Jewelers see festive demand rising 10-20% this year

(October 20, 2016 - by Sutanuka Ghosal & Ram Sahgal)

KOLKATA | MUMBAI: Jewelers are offering discounts of up to 50% on making charges to attract consumers in the ongoing festive season in the hope that the surge in rural demand will more than make up for the almost 10% higher gold prices this year, high import duties and a closer watch by the tax authorities on sales.

On Wednesday, gold price in the physical market was hovering at around 29,747 per 10 gm, 9.6 per cent higher than that a year ago but nearly 7 per cent lower than last month’s peak of 32,000.

"The (recent) drop in gold price will definitely drive demand this festive season. Better monsoon has raised hopes of a better crop this year and this is expected to be reflected in this year’s festive buying," said Somasundaram PR, managing director, World Gold Council India.

He said the industry faced a 42-day strike from March 1, which affected demand. Akshaya Tritiya did not see much demand either as market sentiment was poor and purchasing power in rural India was affected by two successive droughts. In the first half of 2016, gold demand in India fell 29.6 per cent to 247.4 tones from 351.5 tones a year ago.

Jewelers in both organized and unorganized sectors hope festive demand will be 10-20 per cent higher than last year. Unorganized players account for about 80 per cent of India’s 2.7 lakh crore gold jewellery market. After a depressing first half this year, jewelers have increased discount on making charges to 50 per cent from 20 per cent last year on gold jewelry while some are offering as much as 100 per cent discount on diamond jewelry. The duration for such discounts has also risen from 15 days last year to two months this time round.

"Our margins have halved from 5-10 per cent to 4-5 per cent. But that is the only way out to see the business moving," said Saurabh Gadgil, national director, India Bullion & Jewelers Association. Higher discounts can also help avoid mandatory submission of PAN by customers.

The government had on January 1 made submission of PAN mandatory for jewelry purchase worth 2 lakh and above, which, according to jewelers, has affected gold sales in the country by 10-15 per cent.