Gold jewellery demand to grow 6-7% in medium to long-term: Study

Chennai: Gold jewellery demand is likely to grow six to seven per cent over the medium to long-term aided by evolving lifestyle, growing disposable income and the increasing penetration of organised sector, a report has stated.

The demand will also be supported by festivals, evolving lifestyle, and demographic dividend, said credit rating agency Icra in its report.

Gold jewellery demand in India varies across rural and urban markets, right from the type of jewellery bought, timing of purchases among others, it said.

With 65 per cent of population living in rural areas, favourable farm output in the last two years on the back of good monsoons has been a positive trigger for rural demand, where jewellery is a traditional store of wealth, it added.

On the other hand, urban demand has gained traction from rising per capita income and demographic dividend, Icra explained.

Jewellery buying is spread throughout the year with an increased skew towards September to January, led by festive and marriage seasons.

Besides factors like gold price, inflation, priority of needs among others are other key determinants while buying jewellery.

Gold prices increased by over six per cent in the last one year which impacted consumption demand, it said.

This apart, financing to the gems and jewellery sector has been under increased scrutiny in the last year following reporting of fraud by few lenders on exposures to leading diamond jewellers, and on exposures to a couple of gold jewellery retailers in south India, Icra said.

Following this lending to the sector remained cautious with enhanced due diligence and checks on credit quality and inventory quality, it added.

Going forward, Icra expects regulatory measures to continue to accelerate the formalisation of sector and the market shares of organised players are accordingly expected to increase.

NT Bureau