By Archana Sharma

Jaipur, Jun 1 (IANS): The ghost of Nirav Modi scam is stalking the jewellery markets in Jaipur, even as traders were trying to bury the memory of bad days triggered by demonetisation. Added to their woes are the compliance requirements under the goods and services tax.

Traders in the once busy streets of gems and jewellery market in the city are trying to cope with the sense of emptiness brought about by the severe financial crunch, as customers are not easy to find.

"Neither do the traders have money, nor are they being supported by anyone in the market. The Nirav Modi case has further worsened the situation," Sanjay Kala, President of Jewellers' Association, Jaipur, told IANS, adding that the sentiments in the market were poor.

The traders need upfront cash to buy diamonds and gold, which is not coming in. Banks -- still staggering under revelations made in case of the Punjab National Bank fraud case involving Nirav Modi -- have set up new limits on lending to jewellers, further curtailing cash flows.

Those applying for loans have been asked to reduce their limit and told that they cannot demand big amounts against the securities provided. The twin deprivation -- from banks and market lenders -- has made life difficult for traders. Liquidity is suddenly the most difficult thing to get.

According to Jagdish Tambe, past president of the association, demonetisation was responsible in squeezing the money out of the market. "The government could have come out with a better alternative to demonetisation. It should have asked traders to deposit all the money and they could have charged certain amount of tax on the same. There would have been no need to print new currency notes," he said.

GST made matters worse. "Even at this point, the government should realise its mistake and bring in a taxation policy which should be soft. It should think of other areas from where it can generate money," Tambe said adding that what was needed was a liberal taxation policy and soft export-import regime.

Tough times call for tough sacrifices. "Traders should make all-out efforts to sell their old and dead stock at a heavy discount. They should explore new markets where they might earn lesser profits, but can earn immediate cash. This will help in building cash flow into the market," says Nirmal Baradia, former President of the association.

Baradia said many traders had been saddled with big inventories which needed to be pruned immediately.

Many feel that a combination of events had led to a lot of "negativity" in the market. Says Rajiv jain, past chairman of Gem & Jewellery Export Promotion Council: "As sales are low, the confidence of traders is quite weak. There is an immediate need to bring in a strong positivity."

He said efforts needed to be made to improve sales, and eventually the cash cycle, which had been ruptured at this stage. "Once that happens, everything will attain normalcy. This is a temporary phase and markets will boom yet again," Jain added.

Kala too was of the opinion that bringing in "positivity" into the market was sorely needed. "Banks need to make things lenient. They also need to ease up on interest rates. These are testing times and traders should have patience. They should ensure that money circulation is not stopped. If they have property, they should ensure money comes in by selling it. A cautious optimism is good, but blocking the cash flow is not good for business, he said.

He suggested steps like direct access of consumers to wholesailers through exhibitions and internet selling which would also reduce intermediate trade margins, thus helping sales.

A prominent trader, who did not want to be named, said a stagnant real estate market had added to the problems of jewellery trade. Prices had dropped in the real estate business with no sales happening. That meant that lenders did not have liquid money to give. Many lenders had stopped giving loans fearing they might not get their money back. "A vicious cycle has taken hold," he said.

Kamal Kothari, a gem stone dealer, says market players should wait and watch till things start to turn. His assessment is that "good times" would take between three to six months to return. He also says that traders should avoid purchases at the moment because of the uncertainty in the international markets. "All efforts should be made to liquidate inventory," Kothari said.