MUMBAI Rajanikant B. Doshi sits behind the shutters in his tiny jewellery shop on one of the narrow alleyways of Zaveri Bazaar market, anxiously turning one of his rings as he weighs the impact of recent tax increases on his 50-year-old business.
"Business has already gone down and with these taxes it will go down further. We will have to lower our margins," said the 65-year-old, whose shop along with hundreds of others in India's biggest gold market is shut in protest over the higher tax.
In an effort to stem imports by the world's biggest bullion buyer and shore up its current account, New Delhi doubled import duty on gold to 4 percent of value in its March budget and slapped a 0.3 percent excise on unbranded jewellery.
The moves are game-changers for the $200 billion a year jewellery industry and experts are predicting they could cut India's gold imports by a third to 655 tonnes in 2012, allowing China to overtake it as the biggest gold importer.
The strike has prompted Finance Minister Pranab Mukherjee to offer a review of the levies -- yet another hesitation by the fractious coalition government which has retreated on policy from rail fare rises to cotton export bans.
The meeting with the minister may happen in the next few days.
Graphic: India/China gold demand: r.reuters.com/xem66s
Graphic: Price movement in gold: link.reuters.com/xyx96s
While the government waits to see if the taxes curb imports in the way it wants, the industry frets that there could be worse to come, even a ban on imports.
In the half-empty alleyways of Mumbai's Zaveri Bazaar on the 18th day of the strike, shops' shutters carried posters of a padlock and slogans saying "Public protest as Inspector Raj set to return", a reference to hated tax inspections under British rule.
"An extra 2,000 rupees on 10 grams of jewellery will hit the common man," read another placard.
Indians' love affair with gold is well known and gold is at the heart of every Hindu wedding and festival. It is often the investment of choice in a country where millions have no bank for miles and as a defence against near-double digit inflation.
At Doshi Jewellers, a top-selling 10-gram finger ring costs about 30,000 rupees - about three months' wages for average employees. The margins are hardly 2 percent of the value.
Family-run jewellers with small shops, often making items to order, handle about 90 percent of sales in India.
Titan Industries (TITN.NS), Rajesh Exports (REXP.NS) and Gitanjali Gems (GTGM.NS) are the only listed players and have a miniscule portion of the country's trade.
"The revenues of listed jewellery companies will be reduced to the tune of 20-25 percent," said Nayan Pansare, an analyst who advises the jewellery industry.
The small jewellers who are likely to suffer even more are willing to take on the losses of a strike to make their point.
Manish Jain, a sixth-generation shopkeeper at his family's Jain Jewellers, has refused to deliver orders even though it is the peak wedding season. He has lost 4 billion rupees turnover.
"People won't continue with this business ... customers will say they are already paying so many taxes in value added tax, import tax," Jain said in his empty shop.
A few metres down the road at the Mumbai Jewellers Association, Vice-President Kumar Jain said many of the 10,000 jewellers he represented would have to close if the higher taxes stayed.
"We will lose out on business, smaller jewellers will have to shut shop due to this," said the smartly dressed Jain, who estimated the strike had cost the industry 80 billion rupees and the government at least 1.25 billion rupees in missed taxes.
Analysts said buyers were unlikely to switch to silver even though the government abolished excise duty on silver jewellery, as prices are too unpredictable, trading in a wide range of 41,280-73,600 rupees/kg last year.
But the higher gold taxes could make imports of cheaper items from Thailand more attractive, analysts said, as they carry only a 1 percent import duty.
Many customers, however, are considering cheaper alternatives to pricey gold.
"We ... will have to think before buying gifts on occasions," said Mumbai home maker Hemakshi Pinakin Morawala.
"So it will be more of flowers and less of gold now."
(Editing by Jo Winterbottom and Robert Birsel)