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India Braces for Ban on Large Cash Deals
Mar 9, 2017 3:16 AM
By Rapaport News
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RAPAPORT... India’s ban on high-value cash transactions could damage
rural gold demand or spur growth in the black market, the World Gold Council
(WGC) warned.
From April 1, the government will cap cash purchases at $4,493
(INR 300,000) as it continues its attempts to transform the nation’s economy into
one based more on electronic transactions.
“This will have the greatest impact in rural India, where
people do not necessarily have access to checks and electronic payments,” the
WGC said in a market update Wednesday.
Even so, the ban on large cash deals could merely impact
jewelry buyers’ shopping habits rather than force them to spend less overall.
“It could curb gold purchases, it could just encourage gold
shoppers to buy smaller amounts of gold spread over more transactions,” the WGC
added. “Or it could push a large part of demand underground and encourage
growth in the black market.”
The prohibition will be going into effect less than six
months after the government announced its demonetization policy to invalidate
INR 500 and INR 1,000 currency notes. The move took about $220 billion out of
the market and sapped liquidity mostly from smaller and medium-sized jewelers
that trade in cash.
However, the gradual shift to cashless payments will benefit
the gold market in the long term, the council predicted.
“Over time, consumers will move away from cash towards
digital payments, and organized players should benefit from this trend,” it
said. “This change in market dynamics will result in more transparency and a
better deal for consumers, protecting them from shady practices such as under-carating.”
Photo courtesy GJEPC |
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Tags:
Demonetization, gold, India, Jewelry, Rapaport News, retail, WGC, World Gold Council
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