GoldJewellery – Organised Retailers Face Decade-Low Gold Sales Volumes

GoldJewellery –  India’s organised gold jewellery industry is likely to witness its weakest sales volume in nearly ten years during the current financial year as soaring gold prices and increased import duty continue to impact consumer demand. However, despite lower sales volumes, large retailers are expected to maintain financial stability due to stronger revenue realisations from elevated prices.

Demand Weakens as Gold Prices Remain Elevated

A recent industry assessment by CRISIL Ratings stated that overall sales volumes across jewellery, gold coins, and bars could decline between 13% and 15% this fiscal year. The sector had already recorded an 8% fall in the previous financial year.

According to the report, total consumption volume may fall to nearly 620-640 tonnes, marking the lowest level seen in the past decade, excluding the pandemic-affected fiscal year of 2021. Analysts attribute the slowdown mainly to record-high domestic gold prices and higher import costs.

Customs Duty Increase Adds Pressure on Buyers

The Indian government recently raised customs duty on gold imports to 15% from 6%, a move aimed at controlling imports and easing pressure on the country’s trade balance. India imported nearly 720 tonnes of gold in fiscal 2026, leading to foreign exchange outflows estimated at around USD 72 billion.

The higher duty, combined with already elevated international bullion prices and a weaker rupee, has significantly increased the retail price of gold in the domestic market. Industry experts believe this has directly affected affordability for middle-income consumers.

Himank Sharma, Director at CRISIL Ratings, noted that the steep increase in customs duty is expected to discourage jewellery purchases, especially in discretionary categories. He added that although investment-focused demand for gold bars and coins is improving, it may not fully compensate for the decline in jewellery demand.

Shift Towards Lightweight and Lower-Carat Jewellery

As prices continue to rise, consumers are increasingly opting for lightweight jewellery and lower-carat products ranging from 16 to 22 carats. Retailers are also witnessing stronger interest in studded jewellery, which typically uses less gold and is comparatively affordable.

Over the last two financial years, jewellery sales volumes have reportedly declined by nearly 25%, while purchases of gold bars and coins have surged by more than 50%. Market observers say this trend reflects a growing preference among buyers to treat gold as an investment asset rather than a fashion purchase.

Domestic gold prices climbed nearly 55% during the previous fiscal year due to global geopolitical uncertainty and currency depreciation. With 24-carat gold prices hovering around Rs 160,000 per 10 grams, retailers are expected to benefit from significantly higher realisations despite weaker customer footfall.

Retailers Expected to Maintain Stable Financial Performance

Even with shrinking sales volumes, organised jewellery retailers are projected to post revenue growth of 20% to 25% this fiscal year because of higher gold prices. The report estimates that absolute EBITDA for the sector could rise by nearly 20% year-on-year.

At the same time, retailers are likely to face higher inventory carrying costs as expensive gold requires larger working capital support. Inventory holding periods may increase to around 160-180 days compared with nearly 150 days recorded last year.

Companies may also increase discounts and promotional offers to attract customers, which could place some pressure on profit margins. However, stronger cash flows from higher-value sales are expected to support operational stability and future expansion plans.

Expansion Continues Through Franchise Networks

Organised jewellers are continuing their expansion strategies cautiously, particularly through franchise-led business models. Industry analysts say this approach is helping companies improve capital efficiency while strengthening their presence in Tier 2 and Tier 3 cities.

Gaurav Arora, Associate Director at CRISIL Ratings, said retailers are focusing on controlled growth while managing rising debt linked to higher inventory requirements. Although sector-wide borrowings are expected to increase sharply this fiscal year, overall credit profiles are projected to remain stable because of improved revenues and healthy cash generation.

The report also highlighted several factors that could influence the sector going forward, including volatility in gold prices, additional regulatory measures, changes in consumer behaviour, and any future government restrictions related to gold purchases