Gold in India An Industry at a crossroads

Transcription

1 Gold in India An Industry at a crossroads Barcelona, October 2017 An MKS PAMP GROUP Company

2 India s love affair with gold is of great import for global markets 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 2

3 The consumer proposition for Gold is simple and well understood WHY HOW WHO Rural, traditional urban 80% in unorganized sector Transactions through cash Mainly through local jewelers, who are as of now the only successful high value distribution channel in India Jewellers outnumber bank branches by 3x 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 3

4 while the business environment is unpredictable and consequently volatile Systemic changes during the last 5 years Market uncertainty 2012: Banks permission to sell gold coins revoked 2014: 80:20 scheme 2016: 1% excise duty shuts down markets 2016: Demonetisation 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 4

5 Gold in India is perhaps best characterized by a see-saw Simple consumer proposition Who How Why Customs duties Consumer taxes Restrictions on cash KYC Unpredictable business environment Incredible India India has seen transformative change over the last decade How will change affect this paradigm? 5

6 We have witnessed four tectonic shifts in business environment Government vision Key actions What it means 1 Make In India Formation of gold committee under Niti Ayog, significant industry interaction with 8 sub-committees Good delivery standards Spot exchange Gold Board? 2 Good Governance Goods and services tax Universal bio-metric ID (adhaar card), covering 99% adult pop. Tax transparency from import to sale Full traceability on consumer purchases 3 Digital India National Payment corporation of India creates United payments interface Direct payments to all banks in India via existing bank mobile app. Bypasses cards, net banking, e- wallets and cards 4 Financial Inclusion Approved new bank category called payments banks, issued 11 licenses 2 payments banks in operation with customer base of 500m+, focused on providing basic financial accounts 6

7 Coupled with dramatic changes in consumer base Who? How? Why? Elite (>30k HHI) Avg. age in years Affluent (15-30k HHI) + 40% of consumption by Internet users Online Shoppers Digitally influenced 5m 300m Urban population to account for 60% of consumption in 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 7

8 Are we at a tipping point? 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 Drive to transparency No cash - digitalisation Full KYC and tax trail Centralised policy Ease of doing business 2020 How do we adapt to complexity? How do we engage government? 8

9 Looking ahead 9

10 Reimagining the product is important Instant sell back at live feed price

11 In addition, it is critical to leverage the regulatory tailwind What India Wants Gold as of today Gold of tomorrow 1 Make In India Gold is a drain on current account Gold is an economic powerhouse, Export/Import substitution 2 Good Governance Smuggling, Tax avoidance and Money laundering Industry to engage tax authorities more effectively to reinforce clean business guidelines 3 Digital India Mainly in physical and cash form Product innovation to satisfy local demand in a non-physical form with high traceability. 4 Financial Inclusion Gold is currently a substitute for the financial system How can we make this a strong compliment to Financial System 11

12 In the next few years, we may end up seeing binary outcomes Reimagine products and work with govt. to take advantage of the regulatory tailwinds Migrate to unorganized sector, reducing industry long term growth potential 12

13 THANK YOU 27