India’s G&J Industry on Path of Recovery

gold-plated-jewellery-setAfter passing through bad patch for a few years, the latest among it being Q1 of 2014 when India’s gold demand went down by 26%, now it seems that India’s gems and jewellery industry is regaining its lost glitter as its domestic jewellery sales in June so far have increased by 40% thanks to the recent initiatives taken by the Reserve Bank of India (RBI).

Mr. Manish Jain, Vice Chairman of the All India Gems & Jewellery Trade Federation (GJF) says, “Gold jewellery sales during the month of June have gone up by 40% year-on-year, due to the fall in gold prices. The sales have increased by 20-25% in comparison with May. However, smuggling of the yellow metal continues to be a major concern.”

“Sales have increased since premium has fallen from INR 1,500 per 10g to about INR 500, after a few recent initiatives taken by the RBI. The quantum of gold smuggled into India in the last 12 months is equivalent to 10 years of the smuggled amount,” he added.

India’s domestic jewellery demand is also expected to bounce back in 2015 due to the expected fall in gold prices. India Ratings has recently said that gold prices in the international market are likely to decline in 2015 because of the gradual winding up of unconventional monetary policy in the US. While Fitch Ratings expects a further recovery in the US and Eurozone GDP growth rates in ’15, it would make the US dollar stronger against other currencies.

On the other hand, gems and jewellery exporters here are also feeling enthusiastic about their prospects. Higher disposable income along with increased consumer spending and improvements in consumer confidence are set to support export volumes of India’s gems and jewellery, say analysts. An economic recovery, with the positive approach of the new government is also set to benefit exporters.

However, analysts apprehend that if gold prices increase further or if the new government continues with the regulatory measures, it could impact the operating profitability of the gems and jewellery sector and thus their credit profile. Uncertainty in Russia and Ukraine, or any financial turbulence in the global economies including that of China could also badly affect the fragile credit profile of Indian exporters.

At the same time, India’s platinum jewellery demand is also expected to increase by 35% in 2014 because of the rapidly changing consumer choices, especially from the bridal segment which was earlier confined to gold and diamonds, according to Platinum Guild International (PGI). A recent study by the PGI has noted that India’s platinum jewellery consumption would reach to 40 tonnes in 2014 which was around 30 tonnes in 2013, indicating 41% growth from the previous year.

Ms. Vaishali Banerjee, Country Manager India, PGI comments, “The retail forecast for 2014 appears very promising and there seems to be an opening to take this further. First of all, we at PGI have been successful in utilizing the digital media and incorporating marketing programmes that have positioned it well amongst the younger consumers, making it emotionally significant for them. Once the understanding of the value of platinum develops, the demand would increase. Many retailers have shown interest in stocking heavier platinum jewellery, hence PGI is now evaluating the next segment of growth for the market.”

So one can say that India’s gems & jewellery industry is now on the path of recovery and on its way to regaining its lost glory.

Posted by Suresh Chotai