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All That Glitters This Diwali

Gold imports have risen on the eve of the festive season every year since 2016, as jewellers built inventory for the peak season of sales. The 39 per cent jump in imports in 2018 heralds a boom in the jewellery trade, predict experts

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Unlike diamonds, in which India is a pioneer in mining, cutting, polishing and trading, gold never was produced much in the subcontinent. The cutting and polishing of diamonds and other precious stones is one of the oldest traditions in craftsmanship in India.  Today, Indian diamonds have a 55 per cent share in terms of value, 80 per cent share in caratage (weight) and 90 per cent share in terms of volume in the global market. Gem lovers in India, therefore, find ready availability of a wide array of diamonds of nearly every size, quality and cut within the country.

The Kohinoor and other famed stones had gleamed from crowns and necklaces of gold. Precious metals have always been a symbol of power and pomp in the subcontinent. After India became a republic, a newly emergent class of industrialists and big business too flaunted their wealth in a show of gold, especially at weddings. Yet gold was never really produced much in the subcontinent. The Kolar gold mines do not explain the treasures of India’s Maharajas, Maharanis, Badshahs and Begums. So, let us assume that gold and silver was always shipped into India from distant lands, like the Americas.

For the rest of India and especially the much talked of “middle income group”, gold has been a safe nest egg, safer than shares in a company or money in a bank. In traditional Indian homes, gold was the “Stree Dhan” (share in movable family assets) daughters carried to their husband’s home after marriage. The most auspicious time for purchasing this precious yellow metal for Hindus is Akshaya Tritiya (in summer) or Dhanteras, which comes two days before Diwali in autumn. Till a couple of decades ago, the sheer clamour for gold on these two dates in India would send global prices into a tizzy and no doubt, still do to an extent. Today jewellery sales in India account for 29 per cent of the global trade.



The craving and clamour for gold is a credible indicator of the mood and spirit of the Indian consumer. In uncertain times for instance, the risk-averse investor has ploughed more money into gold and silver as a hedge against impending hardships, a trend that is not confined to India any longer. In 2018, the demand for gold shot up to 338.70 tonnes between January and June. According to the World Gold Council, gold imports jumped 39 per cent in June and July alone to 160 tonnes from 134 tonnes during the same period last year (please see infographic, Gold imports on the eve of the festive season). Much of it we assume, flowed into the making of jewellery, the demand for which is inelastic to price.

India not only has a burgeoning market for gems and jewellery, it is an exporter too. India Brand Equity Foundation (IBEF) data suggests that $13.18 billion worth of gems and jewellery were exported between April and August this year. The 39 per cent increase in gold imports this year has obviously wound its way into the jewellery showrooms around the country as jewellers prepare for the orgy of festival spending during in the Dussehra to Diwali season. This gluttonous consumption of gold is not only proof of the growing purchasing power of the Indian consumer, it is also a reflection of the renewed role jewellery has begun to play at Indian weddings and gold’s credentials as a safe-bet investment.



Festive Buying
Saurabh Bhalerao, Associate Director, CARE Ratings, says no matter how turbulent the gold market is in a year, the festival season brings demand back on track. The domestic jewellery market was somewhat subdued between April and June, the first quarter of the 2018-19 financial year (FY19). Jewellery sales have, however, gained traction since July. Bhalerao attributes the surge in jewellery sales to a decent rainfall and the prospects of a good crop in rural India.  The second half of FY19, he says, is expected to be better than the first half, partly because of the rains, the festive season and the wedding season that follows it.

Bhalerao points to the unusual rise in gold imports on the eve of the festive season to suggest that jewellers had built up an inventory to tackle the spurt in demand before Diwali. The year 2017 was an exception to a rule. Every year, says Bhalerao, more than half the annual gold imports occur during the last five months of a calendar year. The imports get reflected in the second and fourth quarter jewellery sales around the country. (Please see infographics on Jewellery Demand Trends).

According to the World Gold Council, Quarter Two and Quarter Four sales in jewellery have increased steadily over the last three years. Jewellery sales jumped from 23 tonnes in 2016 to 32 tonnes in 2017, a 39 per cent increase. In 2018 jewellery sales in these two quarters are expected to spurt further to 33 tonnes, which will be a marginal rise over the previous year. Jewellers though, anticipate much higher sales, their estimates varying from 15 per cent to 50 per over last year.  

Boom Time
A CARE Ratings analysis estimates the gems and jewellery retail market in India at Rs 3, 90, 000 crore.  A remarkable fact is that barely 30 per cent of these sales are at the showrooms of the branded retailers. The ubiquitous friendly neighbourhood jeweller in the unorganised segment of the market   accounts for the rest of the business in gold and gem jewellery.

 Adeesh Nahar, Director of a Mumbai based B2B major (now in designer brands) Rosentiques Fine Jewellery, says the Indian jewellery market was in the throes of a boom. “The auspicious wedding dates and Diwali are the key occasions of festive buying,” says Nahar. He estimates a 50 per cent to 60 per cent rise in jewellery purchases this year. An HDFC Securities Institutional Research paper predicts that the surge in jewellery sales in the home market will be in the region of Rs 2, 722 billion in 2018 and skyrocket to Rs 3,570 billion by 2023.

A new trend in the gems and jewellery market is rising sales in tier-2 and tier-3 cities. Shreyansh Kapoor, Partner and Vice President of Kashi Jewellers, an emerging jewellery brand from Uttar Pradesh, describes the trend as “fantastic”. Kapoor defines the trend as a “regional taste and investment habit”.  The yellow metal’s allure as a safe investment, he says, was driving jewellery buying patterns across the country. Gold and diamond dominate the jewellery market in India, outpacing the craving for precious metals like silver and platinum and precious gems like rubies and emeralds.

In the jewellery market, preferences for patterns and craftsmanship are decisively regional. “West Bengal, prefers plain gold, South India turns completely converse in this regard, showing a preference for artistic temple designs,” explains Kapoor. “Gujratis prefer light-weight jewellery that can be effortlessly worn as they are always on their toes during Navratri, playing Garba or Rass,” he says.  According to HDFC Securities Institutional Research, South India accounts for 38 per cent of the jewellery trade in terms of revenue. West India’s share of the business is 26 per cent, followed by North India, where 21 per cent of the country’s jewellery sales take place. Gold is lack lustre in East India, where it has a modest 15 per cent share in countrywide sales.

Small jewellers in the unorganised sector have the largest slice of the business and compete fiercely with branded retailers. Foreign brands and design houses have not quite cut their teeth on the Indian market yet and their sales are confined to the very high end of jewellery and online transactions. “In this segment, the competition is quite intense due to the brand value of these international names,” says Bhalerao at CARE Ratings, adding, “However, they do not contribute significantly to the overall market size.” Nahar seconds that. “As of now, the penetration of foreign houses isn’t extensive, hence we haven’t really seen an impact on the trade,” says he. (Please see infographic, The market share of brands).

The Turbulences
The token three per cent GST on raw gold did not take the shine away from the blooming and burgeoning market in gold, gems and jewellery. Tremors did occur though, when the Nirav Modi - Mehul Choksi-PNB fraud came to light or the Shree Ganesh Jewellery House scam was exposed in 2017. In 2018, the Nathella Sampath jewellery fraud and Kanishk gold scam, both exposed in March 2018, did somewhat mar the confidence of consumers in jewellers. Both market analysts like Bhalerao and branded retailers like Nahar, however, rule out any impact of the scams on festive sales of gold and gems.

Nahar actually sees a boom in demands straddling the festive and wedding seasons. “I believe that the market is on the rise and we are hopeful of some good traction,” he says. Bhalerao points out that the Gems and Jewellery Export Promotion Council (GJEPC) data shows   a 12 per cent increase in cut and polished diamonds between April and August this year, over the same period last year. He predicts that “overall, India is expected to play a more important role in the global gems and jewellery sector, with diamond miners setting up auction centres in India.” Nahar says the strategy of brands will revolve around exceptional designs.

The sparkle in the market thus, is not likely to die out with the lights of Diwali, but keep shining bright and strong long after, as a growing tribe of Indians with fat wallets descend on the gems and jewellery market.


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