Cash crunch forces villagers to recycle old gold

Kolkata: The cash crunch unleashed by demonetisation has forced Indian villagers to recycle household gold before the wedding season as they are unable or reluctant to spend sparse cash for jewellery despite gold crashing to Rs 27,500 per 10 gm from Rs 31,500 per 10 gm on November 8. The wedding season kicks off from January 15.

“A shortage in cash supply has prompted the agrarian community to recycle their old gold for meeting the wedding demands.Cash purchase for new gold has been less by almost 50% in rural India,“ said Nitin Khandelwal, chairman, All India Gem & Jewellery Trade Federation (GJF).

Rural India consumes about 60% of the gold India imported. According to trade body India Bullion & Jewellers (IBJA) the country imported 905 tonnes of gold in 2015. However, IBJA said import in 2016 has been much less at 493 tonnes. Surendra Mehta, secretary, IBJA said that apart from the imports of 493 tonnes, nearly 375 -300 tonnes of old gold has been offloaded in the market in 2016.

“This is quite a substantial volume considering the import of gold in 2016. A lot of old gold has entered the market from rural India post demonetisation. Since farmers do not have access to plastic money and are not acquainted with online transactions, they were forced to recycle old gold,“ Mr Mehta said.

Even jewellery firms are luring people to recycle old gold. For instance, Malabar Gold & Diamonds has introduced a scheme to . 100 per gram for old give bonus of ` gold when exchanged against diamond jewellery.

While rural India is banking on old gold to meet wedding demand, jewellers do not see a significant rise in new purchase of gold in the first three months of current year.