Kerala’s gold merchants are offering to fund over 50% of a new jewellery park to boost local manufacturing. The industry is also lobbying for a reduction in gold import duties from 15% to 6%, citing rising smuggling and falling margins. With new jewellery sales under pressure, retailers are increasingly relying on old-gold exchange to sustain business.
The Kerala Gold and Silver Merchants Association (KGSMA) has launched a dual-pronged strategy to reshape the regional gold trade. By offering to fund more than half of a proposed jewellery manufacturing park, the association aims to reduce Kerala's heavy reliance on established hubs like Mumbai and Gujarat. This initiative is designed to build a local production ecosystem, encouraging more manufacturing jobs and infrastructure within the state.
The Push for Policy Change
Beyond infrastructure, the industry is lobbying the Union government to revise its tax policy on gold. Since May 13, 2026, the total import duty on gold and silver has stood at 15%. Merchants argue that this high duty, intended to stabilize the rupee and control trade deficits, has inadvertently created a surge in illegal gold imports. The association claims that legitimate businesses are struggling to compete with smuggled gold, which enters the market at lower prices and evades regulatory compliance costs. The traders are formally requesting a reduction in the import duty back to 6%, arguing that this would formalize trade and curb the grey market.
Financial Pressure and Consumer Trends
The broader jewellery sector in India is currently facing significant financial headwinds. Elevated international gold prices and the depreciation of the rupee have put considerable pressure on operating margins. As new gold prices remain high, consumer behavior has shifted. Retailers report that a growing portion of their business—sometimes reaching 70% of sales—now comes from old-gold exchange. Customers are increasingly trading in their existing jewellery to buy new ornaments rather than paying for fresh gold, which helps them manage the impact of high duties and volatile prices.
Industry Hurdles
While the proposal for a jewellery park has gained some government attention, including a preliminary budget allocation of ₹10 crore for a gold corridor in the Kochi-Thrissur belt, the project faces its own set of challenges. One of the primary concerns is the regulatory environment surrounding jewellery manufacturing. The process often involves the use of hazardous chemicals, such as cyanide, which requires strict environmental clearances and waste management infrastructure. Finding a suitable location that meets these stringent safety and environmental standards remains a critical obstacle for the proposed park.
Investors and stakeholders will likely monitor the upcoming multi-stakeholder meetings between the government and industry representatives. The key monitorable will be whether the government agrees to the requested tax rationalization and how the state navigates the environmental regulations necessary to establish a fully functional manufacturing park.