Jewellers in India are bracing to feel the pinch of discretionary purchases after the hike in import duty on gold, silver and other precious metals to 15% from 6% earlier and the PM's appeal to avoid gold purchases for one year.
Both developments are expected to hurt consumer sentiment in one of the world’s largest gold-consuming markets. Bullion traders believe higher duties are likely to push up retail prices of coins and bars and will discourage non-essential purchases.
Jewellers remain cautious and some of them feel this move could impact the urban middle-class consumers who usually increase purchases during festivals and in periods of market optimism. While some others feel that essential wedding demand will continue, industry experts feel discretionary purchases will decline as consumers will now begin reassessing spending patterns amid high rates.
The Prime Minister's appeal on avoiding gold purchases for one year traders believe will also add a psychological angle to the market. Experts believe households may postpone purchases for a while, especially when prices will remain high and geopolitical uncertainty will dominate sentiment.
Due to high prices, higher import duty and dampened consumer sentiment, analysts expect demand for gold jewellery to slow in volume terms, they also feel the current measures may make consumers shift towards old-gold exchange schemes and give a boost the concept of recycling old gold and encourage consumers to opt for lower-carat designs to navigate the higher costs.
Industry experts feel the import duty hike may help the government curb imports and reduce pressure on the current account deficit, but it could also reduce margins for retailers and small jewellers already dealing with fluctuating demand. While some other experts warn that a sharp rise in duties may result in some unofficial trade channels and raise smuggling risks if domestic prices diverge majorly from global prices.
Sakshi Bajaj is a seasoned Associate Editor with over 15 years of experience in broadcast journalism. She has anchored, scripted, produced shows and w...View More
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