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India Gold demand in 2019 is likely to stay flat

Arjun Raychaudhuri, MD & CEO, MMTC PAMP India Pvt Ltd

It is not an exaggeration to say MMTC PAMP India Pvt Ltd has been the principal catalyst for change in the Indian gold industry. So, who else could be better person than Arjun Raychaudhuri, Managing Director & CEO of the company to provide a perspective on market trends, policy direction and digital gold? Below is the excerpt of the interview with Arjun Raychaudhuri.

How do you foresee the demand for gold in the Indian market in 2019?

India is a very complexand a dynamic market. There are quite a few things happening. Yes, on the positive side, there are more auspicious days in year 2019 compared to year 2018. Policy implementation is expected to accelerate this year. Diwali demand which was dull last year, is expected to be better this year. Having said these, higher gold prices take away some demand.

We believe that demand for gold in year 2019 would be more or less the same as in year 2018 at around 750 to 800 tons.

Indian gold dore flows continue to increase. There is a section which feels that the customs duty differential (10% for standard gold vs. 9.35% for gold dore) should be removed. What is your opinion?

It is a policy decision of the government to have a differential duty structure between standard gold imports (finished goods) and gold dore imports (raw material). It is in alignment with the practice in other industrial segments. The government has been able to increase gold refining capacity with this policy. At the same time, the industry has also been able to bring in gold dore, refine and supply to the Indian market at the current differential, thereby creating additional employment. We don’t factor in any changes in this differential in our planning horizon.

Does MMTC PAMP engage with artisanal and small-scale gold miners to source gold dore as well as to promote environmentally friendly gold mining practises?

At present, MMTC PAMP is not sourcing dore from artisanal and small-scale gold mining sector. However, we are closely watching the developments in the sector and exploring various options.

As we are LBMA good delivery and responsible gold accredited, we adhere to very strict global standards for environmental and all other forms of sustainability.

For a large-scale refiner such as MMTC-PAMP, from business efficiency and compliance to responsible guidance perspective (which is integral to our company), large mining companies are preferred. However, it does not rule out the possibility of our engagement with artisanal and small-scale miners.

In five years from now, what would be the main feedstock for an India-based refiner-- gold dore from mines or recycle gold (scrap)? Are we prepared for that scenario as an industry?

I certainly wish that the domestic recycled gold market takes off soon. However, it is contingent on several other things happening as well. We need a revamped GMS in place; for that to happen,clarity on India Good Delivery norms and clarity on overall standards in which we would operate should be there. So, all these policies have to be in place.

The best part is, government is pushing for a ‘holistic change agenda’ including good and clean business practises of gold and jewellery industry.

We are hopeful that eventually recycled gold may be the dominant source of feedstock, but this will take some time and concerted action on part of policy makers and the industry.

What is that one policy change pertaining to the gold industry that government must go ahead with right away?

Niti Aayog report -“Transforming Indian Gold Markets”- has given a holistic set of policy recommendations. As I said before, a revamp in GMS should address India good delivery and related issues, should harmonise the spot gold exchange into its fold and so on. So, while recommendations may appear stand-alone, these are all inter-connected and have to be harmonised.

Specifically, within the set of recommendations, I think gold monetisation scheme (GMS) holds high potential of effectively addressing the problems of the government while at the same time solving the supply-side issues of the market.

Where do new categories of gold such as digital gold appear in the scheme of things?

When we started the digital gold category two years ago, we were hopeful that this would be solving a real customer need. We are happy to see both a significant growth in customers, and also the adoption of modern digital techniques by the industry players.

The customer base however is quite different from what we have been used to – our users seem to be more aware, more discerning, and most importantly, they are significant users of social media, and are able to constructively use online voice to demand change.

It will be critical to ensure robust quality protocols for this customer base at this initial phase of digital gold uptake.

This will be the only way to ensure long term sustainability of not just digital gold but also the broader reputation of the gold industry.

The key objective for us in the near term is to support government and industry to ensure delivery of high-quality standards for this new and mobile customer base.


Disclaimer: Views are personal and not the views of the publisher.