National News
Economic Survey FY25-26: GJ Sector – Stabiliser and Structural Challenge
Industry body lauds leadership of Commerce Ministry officials for steering historic trade agreement with far-reaching impact on export sectors
Finance Minister Nirmala Sitharaman tabled the Economic Survey FY25-26 on Jan 29, 2026, ahead of the Feb 1 Union Budget; it highlights resilient macro fundamentals with FY25 GDP at 6.5% (provisional) and FY26 projection at 7.4%, driven by domestic demand and investments, despite global headwinds like US tariffs. India’s Economic Survey presents the gems and jewellery sector as a critical yet complex pillar of the economy,
- Export Diversification:Indian exporters shifting from US amid declining demand; April-Nov FY26 data shows gems & jewellery US exports down 44.3% (US share from 33.7% to 18.7%), offset by overall export growth of 0.6%; UAE/Hong Kong now 53.6% share (UAE +34.9%, Hong Kong +23.4%); gains in Bahrain, Saudi Arabia (gold jewellery), Canada/Mexico/China (precious stones), boosted by India-UAE CEPA and India-UK FTA progress.
Gems & Jewellery Sector Performance: Total merchandise exports steady at $437.7B; non-petroleum/non-G&J exports up 7.5% to record $374.3B (79% of basket); G&J hit by global demand cycles, gold/diamond price volatility, geopolitics; imports up 6.3% to $721.2B, with gold imports +27.4% (38.2% price rise), widening trade deficit to $283.5B (+17.6%).
Gold’s Dual Role in Finance: Gold loans surged 125.3% YoY (Nov 2025) amid high prices/liquidity needs; MSME guidelines now allow voluntary gold/silver jewellery collateral, expanding credit access; however, microfinance data gaps on gold liabilities hinder assessments; strengthens reserves (gold holdings $78.2B to $117.5B) but flags inflation risks.
Inflation and CAD Pressures: Precious metals drive core inflation wedge (~235 bps); excluding gold/silver, core inflation at 2.3-2.4% vs. 4.6%; high gold demand fuels CAD imbalances due to import reliance, positioning G&J as both economic enabler (lending, diversification) and constraint (volatility, deficits).
Force enabler and constraint :The Economic Survey 2026 portrays India’s gems and jewellery (G&J) sector as a dual-force enabler and constraint. As an enabler, it bolsters financial stability through gold-backed lending surging 125.3% YoY, expands MSME credit via jewellery collateral, drives FTA-led diversification (e.g., UAE exports +34.9%), builds gold reserves to $117.5B, and acts as a financial stabiliser. Conversely, as a constraint, it faces export volatility from demand/price swings softening overall growth, geopolitical/consumer sensitivities, gold imports up 27.4% exacerbating CAD pressures, and lifting core inflation by ~235 bps—highlighting the need for balanced policies amid Trump tariffs and global shifts.
Implications for Trump Tariffs: US trade deal progress noted, but tariffs accelerate diversification to Middle East/Europe/Africa/Asia; textiles likely similarly impacted (export shift implied); G&J’s resilience via FTAs positions India as stable hub, though sustained gold imports demand policy focus on duties, incentives for competitiveness.
Source: GJEPC
For generations, the “locker of the house”—the family’s ancestral gold— was a sacred reserve of last resort. To pledge a wife’s mangalsutra or a grandmother’s bangles was a mark of deep financial shame, the ultimate signal of a family in distress.
But a fundamental shift in the Indian psyche is turning that social taboo into a sophisticated financial strategy. As gold prices hit historic highs, what was once “idle” jewelry is being recast as a high-octane asset class, driving triple-digit growth across the sector and attracting a new breed of affluent borrower.
The shift is most visible in the scale of borrowing. Historically, the gold loan market was dominated by the small borrower, with loans under Rs.2.5 lakh ($3,000) making up 60% of the market.
New data from CRIF High Mark reveals a sharp reversal:
- FY2025: Small-ticket loans dipped to 51% of the market.
- Current Fiscal (8 Months): Small-ticket loans have cratered to just 40%.
The vacuum is being filled by entrepreneurs and high-net-worth individuals (HNIs) who are using gold as collateral to secure single-digit interest rates for business expansion, often bypassing more expensive unsecured loans.
According to a Morgan Stanley note in Oct 2025, India holds about 34,600 tonnes of gold, valued at approximately ₹550 lakh crore. In comparison, the value of gold loans in India stands at around ₹15 lakh crore, against which nearly ₹25 lakh crore worth of gold is pledged.
Why Monetization Failed Where Loans Succeeded
The trend represents a private sector victory where government policy stumbled. In 2015, the Reserve Bank of India (RBI) launched the Gold Monetization Scheme to bring an estimated 25,000 tonnes of privately held gold into the formal economy.
The policy failed largely due to sentimental barriers. To earn interest, owners had to melt their jewelry into bullion, effectively destroying the artistic value and ancestral craftsmanship of heirlooms.
A Structural Change
Banking analysts suggest this is not a temporary spike, but a structural realignment in how India perceives wealth. The modern borrower is increasingly pragmatic, prioritizing the cost of capital over the stigma of the pawnshop.
As banks and NBFCs digitize the process—offering doorstep pick-up and instant credit—the traditional local moneylender is being replaced by fintech-driven platforms and institutional vaults.
The family gold is finally stepping out of the shadows—returning not as ornamentation, but as a powerful line of credit.
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