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AN INTRODUCTION TO THE INDIAN GOLD MARKET MAJOR SPONSOR WORLD GOLD COUNCIL CORPORATE SPONSOR RAND REFINERY LIMITED Published by Virtual Metals Research & Consulting Ltd and Grendon International Research Pty Ltd AN INTRODUCTION TO THE INDIAN GOLD MARKET INDUSTRY COMMENTS Comments in letters, faxes and emails include: Reserve Bank of India (“an excellent work”), State Bank of India (“excellent coverage”) and The Gem & Jewellery Export Promotion Council (“a wonderful, educative, informative book”). “This volume is an absolute boon … The resulting accumulation of facts and data is of fantastic value to anyone who wants to understand the history and nature of the world’s most important market for gold.” London Bullion Market Association “It has provided an excellent basis for the Council and its members to learn about the complex dynamics of the market, and also is a strong foundation for us to review our operational business plans and strategies for the Indian market … it has added significant value to our operations there.” World Gold Council “It is necessary to understand the intricacy of market structures and the historical sequence of events (of the Indian gold market). The book by Nigel Desebrock … provides a veritable gold mine of authentic information”. S.S. Tarapore (former Deputy Governor, Reserve Bank of India), Financial Express (India) PHONE AND FAX NUMBERS IN INDIA In October 2002, Mumbai telephone exchanges either prefixed a “2” to the local number, or replaced the first digit with “56”. Since then, exchanges in other cities have also made changes. In this publication, while the listed Mumbai numbers take the changes into account, numbers for other parts of the country do not. AN INTRODUCTION TO THE INDIAN GOLD MARKET By NIGEL DESEBROCK Grendon International Research Pty Ltd GRENDON INTERNATIONAL RESEARCH GOLD MARKETING CONSULTANT Published in association with AN INTRODUCTION TO THE INDIAN GOLD MARKET Published in December 2002 by Virtual Metals Research & Consulting Ltd and Grendon International Research Pty Ltd. Virtual Metals Research & Consulting Ltd 100 Ashmill Street, London NW1 6RA, United Kingdom Tel: 44-20-7487 3600 Fax: 44-20-7224 4527 Email: [email protected] Grendon International Research Pty Ltd 33 Alexandra Road, East Fremantle, WA 6158, Australia Tel: 61-8-9319 2171 Fax: 61-8-9319 2154 Email: [email protected] Grendon International Research Pty Ltd for Grendon International Research Trust Incorporated in Western Australia Australian Business Number (ABN): 79 486 548 064 Australian Company Number (ACN): 009 424 686 The publication is the outcome of a joint project by Virtual Metals Research & Consulting Ltd (“Virtual Metals”) and Grendon International Research Pty Ltd (“GIR”). © Grendon International Research Pty Ltd ISBN 0-9750147-0-6 The publication is protected by international copyright law. All rights are reserved. Apart from fair dealing for the purposes of private study, criticism or review, no part may be reproduced, stored in a retrieval system, or transmitted in any form by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the copyright owners. However, brief extracts may be reproduced by gold industry entities without formal permission but only with the full and appropriate citing of the original source and a specific reference to the publishers as follows: Source: Grendon International Research/Virtual Metals Although GIR, as the author and copyright owner, has made all reasonable efforts to ensure that the information was accurate at the time of publication, there may be inadvertent errors and omissions and a lack of accuracy or correctness. It makes no representation or warranty, express or explicit, as to the accuracy or completeness of the information. The publication is not and cannot be construed as an offer to sell, buy or trade any securities, equities, commodities or related derivative products, and the publication in no way offers investment advice. Virtual Metals, GIR and their employees accept no liability for any direct, special, indirect or consequential losses or damages, or any other losses or damages of whatever kind, resulting from whatever action or cause through the use of any information obtained directly or indirectly from the information in the publication. Virtual Metals and GIR also have no obligation to inform recipients or readers if, in the future, the information contained in the publication is modified or corrected. Circulation of this publication is limited to leading gold industry entities. Copies are subject to availability. Requests should be directed as follows: Within India: Contact WGC India (Mumbai and Chennai). Rest of world: Contact Virtual Metals (London). Designed by Grendon International Research Pty Ltd. Cover photograph by Harmony Gold Mining Company Ltd, South Africa. Typesetting and layout by Groupacumen Pty Ltd, Perth, Australia. Printed by Scott Print Ltd, Perth, Australia. 2 AN INTRODUCTION TO THE INDIAN GOLD MARKET INDUSTRY SUPPORT MAJOR SPONSOR CORPORATE SPONSOR TRADE SUPPORT An Introduction to the Indian Gold Market has relied greatly on the support of gold-related organisations and businesses that kindly provided information and advice. 16 government-related organisations and departments 14 banks and other official bullion importers 31 bullion dealers, refiners and coin fabricators 114 jewellery fabricators, wholesalers and retailers 16 other gold-related entities Consultant in India Madhusudan Daga AN INTRODUCTION TO THE INDIAN GOLD MARKET 3 FOREWORD AN INTRODUCTION TO THE INDIAN GOLD MARKET This publication, together with the comprehensive analytical study, India’s Golden Era, The Age of Kaliyug, from which it has been extracted, came about when the gold mining companies that underwrite and sponsor Virtual Metals Research & Consulting Ltd asked a seemingly simple question. Would they still be able to sell their ten-tola bars into India in ten years time? It seemed bizarre that, despite India being the world’s largest consumer of gold and thus of vital importance to the global gold business, the world’s understanding of the domestic gold industry proved superficial. At the same time, conventional wisdom seemed to insist that India was a bottomless pit into which vast quantities of gold would continue to disappear, never to be seen by the global gold market again. Was this true? Having thus been commissioned Virtual Metals, in partnership with Grendon International Research, set off for India to find out at first hand what actually happens there, how, where and why it happens and if it will continue to happen in the future. The fruits of these months of labour are, firstly, the analytical report The Age of Kaliyug which contains not only a wealth of trade-related information and analysis by Grendon International Research but also an extensive macro analysis by Virtual Metals of the economic, social and political factors driving the Indian gold market, as well as recommendations; secondly, the publication in your hand, An Introduction to the Indian Gold Market. It is Virtual Metals stated philosophy to support the precious metals markets wherever possible and to actively seek ways of giving something back to the industry that we all rely upon. Through sponsorship, Virtual Metals and Grendon International Research are delighted to be able to share freely a sizeable proportion of the project’s basic market intelligence. Without the World Gold Council as the major sponsor and Rand Refinery Limited as the corporate sponsor, the publication of An Introduction to the Indian Gold Market could not have been funded, so our thanks go to them for their support and generosity. The overall project is indebted to the foresight and vision of the underwriters and sponsors of Virtual Metals: Gold Fields Ltd, Harmony Gold Mining Company Ltd, Western Areas Ltd and Barrick Mining Ltd. To acquire a copy of the comprehensive analytical report India’s Golden Era – The Age of Kaliyug please contact Virtual Metals in London. The price is US$ 9,000. Jessica Cross Chief Executive Officer Virtual Metals Research & Consulting Ltd November 2002 4 AN INTRODUCTION TO THE INDIAN GOLD MARKET PREFACE An Introduction to the Indian Gold Market is based on the outcome of four GIR fieldtrips (totalling 14 weeks) between November 2001 and September 2002, and extensive communication by phone, fax and email with relevant trade entities. It also relies on information gathered by GIR over many visits to India since 1990. In 1993, GIR compiled an unpublished report on the Indian gold market for the World Gold Council. This earlier marketing consultancy project, in particular, has assisted GIR to view the current market from an historical perspective. The publication has been compiled according to three objectives: • Consolidate accessible statistical and other information on the Indian gold market into a single source of reference. • Focus on the gold bullion and jewellery markets, the nature of consumer demand from the trade perspective, and the role of the Indian Government. • Support the promotion of gold in India. EXTERNAL STATISTICS The official import and rupee gold price statistics rely largely on Madhusudan Daga, who collates them on behalf of most international analysts. The estimates of unofficial imports, and the breakdown of industrial gold demand, also rely on Mr Daga. Imports of gold for re-export as jewellery are derived from statistics provided by The Gem & Jewellery Export Promotion