India’s jewellery industry has urged the government to focus on mobilising the country’s vast idle household gold reserves rather than discouraging consumer purchases, warning that a sharp demand slowdown could threaten the livelihoods of millions dependent on the sector.
The appeal by the All India Jewellers and Goldsmith Federation came a day after Prime Minister Narendra Modi called on citizens to defer gold purchases for one year to help conserve foreign exchange reserves amid soaring oil prices and supply disruptions linked to the Middle East conflict.
In a letter to Commerce Minister Piyush Goyal, AIJGF national president Pankaj Arora said the objective of protecting India’s foreign exchange reserves was understandable, but warned against measures that could weaken consumer demand without creating structural alternatives.
“While the intention of protecting India’s foreign exchange reserves is understandable, the solution should not be demand destruction,” Arora said. “The solution should be domestic gold mobilisation, recycling and productive circulation of India’s idle gold stocks.”
The federation said India’s gems and jewellery sector supports nearly 35 million livelihoods across manufacturing, wholesaling, retailing, exports and artisan networks, making it one of the country’s largest employment-generating industries after agriculture and textiles.
Industry executives warned that a prolonged slowdown in gold demand could hit thousands of small jewellers, craftsmen and family-run businesses already struggling with record-high bullion prices and weakening consumer affordability.
India is estimated to hold more than 25,000 tonnes of privately owned gold, one of the world’s largest household reserves, much of it lying idle in homes, temples and family vaults.
The federation proposed the creation of a dedicated bullion bank within Gujarat International Finance Tec-City’s International Financial Services Centre ecosystem to mobilise, standardise and recycle domestic gold holdings more efficiently.
The industry body also called for a major revamp of India’s Gold Monetisation Scheme launched in 2015, arguing that structural weaknesses and limited incentives have prevented the programme from achieving scale.
Among its recommendations were allowing Gold Exchange Traded Funds to lend 20 to 30 per cent of their physical holdings through a regulated framework, introducing dematerialised bullion deposit certificates that can be used as collateral for loans, and ensuring GST and tax neutrality for intra-system gold transfers.
The AIJGF also proposed a national dashboard to track gold mobilisation and import substitution, saying such measures could potentially reduce India’s annual gold imports by 200 to 300 tonnes without damaging employment in the jewellery sector.
Retail gold prices in India have surged to historic highs amid geopolitical tensions, safe-haven buying and fears of prolonged disruption to oil and shipping routes through the Strait of Hormuz.
Analysts say the government is trying to reduce pressure on the rupee and external balances by curbing non-essential imports as higher crude prices sharply inflate India’s import bill.
However, jewellers argue that gold demand in India is deeply linked to cultural traditions, weddings and household savings patterns, making abrupt consumption curbs economically and socially sensitive.
Industry experts believe policymakers may increasingly focus on gold recycling and monetisation strategies as a less disruptive alternative to suppressing consumer demand outright.
- India
