The 5-Point Plan for Economic Self-Reliance

The GJEPC has proposed a multi-dimensional framework to address the rising trade deficit through the following proactive measures:

• Promoting Lower Caratage Jewellery: The industry plans to pivot toward the sale of 14K and 9K gold jewellery. This shift in consumer preference could potentially slash fresh gold imports by 20% to 30%.
• Driving the ‘Old-for-New’ Exchange: To further decrease import dependence, the council is encouraging consumers to exchange existing gold for new jewellery pieces, effectively creating a circular economy within the domestic market.
• Revitalizing the Gold Monetisation Scheme (GMS): The GJEPC is submitting a detailed white paper to the government focused on tapping into India’s massive 25,000 tonnes of idle “grandfather stock” held by households and institutions.
• Deterring Physical Gold Investments: The plan suggests discouraging the purchase of gold bars, billets, and coins for investment purposes—items that currently account for nearly 30% of total imports.
• Framework for Export Growth: Amidst global economic challenges, the council is seeking a special policy framework for exporters, ensuring they can continue to earn vital foreign exchange for the nation.

The Hidden Costs: Smuggling and Working Capital Woes

Despite its alignment with the government’s fiscal goals, GJEPC highlighted the “unintended consequences” of high import duties. The council expressed deep concern that the steep hike—raising total effective taxes—could undo the progress made in formalizing the sector.

Key Industry Risks Identified:

• Rise in Smuggling: High price differentials between India and international markets often fuel illegal trade and grey market activity.
• Capital Blockage: Exporters are facing a severe strain as higher duties lead to a massive amount of working capital being blocked in the form of bank guarantees and upfront taxes.
• MSME Vulnerability: The council warned that MSME manufacturers, who are the “backbone” of the sector, will be the hardest hit by the resulting liquidity crunch.

Balancing Growth and Stability

The GJEPC’s balanced stance underscores the jewelry industry’s unique position: it is a significant contributor to India’s export earnings (GDP) but also a major driver of the trade deficit. The Chairman emphasized that while the industry is committed to reducing import dependence, the government must ensure that these fiscal measures do not stifle the competitiveness of Indian exports on the global stage.

About GJEPC

The Gem & Jewellery Export Promotion Council (GJEPC), set up by the Ministry of Commerce, Government of India (GoI) in 1966, is one of several Export Promotion Councils (EPCs) launched by the Indian Government, to boost the country’s export thrust, when India’s post-Independence economy began making forays in the international markets. Since 1998, the GJEPC has been granted autonomous status. The GJEPC is the apex body of the gems & jewellery industry and today represents 10900+ members in the sector.  With headquarters in Mumbai, GJEPC has Regional Offices in New Delhi, Kolkata, Chennai, Surat and Jaipur, all of which are major centres for the industry. It thus has a wide reach and is able to have a closer interaction with members to serve them in a direct and more meaningful manner. Over the past decades, GJEPC has emerged as one of the most active EPCs and has continuously strived to both expand its reach and depth in its promotional activities as well as widen and increase services to its members.

FAQ’s

1. Why did the Government of India increase gold import duties?
The government increased gold import duties to reduce the trade deficit, protect foreign exchange reserves, and support the Indian rupee amid global economic uncertainty and rising import bills.

2. What is GJEPC’s stand on the gold import duty hike?
GJEPC has supported the government’s “Nation First” policy approach but also cautioned that steep duties could create liquidity problems for MSMEs and encourage illegal gold smuggling.

3. What measures has GJEPC proposed to reduce gold imports?
GJEPC proposed promoting 14K and 9K jewellery, encouraging old gold exchange programs, reviving the Gold Monetisation Scheme (GMS), discouraging physical gold investments, and creating export-friendly policies.

4. How could higher gold duties affect the jewellery industry?
Higher import duties may increase working capital pressure on exporters, raise costs for manufacturers, hurt MSMEs, and potentially reduce the global competitiveness of Indian jewellery exports.

5. Why is GJEPC concerned about smuggling after the duty hike?
The council believes that a sharp gap between domestic and international gold prices could make illegal gold imports more profitable, leading to higher smuggling activity and growth of the grey market.

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By integrating local jewellers into a regulated, tech-driven framework, the council aims to help the government unlock billions in “idle” gold, reducing import dependency and strengthening the nation’s macroeconomic stability.

A Digital Leap for Physical Assets

The core of the GJC’s proposal is a formal transition toward a digital gold ecosystem. This framework, developed in consultation with the Reserve Bank of India (RBI) and the Ministry of Finance, seeks to solve the structural inefficiencies that have hindered the adoption of previous schemes.

• Dematerialisation: Physical gold (bullion, coins, and jewellery) would be converted into digital balances held within the banking system.
• Jeweller Integration: The model leverages the trust and reach of local jewellers to act as key facilitators in the formal financial system.
• Interest-Bearing Wealth: Traditionally non-yielding gold assets are transformed into interest-earning financial instruments without the owner needing to liquidate their holdings.

Transparency and Accountability

To address consumer and regulatory concerns, the GJC has anchored the revised framework on three pillars of governance:

• Full Transparency: End-to-end digital recording of every stage, from deposit and assaying to the final credit.
• Traceability: System-based tracking across the entire value chain, supported by verifiable audit trails.
• Accountability: Clear responsibilities for banks, refiners, and jewellers, backed by strict KYC compliance and regulatory oversight.

Economic Impact: Reducing the Import Burden

The GJC believes this revamped scheme is critical for India’s broader economic health.

• Market Formalisation: Shifting toward a regulated digital framework will improve compliance standards and market efficiency.
• Current Account Deficit (CAD): By mobilising domestic idle gold, the government can significantly reduce its reliance on expensive gold imports, which are a major drain on foreign exchange.
• Leveraging Investment Trends: With the recent surge in gold bullion and coin investments, the GJC sees a massive opportunity to bring these private holdings into the formal economy

Leadership Insight

“The proposed model integrates jewellers into a regulated, digital ecosystem, significantly enhancing transparency and trust for consumers. By unlocking the value of idle gold, we can strengthen domestic supply and reduce reliance on imports.” — Mr. Rajesh Rokde, Chairman of GJC

“The revamped GMS is designed to be practical and scalable. It creates a secure pathway for investors to earn returns on idle gold, transforming it into a productive financial instrument.” — Mr. Avinash Gupta, Vice Chairman of GJC

FAQ’s

1. What is the main proposal by GJC?
GJC has proposed a digital transformation of the Gold Monetisation Scheme, where physical gold like jewellery and coins can be converted into digital assets within the banking system, making it easier to manage, track, and earn returns on gold holdings.

2. How will the digital gold system work?
Under the proposed model, deposited gold will be converted into digital balances after proper valuation and verification. These balances will be maintained in bank accounts, ensuring transparency, traceability, and ease of transactions for investors.

3. What role will jewellers play in the new system?
Local jewellers will act as key facilitators, helping customers deposit gold, verify purity, and integrate them into the formal financial system, leveraging their existing trust and reach among consumers.

4. How does this benefit the Indian economy?
The scheme can reduce dependence on gold imports by mobilising idle domestic gold, improve market transparency, and help lower the current account deficit while strengthening overall economic stability.

5. Can investors earn returns under this scheme?
Yes, the revamped model allows investors to earn interest on their deposited gold, transforming traditionally non-yielding assets into income-generating financial instruments without selling their gold.

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