Gold-plated silver jewellery and articles at growth

Recently, Ketan Dhruv, Director-Bangalore Refinery said, gold’s usage in India for industrial purposes can be broadly divided into two categories – electronics and other industrial. The former covers the use of gold in electrical contacts and printed circuit boards (PCBs), while the latter includes plating and Jari (gold thread).

Looking first at plating, over the last few years the tremendous growth in sales of gold-plated silver jewellery and articles, as well as imitation jewellery (gold-plated brass jewellery), has underpinned the increasing usage of gold potassium cyanide (GPC) in India.

However, not all of this has benefited local GPC producers as most fabricators rely on imported material. For instance, in the first seven months of 2022 alone, India imported nearly 750kg of GPC, equivalent to 510kg of gold in fine-weight terms (gold accounts for 68.2% of GPC).

To minimise costs, thrifting has emerged even in this segment, with the average thickness of gold coatings steadily declining. For instance, watches with a 5-micron (μm) plating thickness a decade ago are now using plating as thin as 0.1 μm.

The key barrier to local GPC production is the 15% import duty on gold bullion compared to that on gold compounds, which includes GPC at 11%. I believe that the government should work towards changing this inverted duty structure so that Indian producers can benefit from a level playing field.

Overall, the duty structure needs to be reviewed for industrial players to boost local industrial usage of gold. With the manufacturing of electronics and PCBs likely to rise and with the demand for plating also growing, there is a need to create a differential import duty structure for the industrial segment.

In our view, this will help domestic fabricators, potentially opening up export markets and, in turn, help to cushion the negative impact of gold imports on India’s current account deficit.

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