Gold jewellery demand likely to fall 5% in FY23
Hike in customs duty on gold by 5% to 12.5% is likely to result in flat revenue growth for gold jewellery retailers in the current financial year
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Mumbai: India's gold jewellery demand is likely to fall by 5 per cent to 550 tonnes this fiscal, mainly due to the hike in customs duty, according to a report. Rating agency Crisil on Wednesday said the hike in customs duty on gold by 5 per cent to 12.5 per cent on June 30 is likely to result in flat revenue growth for gold jewellery retailers in the current financial year compared to the exceptional demand witnessed in the year-ago period. Retailers will have to pass on the hike to customers, which will curtail demand and wean away discretionary buyers, it added.
According to the report, the customs duty hike is likely to lead to higher gold prices for end consumers and may curtail demand in terms of volume, which is likely to fall by 5 per cent this fiscal to 550 tonnes. In the year-ago period, the same stood at 580 tonnes.
After the pandemic-led disruptions abated in the first quarter of last fiscal, pent-up demand and an import duty cut of 5 per cent in February 2021, had triggered a sharp rebound in sales, which continued into the first quarter of this fiscal. Though higher gold prices will compensate for the volume loss and ensure the industry's revenue remains flat compared to last year, operating margins would be impacted, the report said.
"With gold prices increasing due to the import duty hike, gold jewellery retailers will have to adopt innovative sales methods and launch promotional schemes to push sales. "Inventory mix will see a shift towards lower-grammage ornaments to make products more affordable, while discounts could be offered on making charges," Crisil Ratings Director Rahul Guha said.
