Analysis: India ranks fourth in global gold recycling with a capacity of 1800 tonnes by 2021; Findings in the report | India ranks fourth in global gold recycling with a capacity of 1800 tonnes by 2021; Findings from the report

The Gold Refining and Recycling report was released today by the World Gold Council as part of an in-depth analytical study of the Indian gold market. Given the growing demand for gold in India, recycling will continue to be an important issue and in the near future, there will be steady progress in the refining sector, which is now on the path to stability, the report said. The gold refining industry in India has made significant progress in the last few years. India currently ranks fourth in the world in gold recycling. Between 2013 and 2021, India’s gold refining capacity increased by 1,500 tonnes (500 per cent). Not only that, in the last five years, 11 per cent of the country’s total gold supply has come from ‘old gold’. This change is reflected in the changing price of gold, the forecast for future rate hikes and the broader financial outlook.

Somasundaram PR, Regional CEO, World Gold Council, India, said, “Further changes in the bullion market have given the Indian market the potential to emerge as a competitive refining hub with responsible sourcing, export of gold bars and a steady supply of old gold. The domestic recycling market, which depends on the value of the local rupee and the cycle of the economy, is still somewhat disorganized. However, initiatives like the revised GMS (Gold Monetization Scheme) should benefit the market. Various schemes are being implemented to bring the surplus of gold into the mainstream and increase the ease of conversion into liquidity due to turnover in the bullion market. Our report also mentions that the period of wearing jewelry is constantly decreasing. Because, young customers often want to change designs. This trend will help increase recycling. On the other hand, higher incomes and stronger economic growth will reduce direct sales and make it more convenient for consumers to pledge gold rather than sell it directly. That’s why we need to support organized recycling by providing better benefits and technology-based alternatives to the gold supply chain. “

Current status of gold recycling in India

The picture of gold recycling in India has changed significantly over the last decade. Of these, official works were less than five in 2013. So, in 2021, this number has reached 33. As a result, the country’s organized gold refining capacity is estimated to have reached 1800 tonnes as compared to just 300 tonnes in 2013. Although the turnover in the unorganized sector is another 300 to 500 tonnes, the decline in refining in the unorganized sector is significant. Pollution control regulations have been tightened by the government (which has led to the closure of many local gold smelters) and this has changed as more and more retail chain stores recycle old gold through organized refineries.

Similarly, tax breaks have contributed to the growth of India’s gold refining industry. Higher import duty on gold as compared to recycled gold has led to progress in organized refining in India. As a result, the share of gold in total imports increased from just 7 per cent in 2013 to 22 per cent in 2021.

Recycling for gold is an important source of supply

Recycling is an important part of the gold supply. In the last five years, old gold accounted for 11 per cent of India’s gold supply. There are three sources of gold recycling: jewelry, product waste and components from industrial waste. The share of recycled gold in India is the highest at around 85%. Another important factor is old gold biscuits or coins that are sold or exchanged for jewelry. The share of this component in the supply of waste gold is about 10 to 12 per cent. The share of gold in disposable electronics products is less than 5 per cent of India’s disposable gold.

Important issues driving the recycling in India

Although India ranks fourth in the world in recycling, India’s recycling of gold in the country is very small, at only 8% of the global supply of waste gold. Changes in current gold prices, future rate hikes and economic background affect recycling. According to an econometric analysis by the World Gold Council, a 1 per cent rise in prices in the near future will increase recycling by 0.6 per cent. On the contrary, positive growth in GDP in that year and the previous year led to a decline in recycling by 0.3 per cent and 0.6 per cent, respectively. Similarly, demand for jewelery increased by 1 per cent and recycling declined by 0.1 per cent.

Difficulties in recycling gold in India

Despite efforts to make the industry more streamlined and process-based, India’s gold recycling industry remains unorganized. There are three main reasons for this:

  • Accredited refineries have to show a clear source of where the waste gold is taken from. They insist on not doing cash transactions and only work with organized goldsmiths or goldsmiths. As a result, small goldsmiths prefer cash transactions.
  • Many refineries have started additional scrap collection centers. But such centers are few and far between, and they are often seen in large cities. As a result, the difficulty and time involved in sending waste gold to refineries is greater than that of locally melting gold.
  • Due to the current GST rules, consumers will not be able to get back the 3% tax they used to pay for gold. Consumers should be aware of the difficulty in raising capital by selling old gold.

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