The government’s decision to ban large denomination Rs 500 and Rs 1,000 notes from midnight tonight will likely have a bearing on the current wedding season spending, mainly gold buying.
Cash sales in the gold and jewellery trade are quite common and serve two purposes. The purchase allows the buyer the option of converting black money into gold and bullion, while it gives the trader the option of keeping his unaccounted wealth in the form of stock, not disclosed in the books or valued at less than market price.
Bullion and Jewellery is an important sector for both generation and consumption of black money and is also targeted by black money holders looking towards protecting the value of their black money from inflationary depreciation.
A fairly large number of transactions in this sector remain totally unreported and therefore facilitate investment and consumption of black money.
Nearly 600 tonnes of gold are estimated to be used in jewellery products every year in India
According to the World Gold Council, spend on gold jewellery and coins comprises of 8 percent of daily consumption of a household
This is only marginally behind medical expenses and education.
Gold is integral to all Indian wedding ceremonies. Wedding-related purchases account for 50 percent of annual jewellery demand.
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