Foto Photo/ANI
The cause for alarm was the war involving Iran, which triggered a spike in global oil prices. For India, which imports more than 90% of crude oil and about half of natural gas, it was a serious blow to the balance of payments and the rupee exchange rate, writes Reuters. Against this background, Modi urged citizens to save fuel, limit unnecessary travel, more actively move to remote work and reduce gold purchases for the sake of preserving the country’s foreign exchange reserves.
The market took these statements as a signal of possible tightening of economic policy. Investors fear that the authorities may sharply increase import duties on gold – similar to the measures of 2012-2013, when New Delhi tried to stop the fall of the rupee. At that time, tariffs on the precious metal were significantly increased to reduce imports.
Concerns instantly hit the shares of jewelry companies. Shares of Titan Company, Senco Gold and Kalyan Jewellers India lost between 6% and 9% at the beginning of the week. The jewelry industry is particularly sensitive to such signals: India remains the second largest consumer of gold in the world, and the wedding season traditionally supports high demand for jewelry.
Additional pressure is created by the situation on the currency market. On Monday, May 11, the Indian rupee updated the historical minimum, falling to 95.31 per dollar. According to analysts’ estimates, the country’s balance of payments deficit in the current fiscal year could almost triple to 66-70 billion dollars.
Despite market fears, a government source said that New Delhi has no plans to raise duties on gold and silver imports. However, investors doubt that the authorities will be able to maintain the current policy for a long time amid rising energy prices and pressure on the national currency.
