Gold in India - LBMA 2017/S7_AR.pdf · Gold in India An Industry at a crossroads Barcelona, October 2017. MMTC -PAMP India’s love affair with gold is of great import for global
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An MKS PAMP GROUP Company
Gold in IndiaAn Industry at a crossroadsBarcelona, October 2017
MMTC-PAMP
India’s love affair with gold is of great import for global markets
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Physical gold is the key savings vehicle for 200+mn Indian
households, and this demand straddles all sections of society
At any time, India accounts for around 25% of the
global demand for gold
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The consumer proposition for Gold is simple and well understood…
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Gold is a well understood product fulfilling at least 3 key needs• Consumption: Traditional gifting, religious, weddings, adornment• Investment returns: Familiarity with gold price trends• Insurance/ safety net: Through selling / taking a loan against gold
• Mainly through local jewelers, who are as of now the only successful high value distribution channel in India
• Jewellers outnumber bank branches by 3x
• Rural, traditional urban• 80% in unorganized sector• Transactions through cash
WHY
HOW
WHO
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Market uncertainty
…while the business environment is unpredictable and consequently volatile
2016: Demonetisation
2012: Banks permission to sell gold coins revoked
2016: 1% excise duty shuts down markets
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2014: 80:20 scheme
2017: GST rate on Gold and Jewellery
2017: Arbitrage of customs duty via FTA
2017: Jewellery to be considered under ambit of Prevention of money laundering with stringent KYC
Systemic changes during the last 5 years
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IncredibleIndia
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India has seen transformative change over the last decade – How will change affect this paradigm?
Simple consumer proposition
WhoHowWhy
Unpredictable business
environment
× Customs duties× Consumer taxes× Restrictions on cash× KYC
Gold in India is perhaps best characterized by a see-saw
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Make In India1
Key actions What it means
Good Governance
Financial Inclusion
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Government vision
Digital India3
• Tax transparency from import to sale• Full traceability on consumer
purchases
• Direct payments to all banks in India via existing bank mobile app. Bypasses cards, net banking, e-wallets and cards
• Goods and services tax• Universal bio-metric ID (adhaar
card), covering 99% adult pop.
• National Payment corporation of India creates “United payments interface”
• 2 payments banks in operation with customer base of 500m+, focused on providing basic financial accounts
• Approved new bank category called payments banks, issued 11 licenses
• Good delivery standards• Spot exchange• Gold Board?
• Formation of gold committee under Niti Ayog, significant industry interaction with 8 sub-committees
We have witnessed four tectonic shifts in business environment…
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340
650
850
90220
350140
300450
0
200
400
600
800
1000
2015 2020 2025
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Who? How? Why?
Avg. age in 2020 29 years
40% of consumption
by 2025
Elite (>30k HHI)
Affluent (15-30k HHI)
+Urban population to account for 60%
of consumption in 2025.
Online ShoppersInternet users Digitally influenced
Digital ecosystem enabled via material investment in logistics infrastructure. Private providers currently service
75% of all locations
Growth in basic savings accounts held by mainly poor and rural in India.
Similar growth anticipated for pensions, insurance and mutual funds
300m
5m
…Coupled with dramatic changes in consumer base…
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How do we adapt to complexity? How do we engage government?
Are we at a tipping point?
2020
Increasing complexity in product proposition
× Who: Rural consumer to young urban× How: Mobile driven, increased ease
with non-physical× Why: Reduced dependence on gold as
financial penetration increases
Ease of doing business
Drive to transparencyNo cash - digitalisation Full KYC and tax trail Centralised policy
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Looking ahead
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Reimagining the product is important…
Instant sell back at live feed price
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Make In India1
Gold as of today Gold of tomorrow
• Gold is a drain on current account
• Gold is an economic powerhouse, Export/Import substitution
Good Governance
Financial Inclusion
2
4
• Smuggling, Tax avoidance and • Money laundering
• Industry to engage tax authorities more effectively to reinforce clean business guidelines
• Gold is currently a substitute for the financial system
• How can we make this a strong compliment to Financial System
What India Wants
Digital India3 • Mainly in physical and cash form • Product innovation to satisfy local demand in a non-physical form with high traceability.
In addition, it is critical to leverage the regulatory tailwind
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In the next few years, we may end up seeing binary outcomes
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Reimagine products and work with govt. to take advantage of
the regulatory tailwinds
Migrate to unorganized sector, reducing industry
long term growth potential
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THANK YOU
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