In a report, India Ratings and Research on 11 May said it expects jewellery sales to decline by 25 per cent in 2020-21 - April-March on account of over 40 days of lockdown following COVID-19 pandemic and an overall reduction in disposable income.
The demand for retail jewellery will remain muted in 1H FY21 -April-September, however, a sharp recovery is expected in the third quarter of FY21 - October-December, due to the festive and wedding season.
Gold jewellery demand had already slowed down in FY20 in terms of tonnage and revenue due to the economic slowdown and increased gold prices. The possibility of recovery of demand in FY21 has been derailed by the COVID-19 led lockdown and the subsequent continued economic slowdown in the country.
As the research organization has already revised its FY21 GDP growth twice since January 2020 to 1.9 per cent, a further downward revision is possible if the pandemic continues to evolve, resulting in an overall 25 per cent year-on-year.
However, business from rural areas and weddings may remain resilient, adding that from the fourth quarter of FY21 - January-March, sales are likely to improve due to the base effect and expected normalisation in economic activities.
The total gold import of India, which is primarily driven by jewellery demand, is also likely to drop to a decade-low in FY21. In the long-term, jewellery demand will be supported by the rise in savings at the hand of salaried middle-class and upper-middle-class end-users due to postponement of purchases and other reasons.
The overall long-term demand outlook remains upbeat because gold remains to be an attractive investment destination. The industry is expected to bounce back after FY21 with increasing gold rates and continued attraction to gold jewellery due to traditional factors.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
The demand for retail jewellery will remain muted in 1H FY21 -April-September, however, a sharp recovery is expected in the third quarter of FY21 - October-December, due to the festive and wedding season.
Gold jewellery demand had already slowed down in FY20 in terms of tonnage and revenue due to the economic slowdown and increased gold prices. The possibility of recovery of demand in FY21 has been derailed by the COVID-19 led lockdown and the subsequent continued economic slowdown in the country.
As the research organization has already revised its FY21 GDP growth twice since January 2020 to 1.9 per cent, a further downward revision is possible if the pandemic continues to evolve, resulting in an overall 25 per cent year-on-year.
However, business from rural areas and weddings may remain resilient, adding that from the fourth quarter of FY21 - January-March, sales are likely to improve due to the base effect and expected normalisation in economic activities.
The total gold import of India, which is primarily driven by jewellery demand, is also likely to drop to a decade-low in FY21. In the long-term, jewellery demand will be supported by the rise in savings at the hand of salaried middle-class and upper-middle-class end-users due to postponement of purchases and other reasons.
The overall long-term demand outlook remains upbeat because gold remains to be an attractive investment destination. The industry is expected to bounce back after FY21 with increasing gold rates and continued attraction to gold jewellery due to traditional factors.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
