Developing Indian Hallmarking: World Gold Council
A national hallmarking system is an essential component of a successful gold monetisation scheme in India according to the World Gold Council. A good hallmarking system in place will help rebuild trust in the purity of Indian gold, giving consumers’ confidence in the caratage of their gold purchases.
A new report, Developing Indian Hallmarking – A roadmap for future growth, released today by the World Gold Council, finds that improvements to the hallmarking system in India are essential to a successful gold monetisation scheme. The report provides an in-depth assessment of the current Indian hallmarking system and a summary of international best practice methods. The report states that a rigorous and consistent nationwide scheme has the potential to increase the country’s gold exports from an existing US$8 billion to US$40 billion by 2020.
Since the introduction of a hallmarking standard in 2000 by the Bureau of Indian Standards (BIS), India has made good progress in developing its hallmarking system. However, only 30 per cent of Indian gold jewellery is currently hallmarked. There are widespread differences in purity and an average under-caratage of anywhere from 10 per cent to 15 per cent. The report highlights that a lack of BIS-recognised hallmarking centres across the country is also likely to have an impact on the successful implementation of the Indian Government’s gold monetisation scheme which is dependent upon the collateralisation value of gold.
Somasundaram PR, Managing Director, India, World Gold Council says, “A credible hallmarking system with a widespread presence of assaying and hallmarking centres is essential for both the gold jewellery industry and for the implementation of a successful monetisation scheme. The trust and confidence which comes with a credible nationwide hallmarking system will underpin the growth of gold jewellery exports, boosting the Indian industry’s credibility in the global jewellery sector. It is a fundamental requirement if the industry wants to have a bigger role in the ‘Make in India’ ambition and eventually position India as “jeweller to the world’. In addition, the quality of gold would be a critical element for the success of the gold monetisation scheme.”
Key Finding of the WGC Report
The report recommends retaining the India’s current hallmarking model built around independent hallmarking and assaying centres. However, the report suggests implementing six key actions that needs to be taken to improve the efficiency and effectiveness of the current system. These actions include strengthening governance around the hallmarking processes, drive customer awareness of hallmarking, incentivise and facilitate targeted expansion of hallmarking centres, use BIS data to develop a ratings system for jewellers, pilot BIS’ Unique ID scheme or other technology solutions to support hallmarking and pursue membership of the International Hallmarking Convention or develop an Asian alternative.
In the long term, the report recommends hallmarking should be made mandatory and recommends a transition to a manufacture-driven system which would drive consolidation within the unorganised jewellery manufacturing industry. Furthermore, the report is clear the development of a more stringent system would deliver huge benefits to the Indian gold market including: increased trust amongst overseas buyers and financial markets, resulting in a larger export market, a stronger domestic market and job creation across the spectrum.
Hallmarking in other countries
There are three distinct hallmarking models used around the world: Government-owned, manufacturer-driven and independent assay offices. Government-owned works best in smaller countries with an efficient public sector. Manufacturer-driven works best in countries with a strong supervisory infrastructure, robust consumer protection and the ability to impose effective deterrents on rule-breakers. Independent assay offices work best in countries with excellent record keeping and the ability to monitor and enforce standards. The system also benefits from elements of free market dynamics and government initiatives.
Hallmarking in India today
The Indian gold market is not only one of the largest in the world; it is also responsible for creating some of the most beautiful, intricate and handmade jewellery. But the industry has long been hampered by concerns around quality control. To combat these concerns, the BIS introduced hallmarking standards and policies, modelled around the UK system. More than 300 hallmarking centres have been opened, over 13,000 jewellers are accredited and the BIS has established a supervisory structure for both hallmarkers and retailers. As a result, under-caratage has reduced from between 20 per cent and 40 per cent to between 10 per cent and 15 per cent.
However, hallmarking is not mandatory and consumer awareness is low too. Moreover, hallmarked and non-hallmarked jewellery are both sold in the same outlet; and less than one-third of total jewellery is hallmarked. Operationally, many centres suffer from low profitability, poor equipment and slack processes. And from a supervisory perspective, the BIS is not adequately staffed to fulfil its role effectively. Even though, on average, 30% of jewellery is now hallmarked, there are concerns about the quality and credibility of some hallmarking centres. This means the percentage of jewellery hallmarked accurately is expected to be even lower than 30%.
In June 2015, the government has proposed a new Bureau of Indian Standards Bill, 2015. The proposed provisions in the new BIS Bill, 2015 will empower the Central Government and the BIS to promote a culture of quality of products and services through mandatory/voluntary compliance with Indian standards through the process of ‘product certification’ and ‘Certificate of Conformity’ with a broad objective of consumer’s welfare. It is also expected to improve enforcement of Indian standards.
Steps suggested by the report
The Indian gold jewellery market is extremely complex. There are more than 400,000 jewellers, most of which are small and independently operated. The manufacturing base is also highly fragmented and many operators are small-scale. Consumers are extremely value conscious and will sometimes focus more on price than quality, particularly as many are unaware of hallmarking. Consumers, retailers and manufacturers are widely dispersed across India, imposing considerable logistical challenges on hallmarking in remote areas.
However, India still has the potential to derive the greatest benefits with the existing standard by taking some small initiatives like ensuring that governance is effective so hallmarking centres and jewellers operate with integrity. Consumer understanding of benefits of hallmarking needs to be improved via well-planned customer awareness programme. Incentivise and facilitate targeted opening of hallmarking centres and using existing analytics to develop a ratings system for jewellers. There needs to be more structural changes, according to report for long-term benefits.