A recent duty hike has led to a decadal low in volumes for gold jewellery retailers, according to a report by Crisil. Despite the anticipated decline in volumes, the sector is poised to post robust revenue growth of 20-25% on-year, driven by higher realisations. The increase in import duty on gold has made the metal more expensive, dampening consumer demand for jewellery. However, the higher prices are expected to offset the volume drop, resulting in strong revenue growth. Retailers are likely to focus on value-added products and lighter-weight jewellery to attract customers amid the price surge. Crisil notes that while the volume hit is severe, the overall financial health of the sector remains stable due to improved margins and inventory gains. The report highlights that the duty hike, implemented to curb gold imports and manage the current account deficit, has had a pronounced effect on the jewellery industry. Smaller players may face challenges, but larger organised retailers with better hedging and inventory management are better positioned to weather the downturn.
