Focus

123 Hutti is currently the only company mining for gold in India, and is fully-owned by the Governmernt of Karnataka.
124 Hutti Gold Mines (www.huttigold.co.in)
125 Birla Copper is a subsidiary of Hindalco Industries.
126 Indian Minerals Yearbook 2013 (52nd Edition), Part II: Metals and Alloys, Gold – Government of India Ministry of Mines,
Indian Bureau of Mines.

India’s gold market: evolution and innovation 69

India gold mineral reserves and resources
Gold has been discovered in a broad range
of locations across India, although nearly all
economically extracted mineral reserves are
currently located in Karnataka.
According to data published by the Ministry of
Mines,127 India’s current defined gold reserves128 total
71.9t (14.6Mt at 4.9g/t). In addition, 568.5t of gold
(480.2Mt at 1.18g/t) is defined in the primary (hard rock)
resource category, while 5.9t (26.1Mt at 0.2g/t) has
been defined within placer deposits (Chart 41).
These reserves are concentrated regionally: over 99% of
gold mineral reserves are located in the state of Karnataka.
The remaining gold reserves are in Jharkhand, although at
under 0.2t, these are trivial.
Gold resources – gold deposits that are potentially
economically viable – are a lot more geographically
diverse. Over 50% of mineral resources are located in
Karnataka, 33% are in Rajasthan, 6% in Bihar and 5%
in Andhra Pradesh, while the remaining 6% are spread
across a further eight states.

Chart 41: Indian gold reserves and resources are concentrated in Karnataka and Rajasthan
Tonnes
350

300

250

200

150

100

50

0
h
ka

an

la

rh

s
r

d
ha

er
es
es

an

ra

ga
ta

th

th
Bi

Ke
ad
ad

kh
a

as

tis

O
rn

Pr
Pr

ar
j

at
Ra
Ka

Jh

Ch
a
ra

hy
dh

ad
An

Reserves Resources

Source: Indian Bureau of Mines Indian Minerals Yearbook 2014

Over 99%
of gold mineral
reserves are located in the
state of Karnataka

127 Ministry of Mines, Government of India – Annual Report 2014–15.

128 Reserves are that part of the reserve base that can be economically produced or extracted at the time of determination.

India’s gold market: evolution and innovation 70

Future of gold mining in India
India’s gold mining industry has been hampered by
bureaucracy and under-investment
Despite India being one of the world’s largest consumers
of gold, until recently there had been no real policy push to
promote domestic mining. A few private and locally-listed
companies started up after legislation was passed in 2003
allowing private organisations to apply for mining leases.
But it is not an easy market to enter: in some cases,
companies have been waiting more than five years for
permit approval.
As a result, there has been limited investment in gold
exploration over the past decade, particularly from the
private sector.
As of March 2013, there were 13 mining leases granted for
gold across the whole of India:129 eight in Karnataka, three
in Andhra Pradesh, one in Jharkhand and one in Rajasthan.
In 2014, however, mining was only undertaken within
three of these permit areas: Hutti, Uti and Hira-Buddinni,
all located in Karnataka and operated by Hutti Gold Mines.
While the industry is small, it has potential to grow
Some in India have very high expectations for gold mining.
In its 12th five-year plan (2012–17) formulated in 2011,130
a government of India working group outlined that with
adequate investment annual production could be as high
as 70t by 2030. While this is unlikley, it does highlight the
ambition to grow India’s gold mine production.
As new projects reach their production phase, Indian
gold production could grow, albeit from a very low base.
Deccan Gold Mines expects to bring its flagship Ganajur
Main Project (Karnataka) into production in 2017. With
output expected to average 1.6t/yr, the project could
129 Ministry of Mines, Government of India – Annual Report 2014–15.
130 The 12th Five Year Plan, Sub-group II, Metals and Minerals, Strategy based upon the demand and supply for Mineral Sector,
Mineral Exploration and Development (Other than Coal and Lignite) – Government of India Planning Commission.
131 Deccan Gold Mines (www.deccangoldmines.com)
132 A captive mining block is used to meet the needs of block owner, or of the parent, subsidiary or affllaites of the mine owner
and the output from the mining block is not intended for open market sale.
133 http://www.narendramodi.in/cabinet-approves-national-mineral-exploration-policy-498586
India’s gold market: evolution and innovation
double India’s production from current levels. Furthermore,
Deccan is in the process of acquiring the Jonnagiri gold
project (Andhra Pradesh) from Geomysore Services (India)
Private Limited. A mining lease was granted for Jonnagiri
in October 2013, and so the project appears likely to add
further ounces to Deccan’s future production profile by
2020.131
Government has made some progress recently in
helping the industry to grow
In May 2016, Parliament approved an amendment to
the Mines and Minerals (Development and Regulation)
Act 1957 (MMDR), which allowed private companies to
bid for mining leases via a competitive auction process
and proposed that mining leases for major minerals to
be granted for a period of 50 years, compared with the
previous 30-year limit. Further amendements were also
accepted, under which transfer of captive mining blocks 132
could be allowed without need for auction. Under the
initial issue of 43 mining blocks for tender, three are
gold mining deposits. In February 2016, London-listed
Vedanta resources became the first private company to
successfully bid for a gold mine in India – the Baghmara
gold mine in Chhattisgarh – a mine with potential gold
reserves of 2.7t of contained metal.
The National Minerals Exploration Policy (NMEP),
approved in June 2016, is designed to similarly stimulate
mining exploration. The policy allows private companies
to enter into a transparent bidding process, conducted
via e-auction, to carry out exploration of mineral-bearing
areas. The company submitting the winning bid would
be entitled to a share of the royalty paid to the relevant
state government. This policy – aimed at accelerating
exploration activity – opens the way for the auction of
100 prospective mineral blocks.133
71
More can be done to ensure gold mining reaches
its full potential
Although the recent developments bode well in terms
of helping India’s mining sector to realise its potential, a
number of progressive steps would boost domestic gold
production, as well as encourage the wider mining sector.
These include:
Reducing bureaucracy
• State and central government agencies should simplify
the permitting process, perhaps with the introduction
of a single window clearance system. At present,
permitting applications have to be signed off by a
large number of departments and different ministries,
which can make the processes very lengthy. It is not
uncommon for a licence to require approval from at least
15 to 20 different authorities. Reducing the time and
paper work required to obtain permits would lower the
cost of bringing a new mine into production.
Promoting investment
• The mining sector needs funds to grow. Central and
state government should incentivise investment within
the sector, as well as ancillary sectors that support the
mining industry, such as power and transport, which
have also been starved of capital investment
• Making gold mining a strategic sector and bringing it
under the Infrastructure category 134 would provide tax
breaks for investors. This would boost rates of return on
what are often significant upfront capital investments
• A Public Private Partnership (PPP) model would help
promote rail, port and grid capacity, as has been the
case with other infrastructure projects in India, such
as roads, metros and airports. This would provide the
infrastructure neccessary to improve the economics
of future mining projects.
Hutti Gold Mines employs people,
and it is estimated that each of those workers
supports around five dependants.
134 RBI: As per the expanded definition of infrastructure, this is made up of the following categories: a) energy,
b) communication, c) transport, d) water and sanitation, e) mining, exploration and refining, and f) social and
commercial infrastructure; various infrastructure sub-sectors are also included within each category.
India’s gold market: evolution and innovation
Economic impact of gold mining
Gold mining can provide significant sustainable socio-
economic development to India. This is not just through
the investment required to explore and mine for gold, but
also through the legacy of creating a skilled workforce.
Furthermore, mining helps bring infrastructure investment
to a region, and helps initiate and support associated
service industries, all of which often persist long beyond
the working life of the mine.
Mining can provide significant employment opportunuities
to rural areas. Currently, Hutti Gold Mines employs 5,000
skilled workers and contractors, and it is estimated that
each of those workers supports around five dependants.
Our report, The social and economic impacts of gold
mining, published in 2015, showed that 70% of total
expenditure by gold producing companies was via
payments to local suppliers and contractors, as well as
wages to employees. This highlights the important impact
even a small gold operation can have on its community.
And given that India is one of the world’s largest gold
consuming countries, it makes sense for it to develop
mining capacity. For this to happen, changes need to be
made. Bureaucracy needs to be reduced and investment
encouraged. There are encouraging signs here, with the
changes to the MMDR and introduction of the NMEP. If
this trend continues, maybe India’s mine production could
grow from its current low level.
5,000
72
10: Gold policies

India has a long-standing affinity with gold, but its gold-policy

measures have often been muddled. Historically, they have
distorted the market without achieving the policies’ aims.
Some recent developments suggest the policy approach is
improving: the Indian Gold Coin and proposed hallmarking
regulations will develop a trusted standard of gold that can be
traded more easily. This may support the government’s gold
monetisation scheme.

A brief history of gold policies
India’s track record on gold-related policies is both
long and varied
The government’s interest in the gold market dates back
to independence in 1947. To understand better the current
gold policy environment one needs to understand India’s
policy history which, broadly speaking can be broken down
into four phases.135
1. Restriction (Ban on private ownership of gold)
Between 1947–1962 policies were geared towards
controlling the gold market. The stated objectives behind
this restrictive approach were to wean people off gold,
to regulate supply, reduce smuggling, and reduce the
domestic price of gold.
2. Prohibition (Era of Gold Control Act)
This restrictive approach was enhanced between 1963
and 1989. The Gold Control Rules were promulgated in
1963 and the final provisions were enacted under the
Gold (Control) Act 1968, whereby several additional
restraints were placed on gold businesses, including:
• Manufacturing gold jewellery above 14-carat purity
was prohibited
• Limits were placed on individual holdings of
gold jewellery
• Individuals and families could only hold up to two and
four kg of gold, respectively, and only in the form of
jewellery, which had to be declared to the authorities
• Jewellers were obliged to maintain records of all
business transactions.
At the same time the government tried to mobilise gold by
issuing gold bonds, introducing gold auction schemes and
through the Voluntary Disclosure of Income and Wealth
(Amendment) Ordinance (1975),136 which encouraged
Indian households to disclose hitherto undeclared wealth,
including gold. These efforts were designed to control the
budget deficit and reduce gold smuggling.
3. L
 iberalisation (Government policy aimed at
deregulation)
Between 1990 and 2011 India started to liberalise
(see Chapter 1) and a different approach was adopted,
as the government introduced measures to deregulate the
gold industry:
• The Gold (Control) Act was repealed on 6 June 1990.
Under this policy regime gold smuggling had flourished.
Now, the liberalisation of gold imports took priority137
• The Non-Resident Indian scheme was introduced
in 1992, and in 1994 a Special Import Licence (SIL)
scheme was launched to facilitate entry of gold
into India
• In 1997, under the Open General Licence (OGL)
scheme, seven banks were initially authorised as official
importers of gold; this number later increased to 20
• In 1999, the government tried to mobilise gold through
the Gold Deposit Scheme (GDS), launched by the
State Bank of India to allow gold to be deposited at a
specified interest rate.

135 For more information, please see Why India Needs a Gold Policy, Federation of Indian Chambers of Commerce and Industry, 2014.
136 Voluntary Disclosure of Income and Wealth (Amendment Ordinance 1975- http://incometaxindia.gov.in/Communications/
Circular/910110000000001074.htm
137 The Gold (Control) Repeal Act, 1990; http://lawmin.nic.in/legislative/textofcentralacts/1990.pdf

India’s gold market: evolution and innovation 73

The end of this phase was marked by rising gold demand,
gold imports and gold prices. In 2007, demand totalled
771.1 tonnes. It peaked at 1001.7 tonnes in 2010, reduced
slightly in subsequent years, but remained between
850–950t. At the same time, the gold price more than
trebled and the current account deficit (CAD) began to
spiral out of control. (For more information on the
macro-economic back-drop, please see Chapter 1)
Review of gold policy since 1947
Restriction (1947–62)
• Foreign Exchange Regulation Act (FERA) introduced
in 1947
• Nationalisation of Kolar gold mine at Mysore took
place in 1956
• Replacement of the proportional reserve system with
the minimum reserve system for currency issue in 1956
• First Gold Bond Scheme introduced in 1962. • Reducing the loan that can be given against gold as
Prohibition (1963–1989)
• Gold Control Rules (1963)
• Gold (Control) Act (1968)
• Gold Bonds 1980 (March, 1965)
• National Defence Gold Bonds 1980 (October, 1965)
• Voluntary Disclosure of Income and Wealth
(Amendment) Ordinance (1975)
• Gold auctions (1978).
Liberalisation (1990–2011)
• Gold Control Act 1968, repealed in June 1990
• NRI Scheme introduced in March 1992
• Scope of Special Import License (SIL) scheme
expanded to include gold in April 1994
• In 1997, seven banks were authorized to import
gold – a number that was later increased to twenty
banks. Gold Deposit Scheme (GDS) launched by
State Bank of India in 1999
• Gold Deposit Scheme (GDS) launched by State Bank
of India (1999)
• Banks permitted to sell gold coins in 2002, extended
to India Post in 2008.
138 RBI/2013–14/148, A.P. (DIR Series) Circular No.15, 22 July 2013.
139 RBI/2013–14/187, A.P. (DIR Series) Circular No. 25, 14 August 2013.
140 RBI Notification RBI/2013–14/260, DNBS.CC.PD.No.356 /03.10.01/2013–14, 16 September 2013.
India’s gold market: evolution and innovation
4. Intervention (Period of high customs duty
and 80:20 policy)
The deterioration of the current account deficit threatened
to affect the country’s credit rating. Global uncertainties
– caused by quantitative easing and the European crisis,
which affected India’s exports and investment flows –
and an unfortunate convergence of adverse domestic
governance issues were the primary triggers.
Intervention (2012–2013)
• Duty hike to 10% from 2% through repeated increases
between January 2012 and August 2013
• Introduction of the “80:20 rule”, an export obligation
of 20% on importers of gold138
• Ban on import of gold coins and sales through
banks and post offices139
collateral from 75% to 60% of the value (LTV ratio).140
Transparency (2014–end-2016)
• Removal of “80:20,” an export obligation of 20% on
importers of gold (November 2014)
• Ban lifted on import of gold coins (November 2014)
• Gold Deposit Scheme of 1999 withdrawn and
relaunched in new form as Gold Monetisation Scheme
(November 2015)
• Launch of first ever National gold coin – Indian Gold
Coin (November 2015)
• Sovereign Gold Bond Scheme launched
(November 2015)
• PAN (Tax Number) made mandatory on jewellery
purchases above Rs200,000 (January 2016)
• Introduction of 1% Excise duty on Jewellers above
Rs120mn turnover (April 2016)
• Demonetisation of INR500 and INR1,000 notes
(November 2016)
• Removed 1% excise duty on branded gold coins with
purity of 99.5% (December 2016)
• New Bureau of Indian Standards (BIS) Act introduced
that makes Hallmarking mandatory, effective
1 January 2017.
74
Resolving these required deepseated structural reforms,
but instead policymakers settled for a short term
“solution” of erecting barriers to curb imports. And gold
was an easy target.
On January 17, 2012, custom duty was raised to 2% and
then again to 4% on March 16, 2012. The following year
the import duty continued to rise, eventually reaching
10%, and the government introduced a new set of
restrictive policy measures aimed at curbing demand.
The measures were imposed to address the sudden
deterioration in the CAD.
5. T
 ransparency (Policy drive of Prime Minister Modi’s
government to improve transparency and expand
tax base)
In recent times, the government has been pushing for
transparency in all aspects of economic activity and, in
particular, to expand the tax base from just 1% of the
population to at least 10%. Although disruptive in the
short term, over a longer time frame gold should benefit
from this drive, which supports the initiative to mainstream
gold savings through banking and organised channels.
Does policy intervention work?
Gold demand data indicates that successive attempts
to curb the demand for gold have proved ineffective.
Restrictive import policies had a limited effect on demand.
Instead, they led to increased smuggling. The volume of
gold smuggled into India between 1968 and 1995 varied
from 10 to 200t per year and from 2013 and 2014
– when the 80:20 rule was in effect – smuggling rose
to between 350–400t.
In contrast, during periods of liberalisation in the gold
market demand was met primarily through official
channels. Smuggling was curbed, the price differential
between the domestic and international gold market
narrowed, and the government earned revenue through
import tariffs and domestic taxes.
The evidence – including the econometric analysis outlined
in Chapter 1 – suggests that policy intervention, at best,
has a marginal, short-term effect. It would seem more
appropriate to question whether an economically and
141 STBD – Short Term Bank Deposit – The deposit of gold made under the GMS with a designated bank for a short term period of 1–3 years.
142 Medium and Long Term Government Deposit(MLTGD) – The deposit of gold made under the GMS with a designated bank in the account
of the Central Government for a medium term of 5–7 years or a long term period of 12–15 years or for such period as may be decided from
time to time by the Central Government.
India’s gold market: evolution and innovation
traditionally significant asset like gold should continue
to be treated in an ad-hoc manner by successive
governments. Perhaps the time is right to deliver a
comprehensive gold policy for India, one which would
accept India’s affinity with gold and put that affinity to
work for the good of consumers, the good of the industry
and the good of the economy.
Recent developments
Gold Monetisation Scheme
In 2015 the Indian Government launched the
Gold Monetisation Scheme (GMS). The objectives of
this scheme are:
• To mobilise the gold held by households and institutions
in the country
• To provide a fillip to the gems and jewellery sector in the
country by making gold available as a raw material on
loan from the banks
• To boost recycling and reduce India’s reliance on imports
to meet domestic demand.
The gold monetisation scheme deposits fall into two
categories: a Short Term Bank Deposit (STBD)141 and a
Medium and Long Term Government Deposit (MLTGD).142
In the GMS customers can deposit gold in any form – be
that jewellery, ornaments or bars and coins – to be assayed
and then credited to the appropriate account.
The principal and interest on an STBD are denominated
in gold. In the case of MLTGD, the redemption of the
principal at maturity shall, depending on the depositor’s
preference, be either in Indian Rupees equivalent to the
value of gold at the time of redemption, or in gold. Where
the redemption of the deposit is in gold, an administrative
charge of 0.2% of the notional redemption amount in
terms of Indian Rupees is applied. But the depositor does
not have this flexibility when it comes to the interest; the
interest accrued on MLTGD is calculated with reference to
the value of gold in terms of Indian Rupees at the time of
the deposit and is paid in cash.
75
The scheme has had a slow start. According to the
Finance Ministry, 5.7t143 of gold has been collected under
the Gold Monetisation Scheme. Most of these deposits
have been from temples and trusts. Nevertheless, it is
worth considering what success would look like for this
scheme. It is well documented that the previous Gold
Deposit Scheme launched in 1999 only managed to
mobilise around 15t over its lifetime. The latest scheme is
still very much in its infancy: incentives and infrastructure
need to be developed. In our view, if the scheme has
accumulated 25–30t in the next three years, it could be
considered a success.
GMS-linked Gold Metal Loan (GML) scheme
Introduced in late 2015, the objective of this scheme
is to use the gold mobilised through the monetisation
scheme to reduce imports of gold to some extent. The
Reserve Bank of India specified that the gold mobilised
under STBD may be provided to jewellers as GML. The
designated 144 banks can also purchase the gold auctioned
under MLTGD and extend GMLs to jewellers.
Under this scheme, jewellers will receive physical delivery
of the gold either from the refiners or from the designated
bank, depending on where the refined gold is stored.
Designated banks other than the nominated banks145
are eligible to import gold only for the redemption of
the gold deposits mobilised under the STBD.
The designated banks are free to determine the interest
rate to be charged on GMS-linked GML.
143 Correct as of 14 November.
144 According to RBI Designated Banks are All Scheduled Commercial Banks (excluding Regional Rural banks) that decide to
implement the Gold Monetisation Scheme.
145 Nominated Bank: A scheduled Commercial Bank authorised by the RBI to import gold under the extant Foreign Trade Policy.
India’s gold market: evolution and innovation
Hallmarking and Assaying
India’s gold industry has long been plagued by
undercarating. But this might be about to change. In
March 2016, the government of India received the assent
of the President on the new Bureau of Indian Standards
(BIS) Act 2016 (New BIS Act), which will replace the old
BIS Act of 1986.
The New BIS Act will be effective from 1 January 2017
in the official gazette of India.
The Act has significant implications for India’s gold
industry as it has provided specific empowerment
to the Central Government in the following areas of
standardisation for gold:
• The BIS will become the national standards body of
India, and the government has been empowered to
make hallmarking of precious metals compulsory.
This could transform the industry. For example, the
government could make it compulsory that such articles
are sold only through certified outlets
• It also comes with legal powers. The use of a hallmark
by non-accredited jewellery centres will be an offence.
Retailers that violate the hallmarking rules will be liable
for a fine of up to 10 times the value of the product, or
imprisonment for up to two years
• If hallmarking of precious metals becomes mandatory
and any hallmarked jewellery is found to be of lower
caratage, consumers will be able to complain via the BIS
website and ask the seller for a replacement.
Jewellery shopping.
76
Sovereign Gold Bond scheme
Sovereign Gold Bonds (SGBs) are government securities
denominated in grams of gold. They are substitutes for
holding physical gold; they are not backed by physical
gold. Investors have to pay the issue price in cash and the
bonds will be redeemed in cash on maturity. The Bond is
issued by the Reserve Bank on behalf of the Government
of India.
The Bonds are denominated in multiples of gram(s) of gold
with a basic unit of one gram. The tenor of the Bond is a
period of eight years with an exit option from the fifth year,
exercisable on the interest payment dates. The minimum
permissible investment is two units (i.e. two grams of
gold). The maximum amount that can be subscribed is
500 grams per person per fiscal year (April–March).
The finance ministry has recently permitted listing and
trading of the first tranche of gold bonds. Trading in these
bonds began on 9 June 2016 on both the Bombay Stock
Exchange and the National Stock Exchange.
While it may appeal to institutional investors, this is
unlikely to appeal to retail investors. For them, physical
gold is more than just a financial return. Gold is entwined
with religion and emotion. In our view, the Soverign Gold
Bond Scheme is unlikely to affect physical gold demand.
India’s gold market: evolution and innovation
New trade and policy forums
Faced with the new gold policy framework, regulatory
challenges, and the increase in smuggling in 2016, India’s
bullion sector has continued to make moves to formalise
its business. Most recently, the ‘Bullion Federation of
India’, an industry body composed of 50 leading bullion
dealers across 17 states, was created amid a groundswell
of intention to conduct business in a transparent way,
avoiding unaccounted money and fully complying with tax
requirements and regulation.
And encouragingly, the government has established an
all-encompassing working group to look at the regulatory
environment for gold. We are hopeful that such a
centralised review of gold related regulation will yield
positive results for the gold. While this is a welcome
development for the industry, more can be done.
77
Focus: India’s latest effort to crack down on black money
will have a big impact on gold demand
India has a long and troubled history with black money – or
unaccounted wealth - and the authorities latest scheme to
combat it will have a big impact on both India’s economy
and its gold demand. On the 8 November 2016, Prime
Minister Narendra Modi announced that the government
of India was withdrawing the legal tender status of Rs500
and Rs1,000 banknotes. About 86% of the total value of
currency in circulation was suddenly removed from the
financial system. While the intention of the authorities
– to bring black money into the official economy – is
praiseworthy, the measure is likely to squeeze economic
growth in the short term, especially given the importance
of cash in the grey economy. But looking further ahead, a
more efficient, transparent economy will support growth
and that, in turn, will support gold demand.
‘Demonetisation’ is not new to India but the effects
of the latest move are far-reaching
A total of Rs15.44 trillion (tn) – or 86% of the currency in
circulation – was withdrawn from the economy following
the announcement on 8 November. While Rs1000 notes
have been scrapped entirely, new Rs500 notes and
Rs2000 notes have been introduced. By mid-December,
Rs12.44tn scrapped currency had come back into the
financial system – an impressive amount, but it still
represents a liquidity squeeze.146
This has happened before. In 1946 and 1978 the
respective governments of the day executed similar
measures. But the impact was less severe as high
denomination notes did not account for as large a share of
total currency and were not as widely held by the general
public as in 2016. This time around all sections of Indian
society have felt the impact, including the very poor. But
it was part of a broader strategic plan, which began with
the Jan Dhan ‘financial inclusion’ programme (intended to
provide access to a bank account for every household).
This will have eased the inertia and fear around banking
transactions for many, smoothing the path towards greater
acceptance of non-cash transactions.
The latest move will, undoubtedly, have a significant
impact on the economy in the short-term. The grey
economy – which is wholly reliant on cash – accounts
for nearly 83% of non-agricultural employment147 and in
2008 accounted for around 46%148 of Gross Value Added
excluding agriculture. The depth of the contraction will
depend on how much of the Rs15.44tn is replaced, and
how quickly it happens. The liquidity squeeze from will
146 https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=38886
147 http://laborsta.ilo.org/applv8/data/INFORMAL_ECONOMY/2012-06-Statistical%20update%20-%20v2.pdf
148 http://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/publication/wcms_234413.pdf
India’s gold market: evolution and innovation
weigh on discretionary consumption in the short-term, and
affect businesses’ investment prospects. Some sectors
will be harder hit than others. Real estate transactions
often involve an element of cash, so property prices are
likely to falter, which may have a damaging wealth effect,
further weighing on sentiment and domestic demand.
In the long-run, however, it should have a positive effect
on economic growth. Bringing more of this economic
growth into the formal sector will reduce corruption which
hinders economic growth. The boost to bank deposits
arising from the combination of the Jan Dhan programme
and the demonetisation announcement will improve
banks’ ability to lend to productive businesses, further
boosting economic growth.
Although gold demand faces some short-term
headwinds, longer-term prospects are encouraging
The cash crunch is taking its toll on gold demand in the
short term. Rumours about caps on gold holdings and
gold buying added fuel to the fire. And as tax authorities
investigated some jewellers who had, immediately after
demonetisation, created opportunities to convert old
currency for fake or back-dated sales, the resultant panic
ensured that even genuine gold buyers were reluctant to
buy wedding jewellery. The caps on withdrawals from
banks and lack of cash in ATMs meant that whatever
cash was available was largely spent on essential items,
in both rural and urban India. Small jewellery businesses,
particularly in the rural centres, will feel the pinch until
cash becomes more freely available.
Together with the introduction of Goods and Services
Tax, mandatory hallmarking and a massive push by
organised jewellers to promote non-cash payments,
business practices across the gold trade will become more
transparent. This will hit the grey market and deter those
seeking anonymity in order to avoid taxes. Consumers
meanwhile will see the benefits of transparency in prices
and purity. The organised trade will prosper as gold enters
the mainstream financial system.
This latest demonetisation exercise should also expand
the tax base and the positive impact on public finances
could generate a more benign and gold-supportive
policy approach. Transparency across the value chain is
necessary for gold to be mainstream. This is a historic
opportunity for the industry to redefine itself and emerge
stronger, domestically and globally.
78
Appendix 1: Methodology
Writing a comprehensive report such as this is a daunting
task; the sheer size, breadth and complexity of India’s
gold market makes it challenging. To build as complete a
picture as possible, we had to draw upon several strands
of complementary research.
Field research
We commissioned Metals Focus, one of the world’s
leading precious metals consultancies, to undertake a
comprehensive programme of field research. This involved
speaking to market participants across the entire supply
chain, including refiners, banks, logistic companies,
manufacturers and retailers. In a six month period Metals
Focus spoke to over 200 contacts across 10 states.
We supplemented this with a series of roundtable
discussions. We hosted events in Mumbai, New Delhi and
Kochi with over 30 senior gold market participants, to test
and refine the findings of the field research.
Econometric analysis
While the field research provides insight on how the
market is structured and developing, econometric
analysis provides clarity on the macroeconomic drivers of
gold demand.
We analysed demand and supply data from 1990 through
to 2015 to identify the key factors influencing investment
and jewellery demand. The central insights are covered
in the report, while a detailed summary can be found in
the appendix.
Consumer insights
The final piece of research used in the report is
comprehensive proprietary consumer and market insight.
People often have views on the gold market which may be
dated, or not backed up by evidence. We wanted to make
sure our comments on the gold market are current and
evidence-based.
We commissioned TNS – one of the world’s foremost
consumer and market research companies – to survey
4,000 India gold consumers in early 2016. 2,000 investors
and 2,000 jewellery consumers were each asked over
60 questions. The survey was split equally between urban
and rural India using online (urban) and face-to-face (rural)
methodology. In addition, over 30 face-to-face interviews
conducted with a range of gold consumers in New Delhi
and Chennai, generated supporting qualitative insights.
149 Options are different for jewellery and investment. For jewellery, the competitive set includes jewellery and luxury fashion purchases (e.g. gold, platinum,
silver or costume jewellery, smart phones/watches and luxury fashion). For investment, it will include gold bars and coins, gold jewellery, ETFs, stocks and
shares, savings accounts etc.
India’s gold market: evolution and innovation
The TNS study provides insight into ‘share of mind’ and
‘latent demand’ for gold, which are measures commonly
used in market research to assess the growth potential
of a product or category. Share of Mind is based on the
calculation used in TNS’ Conversion Model Tool, which has
been used extensively across the world by over 800 brands.
Put simply this is how they are measured:
Share of mind = what would we expect people to invest
in or purchase for each option in the competitive set149
based on their ideal preferences.
Latent demand = the difference between “share of
mind” and actual investment or purchase levels. When
this is positive it indicates potential for growth and is a
warning sign if it is negative.
Market research
We also drew upon a broad catalogue of consumer
research which we have commissioned over recent years.
This includes:
• ICE360º: This was a broad-based survey of jewellery
consumers. This survey was conducted between
August and November 2014. The survey included
6,000 rural households and 14,200 urban households
• Nielsen: This survey focused on the investment market.
For the qualitative phase of the study, 50 interviews
were conducted in 12 locations. For the quantitative
phase, a total of 5,022 consumer interviews and 502
channel partner (jewellers, independent financial
advisors, bank employees) interviews were conducted
over a period of six months
• Kadence: Between May 2013 and February 2014 we
asked over 10,000 jewellery consumers about their
intention to buy, price expectations and whether they
had sold jewellery
• Usage and attitudes study (2012): TNS conducted a
survey of over 13,000 jewellery consumers in 2012.
These datasets allow us to quantitatively support
established views on the gold market, and uncover
genuinely new insight into India’s consumer behaviour.
Gold demand data
Throughout this publication we will make reference to gold
demand and flows measured in fine gold content, as we
do in Gold Demand Trends. Unless otherwise stated, all
gold demand data used is from the World Gold Council’s
data series which is reported in Gold Demand Trends.
79
Appendix 2: Indian gold demand:
an econometric analysis
What drives Indian gold demand?
An econometric approach
Gold is a global asset and is bought and sold by
consumers and investors for many reasons at various
times. As such, some people consider that it’s not easy to
understand gold’s behaviour, but in reality it responds to
the basic laws of economics and the equilibrium of supply
and demand. The question is, then, what drives demand
and supply in turn?
To answer this question from an Indian perspective, we
undertook an econometric analysis using macroeconomic
variables to explain the long- and short-term dynamics of
demand and supply over the past two decades.
Our objective was to use a quantitative approach to obtain
new insights and verify if anecdotal evidence and common
wisdom match reality.
A brief introduction to Error Correction Models
(ECMs)
We often discuss that while we may see short-term
changes in demand, there are long-term dynamics that
drive the gold market. To understand this, we decided to
use a common econometric approach to modelling called
ECMs. This type of model specification allows for finding
variables that explain deviations in gold demand (or supply)
from its long-run equilibrium.
In general terms, the model can be written in two parts:
Long-run equilibrium
yt = δ 0+δx x t+u t
In this case, yt represents annual demand (or supply)
for gold and the model suggests there is long-term
relationship with x t ; note that x t may represent one or
multiple variables; δ represents the long-term elasticity.
The relationship between yt and x t deviates from its
equilibrium each period by a certain amount which
we denote u t (also called the error term); u t , in turn, is
influenced by short-term fluctuations in macroeconomic
(or other) variables.
India’s gold market: evolution and innovation
Short-term fluctuations
∆yt =β 0+βx ∆ x t+βz z t –λu t –1+∈t
This equation deals with the annual deviations from the
long-term equilibrium. In the case, ∆yt represents year-on-
year changes in demand (or supply) and links fluctuations
changes in x t (namely ∆ x t ), as well as possibly an
additional set of variables z t , and fraction of the
“error-correction term” u in the previous period ( t–1). In
other words, short-term fluctuations in demand (or supply)
are driven by various macro factors, but the system also
mean reverts to its long-run depending on how far it
deviated from equilibrium the year before. The β ’s are the
short-run long elasticities and λ shows the strength of the
reversion to the mean.
Selecting the relevant data and historical period
Using an ECM framework, we analysed the Indian gold
market. Given that Indian gold production is negligible,
we focused on jewellery, investment, and technology
demand, as well as gold recycling from the supply side.
There is annual data available for most of these series
going back to 1980, but we restricted our analysis to the
period from 1990 to 2015. The reason is two-fold:
• Gold imports were banned until 1992 and consumers
had to resort to smuggling to satisfy demand154
• Our analysis typically focuses on consumer demand,
rather than fabrication. We only have consumer demand
data going back to 1995. And while we use fabrication
data to estimate consumer demand for the first part of
the 1990s, the further back we go, the less reliable the
approximation becomes.
While using data since 1980 and modelling the structural
shift that happened in the 1990s is possible, we believe
that using the shorter period better represents the
reality of the Indian market today and, as we note later,
using the longer period (when applicable) delivers very
similar results.
80
Modelling the long- and short-term Table 22: Income plays an important role in driving
gold demand up, while higher gold prices reduce it
dynamics of the Indian gold market Summary statistic from long-term cointegrating demand
Our analysis focuses on five gold demand relationships
and supply series: Constant Income Price Tax
δ0 δ1 δ2 δ3
• Consumer demand (jewellery plus bars and coins)
Estimate 1.50 0.95 -0.47 -3.1
• Jewellery Standard error 0.55 0.16 0.16 1.7
• Bar and coins T-stat 2.7 6.1 -2.9 -1.8

• Technology R2 84.5%

Source: World Gold Council

• Recycling.

Consumer demand When the system is in equilibrium (in other words,

Our model suggests that, over the long run (ie in
equilibrium), annual gold demand is driven by income150
and price – all in logs. In addition, we included a variable
capturing the level of import duty on gold, which gradually
increased since 2012, resulting in a small contraction in
long-term demand driven by government policy. The
long-run equation is given by:
d t=δ 0+δ1income t+δ2 price t+δ3 Itax+u t.
Income is given by Gross National Income per capita and
the gold price is measured in rupees. The import duty
variable rose gradually from 1% prior to 2012 to 10% by
2014. Chart 42 and Table 22 show the model fit and
relevant coefficient estimates.
when there is long run stability and no deviations from
exogenous shocks present or past), a 1% increase in
income results in a 1% increase in demand. However, a
1% increase in price, reduces demand by 0.5%. Finally,
long-term demand has fallen by three tonnes for every
1% increase in gold’s import duty.
Over the short run, the system of course deviates from
the long-term equilibrium. Our model suggests that
changes in annual demand are driven by inflation, short-
term price movements, excess rainfall and the level of
taxes. Deviations from the long-run equilibrium also have a
mean reverting effect. The equation is given by:
Δ dt=β1π t+β2 Δ pt+β3rainfall+β4tax–λu t –1.

Chart 42: Long-term Indian gold consumer demand is

influenced by income and price and was suppressed
by government import restrictions
Annual gold demand (in tonnes) from 1990 to 2015
Tonnes
1,200

1,000

800

600

400

200

-200

-400
1990 1994 1998 2002 2006 2010 2014
Consumer demand Fitted Residual

Source: Metals Focus; World Gold Council

150 We additionally tested the long-term relationship between gold demand and the level of consumer prices (primarily driven by
agricultural prices in India) which was statistically significant. Unless there is deflation, consumer prices typically grow and so
does gold demand. Consumer prices are themselves driven by income, availability and demand. We chose to use income as
the explanatory variable as it gave an equivalently good fit and is more intuitive to explain long-run (and future) dynamics as
there is more information about expectations of household income growth.

India’s gold market: evolution and innovation 81

Δ d denotes year-on-year (yoy) changes in demand, π in other words, the macroeconomic variables used offer a
inflation, Δ p yoy changes in the rupee gold price, and good guide to know the direction annual demand will take
rainfall is given by the excess rainfall relative to the even if the magnitude estimate is slightly off.
long-term average since 1900; import taxes are assumed
fixed prior to 2012 and then increasing as the government Jewellery
policy changed.151 Chart 43 and Table 23 show the Consumer demand is primarily driven by jewellery, which
short-term model fit and relevant coefficient estimates makes up 75% of Indian annual demand.152 As such, it is
and other statistics. not surprising that our analysis resulted in a very similar
model. Namely, the long-run equation is given by:
Chart 43: In the short-run, gold demand responds to
inflation, price, rainfall and the level of taxes d t=δ 0+δ1income t+δ2 price t+δ3 Itax+u t.
YoY changes in gold demand from 1991 to 2015 Given the similarities, we summarise in Table 24 the
Growth % jewellery coefficient estimates.
60
50 Table 24: Long-term jewellery demand responds to
40 income, price and import restrictions
30
Summary statistic from long-term cointegrating demand
relationships
20
10 Constant Income Price 80:20 rule
δ0 δ1 δ2 δ3
0
-10 Estimate 2.65 1.02 -0.69 -1.67

-20 Standard error 0.50 0.15 0.15 1.56

-30 T-stat 5.2 7.1 -4.6 -1.1

1991 1995 1999 2003 2007 2011 2015 R2 81.7%
Consumer demand Fitted Residual Source: World Gold Council
Source: Metals Focus; World Gold Council
The interpretation is quite similar to consumer demand,
Table 23: Higher inflation and more rain result in except that, jewellery is more responsive to the gold price
higher annual consumer demand, higher prices and and the rising import duty had less of a dampening effect
taxes lower it (in fact, its effect was not very significant statistically
Summary statistic from short-term demand dynamics speaking).
ECV Inflation Price Rainfall Tax
-λ β1 β2 β3 β4 The jewellery short-run equation is also given by:
Estimate -0.56 2.56 -0.90 0.48 0.48 Δ dt=Δ 1π t+β2 Δ pt+β3rainfall+β4tax–λu t –1.
Standard error 0.16 0.52 0.26 0.31 0.31
T-stat -3.51 4.92 -3.53 1.56 1.56 Table 25 summarises the relevant estimates and statistics.
R2 66.7%
Table 25: Higher inflation and more rain result in
= direction 84.0%
higher annual jewellery demand, higher prices and
Source: World Gold Council taxes lower it
Summary statistic from short-term demand dynamics
In the short run (in this case, a year), a 1% consumer price
ECV Inflation Price Rainfall Tax
inflation pushes gold demand up by 2.6%; an additional
-λ β1 β2 β3 β4
1% of rain during the Monsoon season, increased demand
Estimate -0.51 2.42 -1.03 0.36 -1.36
by 0.5%. Conversely, a 1% increase in price, reduces
Standard error 0.16 0.50 0.25 0.29 0.92
short-term demand by 0.9% and, holding everything else
constant, higher taxes since 2012 have reduced gold T-stat -3.10 4.83 -4.16 1.23 -1.47

demand by 1.9%. Finally, lower than average demand in a R2 64.1%

given year, lifts demand up the subsequent year. Notably, = direction 84.0%
while the R2 is a respectable 67%, the model gets the Source: World Gold Council
direction of demand growth close to 84% of the time –

151 While taxes were not exactly fixed before 2013, gold price premium data indicates that little of those changes were passed
to the consumers and so, we assumed, little fluctuations would have a small impact in consumer demand.
152 This corresponds to the 26-year average ending in 2015.

India’s gold market: evolution and innovation 82

Investment
We define investment demand as annual purchases of
bars and coins. While there are some similarities to the
drivers of jewellery demand, there are also some notable
differences which we explore here. Our model suggests
that, over the long run (i.e in equilibrium), annual bar
and coin demand is primarily driven by income153 and
not price. In addition, higher import duties have taken a
more significant toll on investment demand. The long-run
investment equation is given by:
dt=δ 0+δ1income t+δ2 Itax+u t .
Chart 44 and Table 26 summarise the results.
Chart 44: Long-term Indian bar and coin demand is
driven by income – not price, and it was suppressed
by government import restrictions
Annual gold demand (in tonnes) from 1990 to 2015
Tonnes
400
300
200
100
0
-100
purchases are made, additional income may go to
long-term savings in the form of bars and coins
irrespective of price; second, for investment purposes,
higher prices may be an indication of momentum which
counteracts the dampening force typically found in
‘normal’ (and ‘superior’) economic goods. Finally, higher
import duties have had a larger impact on bar and coin
demand than they did for jewellery, reducing demand
by 9.5t for every percentage point increase. This finding
supports the hypothesis that the main gold demand is in
jewellery with bars and coins being supplementary.
Over the short run, just like in jewellery, our model
suggests that changes in annual bar and coin demand are
driven by inflation, short-term price movements, excess
rainfall and the level of taxes. Deviations from the
long-run equilibrium also have a mean reverting effect.
The equation is given by:
Δ d t=β1π t+β 2 Δ pt+β 3rainfall+β4tax–λu t –1.
Chart 45 and Table 27 show the relevant results.
Chart 45: In the short run, inflation, price, rainfall
and prices play a part
YoY changes in gold demand from 1991 to 2015
Growth %
250
200

-200 150
1990 1994 1998 2002 2006 2010 2014
100
Investment demand Fitted Residual
50
Source: Metals Focus; World Gold Council
0
Table 26: Income growth pushes bar and coin demand
-50
up, but prices do not have a statistically significant
influence in the long run -100
1991 1995 1999 2003 2007 2011 2015
Summary statistic from long-term cointegrating demand
relationships Investment demand Fitted Residual

Source: Metals Focus; World Gold Council

Constant Income Price
δ0 δ1 δ2
Table 27: Inflation, taxes and rainfall weigh more
Estimate -6.54 1.12 -9.53
on bar and coins than they do on jewellery, price
Standard error 1.09 0.11 3.36 weighs less
T-stat -6.0 10.1 -2.8 Summary statistic from short-term demand dynamics
R2 83.9%
ECV Inflation Rainfall Tax Price
Source: World Gold Council -λ β1 β2 β3 β4
Estimate -0.70 4.41 0.80 -4.47 -0.88
In equilibrium, a 1% growth in income moves long-term
Standard error 0.13 0.91 0.54 1.72 0.44
bar and coin demand by 1.1%. Price is not a significant
T-stat -5.42 4.85 1.49 -2.60 -2.02
driver of investment in the long run. We believe the reason
R2 76.8%
for this is two-fold: first, in India, bar and coin demand
= direction 76.0%
is complementary to jewellery, as such, once jewellery
Source: World Gold Council

153 Similarly to consumer demand and jewellery, using the level of consumer prices results in an equivalently reliable model.
We also chose to use income for its economic simplicity.

India’s gold market: evolution and innovation 83

In the short run, investment demand responds more Table 28: Economic growth is counterbalanced by
strongly to inflation, rainfall, and taxes than jewellery prices and import restrictions in determining
does, and conversely price has a lesser (but statistically long-term technology demand
significant) effect. Bar and coin demand grows by 4.4% Summary statistic from long-term cointegrating demand
for every additional 1% in inflation, and 0.8% for a 1% relationships
excess rainfall during the Monsoon. Conversely, a 1% 1990s 80:20
Constant GDP Price ban rule
increase in price, reduces short-term investment demand
δ0 δ1 δ2 δ3 δ4
by 0.9% and, holding everything else constant, higher
Estimate 3.47 1.03 -1.11 -1.91 -0.33
taxes since 2012 have reduced gold demand by 4.5%.
Standard error 0.84 0.24 0.23 0.22 0.27
Investment demand also mean-reverts faster than
jewellery – as seen by a higher λ. The model explains T-stat 4.3 4.2 -4.6 -8.5 -1.2

77% of the variability and equally correctly estimates R2 87.0%

the direction of demand growth 76% of the time – less Source: World Gold Council
often than for jewellery, but a high proportion of time
nonetheless. Chart 46 and Table 28 summarise the results.

Technology In the long-run, a 1% increase in national GDP leads to

Gold demand for electronics, dentistry and other uses a 1% increase in Indian technology demand for gold.
is relatively small in India, adding between 10 and 20 However, technology demand is quite sensitive to the gold
tonnes to total annual demand. Still, our analysis was able price, and a 1% increase pushes demand down by 1.1%.
to capture some interesting dynamics and insights. On Similarly, import restrictions affect demand substantially.
the long run, technology demand is linked to Indian GDP The pre 1992 ban suppressed long-run demand by two
and the gold price. It was also affected by the 80:20 gold tonnes per year and the 80:20 import rule decreased
import rule (in place between 2012 and 2014),154 as well as demand by 0.3t.
by the import ban pre-1992.
Over the short run, a few additional variables appear:
The long-run equation is given by: there is a persistency in technology demand (momentum)
and past GDP also influences short-term deviations. In
d t=δ 0+δ1GDPt+δ2 p t+δ3 I 80:20+δ 4 I1992+u t . addition, a substitution effect between copper and gold
becomes apparent. The equation is given by:
Chart 46: Long-term Indian technology demand is Δ d t=β1 Δ d t –1+β2 Δincome t+β3 ΔGDPt –1+β4 spread–λu t –1.
driven by economic growth, price, and it was
heavily influenced by import restrictions Chart 47: Past demand and GDP growth influence
Annual gold demand (in tonnes) from 1990 to 2015 technology demand, so does income, the gold price,
Tonnes and the price differential between copper and gold
35 YoY changes in gold demand from 1991 to 2015
30
Growth %
25 250
20
15 200
10
150
5
0
100
-5
-10 50
-15
1990 1994 1998 2002 2006 2010 2014 0

Technology demand Fitted Residual -50

Source: Metals Focus; World Gold Council 1991 1995 1999 2003 2007 2011 2015
Technology demand Fitted Residual

Source: Metals Focus; World Gold Council

154 The 80:20 rule was an import restriction rule imposed by India where importers were required to export 20% of imports in the
form of jewellery. The rule came into effect on 22 July 2013 and was removed on 28 November 2014.

India’s gold market: evolution and innovation 84

Table 29: Income growth and demand momentum Chart 48: Recycling is influenced by price, jewellery
push short term technology demand up, while demand and economic growth
substitution and rising inventories push it down YoY changes in gold demand from 1991 to 2015
Summary statistic from short-term demand dynamics
Growth %
ECV Techt –1 Income GDP t –1 Spread 100
-λ β1 β2 β3 β5
80
Estimate -0.91 0.17 2.65 -1.16 -0.05
60
Standard error 0.19 0.13 1.05 0.48 0.03
40
T-stat -4.67 1.33 2.53 -2.39 -1.51
20
R2 66.9%
0
= direction 68.0%
-20
Source: World Gold Council
-40
Chart 47 and Table 29 show the relevant results. -60
1991 1995 1999 2003 2007 2011 2015
Over the short run, technology demand displays some
Recycling growth Fitted Residual
momentum. A 1% increase in the previous year demand,
Source: Metals Focus; World Gold Council
pushes demand up 0.2%; a 1% increase in income lifts
demand by 2.6%. Conversely, past GDP pushes demand
Table 30: Higher prices result in more recycling, but
down by 1.1% – this implies that manufacturers may over stronger growth and jewellery demand have the
stock on good years and cool down demand the following opposite effect
year. In addition, a widening of the spread between the Summary statistic from short-term recycling dynamics
copper and gold prices reduces demand by 0.05% as
Price Jewellery GDP GDP t –1
a substitution effect kicks in. Finally, technology β1 β2 β3 β4
demand mean reverts rapidly, as λ is approximately 0.9.
Estimate 0.73 -0.39 -0.47 -0.49
The model explains 67% of the variability and equally
Standard error 0.37 0.30 0.47 0.48
correctly estimates the direction of demand growth
T-stat 2.22 -1.29 -0.99 -1.01
68% of the time.
R2 32.5%
Recycling = direction 68.0%
Once the import ban was lifted in the 1990s, gold Source: World Gold Council
recycling has experienced variability, but has not displayed
a marked trend like other aspects of demand do. In some In the short run, quite intuitively, a 1% increase in prices
sense, this would imply that Indian gold recycling is fairly pushes recycling up by 0.7%. Conversely, GDP positive
consistent – approximately 90 tonnes – over the long growth in the same year and the previous one push
run.155 However, there are variables that affect their annual recycling down by 0.6% each. In addition, a 1% increase
changes. Thus, we focused our analysis on short-term in jewellery demand pushes recycling down by 0.4%. In
dynamics. There we found that recycling is positively other words, recycling seems to respond to the opposite
correlated to price, and inversely correlated to price and forces jewellery demand does – which makes sense as
GDP growth. it is the reverse mechanism. This model is not as robust
(or statistically significant) as the models we found for the
The short-run equation is given by:
different aspects of demand. Yet, while it explains less of
Δ rt=β1 Δ p t+β2 Δd t jwlry+β3 ΔGDPt+β4 ΔGDPt –1. the variability than the demand models do, it nonetheless
estimates the right direction of the change in recycling at
The results are summarised in Chart 48 and Table 30. least two thirds of the time.

155 In statistical terms, we would say that annual recycling appears to be stationary – but not constant.

India’s gold market: evolution and innovation 85

Appendix 3: India’s above
ground stocks
The level of India's above-ground stock of gold is keenly
debated. Estimates vary between 15,000–25,000t. This
broad range is not surprising. Making an estimate is a
notoriously difficult exercise.
But it is important for the industry to have an estimate in
which it can have confidence. We have taken a closer look
at India’s gold flows to come up with a credible estimate.
Methodology
An accurate assessment of Indian gold holdings requires
an estimate of historical purchases of gold. It is important
to be clear that this estimate does not include the volume
of gold that may be in the supply chain at any given time.
We assessed the household stock of gold from the
accumulation of annual flows; essentially the sum of
annual net retail investment and jewellery consumption
less jewellery recycling. This allowed us to form an
estimate of the household stocks of jewellery and
bars and coins.
India’s gold holdings
Indian gold holdings can be divided into three distinct
categories:
• private households
• religious institutions
• financial institutions
Private households
Households are by far the largest holders of gold in India,
and have a long tradition of buying gold, stretching back
several centuries.
Using an historical GFMS report from 1968 as a starting
point, we built a picture of jewellery, bar and coin
consumption. Annual data for gold imports, fabrication,
consumption and recycling allowed us to derive the net
addition to stocks of gold held by Indian households.
Allowances were made for hand-carried cross-border
156 A princely state was a nominally sovereign monarchy under a local or regional ruler. Their history goes back as far as 5th century BC.
https://en.wikipedia.org/wiki/Princely_state#cite_note-1
India’s gold market: evolution and innovation
flows and round-tripping. Recycling estimates were stress-
tested to arrive at a robust estimate. The data imply that
private households and individuals are responsible for
around 22,500t of gold holdings.
Religious institutions
It is well documented that households often gift gold
to temples, churches and other religious institutions.
Indian temples are among the richest in the world, some
receiving donations valued at billions of Rupees. Given the
strong religious ties in India and the affinity towards gold,
it is not surprising that temples receive donations of bullion
and ornaments.
But such holdings are not transparent; there are no data
available detailing the amount of gold held by temples.
And they are quite fragmented: we know there are more
than 700 “popular” temples, with many thousands of far
smaller ones across the country.
While religious institutions’ gold is distinct from private
ownership, developing an accurate picture of India’s total
stock of gold means we need to subtract it from the
estimate of private household ownership of gold; temples
do not buy gold themselves, a large portion of it is given
by worshippers.
But not all of it is given by worshipers. Some of religious
institutions gold was accrued before 1968, the starting
point for our household estimate, and was donated by
princely states.156 This adds a significant margin of error
to any estimate for India’s stock of gold, which include
religious institutions’ holdings.
Some of the larger and wealthier temples are known to
have large holdings of gold. The Padmanabha Swamy
Temple, for example, was recently found to have an
estimated Rs1.2tn in precious metals, stones and
ornaments in five vaults. And there are many other
temples with significant annual levels of income and
enormous volumes of annual visitors: Tirupati Balaji
receives around Rs6.5bn worth of donations per year,
while Vaishno Devi welcomes eight million visitors each
year, many of whom will make a donation.
86
Based on income levels and visitor numbers, some
assumptions regarding the proportion of donations made
in gold and the number of temples around the country, our
broad estimate is that temples in India may hold between
2,000– 4,000t. Our guess is that 1,000t might have been
accrued before 1968, which means between 1,000t
and 3,000t was given to religious institutions by
private individuals.
One might be tempted to include holdings of gold by
loan companies and banks, but to do so would be double
counting: the gold is pledged as security, therefore the
ownership lies with the household.
The Reserve Bank of India’s holdings are also transparent.
According to its latest figures it holds 558t, accounting for
around 5% of its total foreign exchange reserves.157

But as previously mentioned, this should not be added

to India’s total stock of gold. Temples’ gold is largely
gifted from individuals and households and will already
be accounted for by the analysis undertaken on private
households.
Glossary
For a glossary of terms used in this report, please see:
www.gold.org/research/india-gold-market/glossary

Financial institutions and government

These are two of the most transparent parts of the market
to assess. A good indication of financial gold stocks is
provided by ETF holdings. As of end-August 2016, these
amounted to 23t.

157 IMF, RBI.

India’s gold market: evolution and innovation 87

Copyright and other rights
© 2017 World Gold Council. All rights reserved. World Gold Council and the
Circle device are trademarks of the World Gold Council or its affiliates.
All references to LBMA Gold Price have been provided for informational
purposes only. ICE Benchmark Administration Limited accepts no liability or
responsibility for the accuracy of the prices or the underlying product to which
the prices may be referenced.
Other third party data and content is the intellectual property of the respective
third party and all rights are reserved to them.
Any copying, republication or redistribution of content, to reproduce, distribute
or otherwise use the statistics and information in this report including by
framing or similar means, is expressly prohibited without the prior written
consent of the World Gold Council or the appropriate copyright owners except
as provided below.
The use of the statistics in this report is permitted for the purposes of review
and commentary (including media commentary) in line with fair industry
practice, subject to the following two pre-conditions: (i) only limited extracts
of data or analysis be used; and (ii) any and all use of these statistics is
accompanied by a clear acknowledgement of the World Gold Council and,
where appropriate, of Thomson Reuters, as their source. Brief extracts from
the analysis, commentary and other World Gold Council material are permitted
provided World Gold Council is cited as the source. It is not permitted to
reproduce, distribute or otherwise use the whole or a substantial part of this
report or the statistics contained within it.
While every effort has been made to ensure the accuracy of the information in
this document, the World Gold Council does not warrant or guarantee the
accuracy, completeness or reliability of this information. The World Gold Council
does not accept responsibility for any losses or damages arising directly or
indirectly, from the use of this document.
The material contained in this document is provided solely for general
information and educational purposes and is not, and should not be construed
as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, gold,
any gold related products or any other products, securities or investments.
Nothing in this document should be taken as making any recommendations or
providing any investment or other advice with respect to the purchase, sale
or other disposition of gold, any gold related products or any other products,
India’s gold market: evolution and innovation
securities or investments, including without limitation, any advice to the effect
that any gold related transaction is appropriate for any investment objective or
financial situation of a prospective investor. A decision to invest in gold, any
gold related products or any other products, securities or investments should
not be made in reliance on any of the statements in this document. Before
making any investment decision, prospective investors should seek advice
from their financial advisers, take into account their individual financial needs
and circumstances and carefully consider the risks associated with such
investment decision.
Without limiting any of the foregoing, in no event will the World Gold Council
or any of its affiliates be liable for any decision made or action taken in reliance
on the information in this document and, in any event, the World Gold Council
and its affiliates shall not be liable for any consequential, special, punitive,
incidental, indirect or similar damages arising from, related to or connected
with this document, even if notified of the possibility of such damages.
This document contains forward-looking statements. The use of the words
“believes,” “expects,” “may,” or “suggests,” or similar terminology, identifies
a statement as “forward-looking.” The forward-looking statements included
in this document are based on current expectations that involve a number of
risks and uncertainties. These forward-looking statements are based on the
analysis of World Gold Council of the statistics available to it. Assumptions
relating to the forward-looking statement involve judgments with respect to,
among other things, future economic, competitive and market conditions all of
which are difficult or impossible to predict accurately. In addition, the demand
for gold and the international gold markets are subject to substantial risks
which increase the uncertainty inherent in the forward-looking statements.
In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the World Gold Council that the forward-
looking statements will be achieved.
The World Gold Council cautions you not to place undue reliance on its
forward-looking statements. Except in the normal course of our publication
cycle, we do not intend to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, and we
assume no responsibility for updating any forward-looking statements.
88
Pulps used to produce this paper are
Elemental Chlorine Free (ECF).

The paper mill and printer are accredited

to ISO14001 environmental standards. IN002201610
World Gold Council
10 Old Bailey, London EC4M 7NG
United Kingdom
T +44 20 7826 4700 
F +44 20 7826 4799 
W www.gold.org

Published:
India’s goldJanuary
market:2017
evolution and innovation 90