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New Delhi: It is hard to imagine Indian households without gold. It is acquired not for adornment, but as savings, protection, and ritual gold. From weddings to festivals to family events, it continues to be celebrated the same way all over the country, in cities and towns, large and small. But gold jewellery industry is facing a great challenge this year as the combination of high prices and import duties is beginning to dent purchases from consumers.
India’s organised gold jewellery industry is likely to see its weakest year for sales volumes in almost a decade. A recent report by CRISIL Ratings suggests the overall gold consumption volumes, which include bars, coins and jewellery, may drop by 13-15% this year, following a decline of 8% in the previous year.
If estimates remain valid, total consumption would drop to almost 620-640 tonnes, excluding the Covid-affected fiscal year of 2021. The decline is largely due to affordability rather than a complete drop in consumer interest.
One of the big triggers has been the sharp hike in customs duty on gold imports. The central government has recently increased the duty from 6% to 15% to curb the trade deficit and ease pressure on the rupee. India imported almost 720 tonnes of gold during fiscal 2026, resulting in a foreign exchange outflow of about $72 billion.
Meanwhile, global uncertainty and a softer rupee have caused domestic gold prices to jump sharply. Prices of gold rose 55% nearly in the last fiscal year alone, making it much more expensive for consumers to buy jewellery.
The impact is starting to show in buying habits throughout the market. More and more consumers are going for lighter jewellery, lower-carat pieces and studded designs that incorporate less gold. In most shops, customers are becoming wary of splurging on heavy, nonessential pieces.
There is likewise a shift toward bars and coins gaining prominence, especially among consumers who see gold as an investment, not just a lifestyle purchase. Jewelry demand has reportedly dropped about 25%, and bars and coins demand has grown more than 50% over the past two fiscals.
What is remarkable is that, even with lower volumes, organized jewelers are still expected to deliver healthy revenue growth this year.
With gold prices currently hovering around Rs 1,60,000 per 10 grams for 24-carat gold, retailers are earning significantly higher realisations per gram sold. According to CRISIL’s analysis of around 70 organised jewellers, sector revenues could still grow by 20-25% this fiscal even as volumes decline.
The fish hook reasons are a bit obvious: fewer than before, but at a higher price point per sale.
Profitability is expected to remain relatively high as well; however, margins may be pressured by higher promotional spending, greater customer discounts and a higher contribution from low-margin items such as bars and coins.
Meanwhile, retail is seeing operational headwinds. As gold prices rise, jewellers require greater working capital to maintain inventory levels. Inventory periods are set to rise to around 160-180 days this fiscal, compared with 150 days last year.
For this reason, overall debt levels in the sector are also forecast to rise as enterprises borrow more to cover inventory requirements and expansion plans for their stores.
In spite of the tough climate, organised jewellers aren’t halting growth. Several bigger players are still looking to tier two and tier three cities, using franchise-led models that dematerialise capital investment as well as extend the product’s reach.
The trend also mirrors the evolving tastes of consumers. Younger consumers, in particular, now lean towards organised retailers due to improved information about purity, hallmarking, return/exchange policy and price. Trust has become an important consideration for buyers, especially given current high prices.
Wrap it up in an embellished gold bangles; that’s what the consumer wants to indulge themselves. And, every organisation wants to be able to match their customer’s desire to spend their money on the best bang for their buck. In the market for the perfect gold bangles, maybe buying from that flashy little shop on the corner that has an eye for
Still, risks linger in the sector. On top of gold prices, further policy tweaks around imports and still-underperforming consumer sentiment could weigh on demand. Alternatively, a correction in prices could boost affordability and accelerate the recovery of jewellery sales.
For the time being, India’s gold jewellery industry is in strange bedfellows. Demand is tapering, consumers are buying more selectively, and price sensitivity is playing another major role. Still, organised retailers continue to thrive with rising prices and changing consumer buying patterns, helping them to maintain revenue growth amid one of the industry’s most challenging demand cycles in recent years.
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