India’s Union Budget 2023, presented by the Hon’ble Finance Minister Smt Nirmala Sitharaman on 1st February, 2023, has some significant benefits for the gold sector and micro, small and medium enterprises (MSMEs).
The budget is aimed at boosting the Indian economy and making it more competitive in the global market. MSMEs constitute more than 90% of the total units in the gem and jewellery export industry. The gold sector, being a crucial contributor to the Indian economy, has received some major benefits in this budget that are expected to give added impetus to the industry.
Vipul Shah, Chairman, GJEPC, said, “We were expecting a larger import duty reduction of gold and other precious metals. However, we will continue to pursue the Govt. to rationalise the import duty. Nevertheless, there were a host of measures introduced in the budget that will directly and indirectly benefit the gem & jewellery sector. We hope PM Vishwakarma Kaushal Samman package of assistance for traditional artisans and craftspeople will be extended to the 5,000-year-old indigenous gem & jewellery industry.”
Dr. Nawal Kishore Agarwal, Convener, Gold Jewellery Panel, GJEPC, noted, “The latest budget has some positives, and we are grateful to the government for considering our proposal to increase the import duty on finished jewellery products to support the domestic market. This is a positive move. The stimulus package for MSMEs is another commendable step as it will benefit the industry directly and indirectly. On the other hand, the Council will continue its efforts to address the main challenge, which is to ask the government to lower the duty on importing gold. Exporters are facing high costs for raw material investments, including a 15% import duty and a 3% VAT. These costs can only be recovered once the goods are exported and payment is received, making it a bigger burden for small manufacturers who have limited resources.”
Some direct and indirect industry benefits outlined in the Union Budget 2023 are:
- Lower Customs Duty: The Customs duty on gold and other precious metals has been reduced from 12.5% to 10%. However, the overall duty has remained the same, at 15%, due to the increase in the Agriculture Infrastructure & Development Cess (AIDC). Nonetheless, the industry views the move to lower Customs duty as a positive step.
- Digital Gold Benefit: The conversion of physical gold to Electronic Gold Receipt and vice versa will not be treated as a transfer and won’t attract any capital gains. This would promote investments in the electronic equivalent of gold.
- Boost To Jewellery Exports: The budget has proposed to increase the allocation for the Interest Equalization Scheme from ₹2,376 crore in 2022-23 to ₹2,932 crore in 2023-24, up by 23%, which will help in supporting exports particularly by MSMEs and may result in increasing the subvention support as demanded by the exporters in view of rising interest rates. This is expected to increase the competitiveness of the Indian jewellery industry in the international market and boost exports.
- Support To MSMEs: The budget has proposed to provide support to the small and medium-sized enterprises in the gems and jewellery sector through a scheme that provides credit at a low interest rate. The revamped credit guarantee scheme for MSMEs will take effect from 1st April 2023 through infusion of ₹9,000 crore in the corpus. This will enable additional collateral-free guaranteed credit of ₹2 lakh crore. Further, the cost of the credit will be reduced by about 1%. This will help the MSMEs in the gem and jewellery sector to expand their operations and contribute to the growth of the industry. GJEPC has welcomed the Government’s assurance of returning 95% of forfeited amount to the enterprises in event of contract failure during Covid-19 by MSMEs, which will provide relief to them.
- Focus On Skill Development: The budget has proposed to focus on skill development of artisans in the art and handicraft segment, which is likely to include gems and jewellery. This will help the industry to create more job opportunities and increase the competitiveness of the Indian jewellery industry in the global market. GJEPC is hopeful that the PM VIKAS package of assistance for traditional artisans and craftspeople will be extended to the millennia-old indigenous gem and jewellery industry.
- Investment In Infrastructure: The ₹13.7 lakh crore investment for infrastructure (estimated at 4.5% of GDP) by the Government is seen as a positive step that will unleash the true potential of the Indian Economy. The direct capital investment by the Centre is complemented by the provision made for creation of capital assets through Grants-in-Aid to States. This will indirectly help the gem and jewellery industry to keep pace with the latest infra developments and remain competitive in the global market.
The benefits outlined in the Union Budget 2023 for the gold and MSME sectors are expected to give a boost to the Indian economy and make the gem and jewellery industry more competitive in the global market.
The gem and jewellery industry is poised for growth and is expected to make a significant contribution to the Indian economy in the coming years.