The largest consumer of gold in the world in 2012-2013, India was a growing market for gold jewellery, mainly pertaining to its value in the ethnic and spiritual customs of the country. Gold prices in international markets had been growing, but this had little relevance on India's voracious hunger for gold.
Heavy gold imports had led to a rise in country's fiscal deficit above the sustainable level of 2.5-3% of gross domestic product (GDP) and reached 4.2% in FY2012. The government's recent policies had started operations in the beginning of 2013 and concerned Velvetcase, a made-to-order jewellery company in Mumbai, on gold imports. Among a number of other measures, the Indian government had inflated import duty from 4% to 10% during the year.
The increase in import duties raised input costs, consequently slowing the demand for gold jewellery to some extent.Velvetcase had a firm believe that its distinct business model of developing jewellery using a low karat gold will not only please India's passion for the gold, but also resolve in ameliorating the current account deficit (CAD) of the country by decreasing the amount (in grams) of gold used in the manufacture of jewellery.
PUBLICATION DATE: September 15, 2014 PRODUCT #: ISB035-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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