Indian Gold Jewelry Demand To Grow 8-10%
As India gears up for the gold-buying Akshaya Tritiya festival, one credit rating agency says it is optimistic towards the country’s jewelry demand in the medium-to-longer term. “ICRA expects the domestic gold jewelry industry to record robust growth of ~8-10% over the medium to long term, aided by the growing penetration of the organized sector,” the report said, which was released Monday.
According to the report, recent relaxation of gold restrictions in the country helped turnaround the slowing industry, on both the supply and demand sides. “ICRA expects jewelry demand growth to be ~10% during the current year, supported by recent regulatory reliefs for the industry,” it said.
“In terms of supply, imports over the medium term are expected to reach the levels witnessed prior to the curbs, largely replacing sourcing of gold through the unofficial channels / recycled gold,” it added.
In 2014, the Indian government made a surprise move when it withdrew the 80:20 rule, which said that 20% of all imported gold had to be mandatorily exported before any new shipments could be brought into the country. Officials expected the move would reduce the amount of black market gold entering the country.
However, ICRA noted that although this move was a positive for the gold industry in India, an import duty on gold still remains, which could “result in some imports continuing through illegal channels.”
Many factors within the dynamic economy of India will help the gold market in the coming months, the report said.
“Over the near term, ICRA expects improvement in gold availability coupled with the re-introduction of low cost gold metal loans, rising consumer sentiments and aggressive store expansion by organized retailers to drive volume growth,” the report said.
On a longer term basis, the report said that gold jewelry demand in India will be supported by cultural underpinnings in the country, such as a growing disposable income, “especially in tier 2/ tier 3/ rural markets which account for a major chunk of the demand.”
As a final note, ICRA said it expects retailers to record notable growth over the medium to long term as well.
“ICRA expects large retailers to record 10%+ growth over the short-to-medium term buoyed by improving consumer sentiments and aggressive store expansion.” |
