The beating to cash-driven sectors like gold and real estate notwithstanding, Indian industry is gung-ho about the Prime Minister’s decision to derecognise notes.
PRIME MINISTER NARENDRA MODI ’S announcement derecognising Rs.500 and Rs.1,000 notes came when most shops in Mumbai were seeing end-of-day sales or were about to down their shutters. “Within an hour of the announcement there was a massive rush and we remained opened till close to midnight,” says Navin Jhaveri, a jeweller in the Opera House area which houses upmarket jewellery stores.
The days and nights that followed November 8 at the city’s Zaveri Bazaar, one of the central points for precious metal and jewellery trading, resembled the week before Deepavali when people buy a lot of jewellery. Apparently, many jewellers were willing to take cash and give backdated bills for sales. Jhaveri said, “The big loophole in the gold and ornament business is that you can buy jewellery or bullion up to Rs.2 lakh without having to give a PAN [permanent account number]. If the price of the product is above that, the seller has a way of splitting the bills. Therefore, this was an easy way to dispense cash and still hold a good investment.”
Nothing was illegal about it as the seller was giving valid bills and VAT charged, says Jhaveri. “Everything was kosher.” But for the seller who might have, say, 80 per cent of the payments in cheque and 20 per cent in cash, it spells trouble. He does not pay taxes on that cash.
A diamond merchant with a leading company says, “People were going nuts. They would rather take a hit and have something in their hands than lose all the money.” On November 8, gold was selling at about Rs.31,500 for 10 grams. When the currency crisis hit, the price peaked at Rs.60,000 per 10 grams.
According to market estimates, such has been the demand for gold that as much as $1 billion worth of gold, or around 30 tonnes, was imported from November 9 to November 15. On an average 30 tonnes of gold is imported in a month.
This story is from the December 9, 2016 edition of FRONTLINE.
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This story is from the December 9, 2016 edition of FRONTLINE.
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