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Jul 27

Customs duty cut spurs gold jewellery buying frenzy



The recent customs duty cut in the budget has triggered a rush at jewellery stores as consumers buy gold in preparation for the wedding season. Prices fell sharply after customs duty cut announced in Budget 2024, sparking a 20% increase in demand. Jewellers have canceled artisans' leave to keep up with the surge.



Customers in the world's second-largest bullion market have begun flocking to jewellery stores since Tuesday evening to benefit from the reduced rates of gold. They are mostly buying heavy jewellery that had eluded them for the last six months as gold prices scaled a record ₹74,000 per 10 gm.


Jewellers have cancelled craftsmen leaves with daily demand surging as much as 20% since the duty cut. Jewellers are expecting the growth momentum to sustain through this festive season. India imports almost all the gold it uses for making jewellery and bars.



"We have cancelled leaves of our karigars (gold artisans) for the next seven days to meet the sudden surge in demand," said Kumar Jain, owner of Umedmal Tilokchand Zaveri, a retailer based in Mumbai's jewellery hub Zaveri Bazaar.


Gold prices decreased from Rs 72,609 per 10 gm on Tuesday to Rs 69,194 per 10 gm on Wednesday. This drop of Rs 3,415 per 10 gm followed the government cutting duty on gold imports from 15% to 6% in the budget.


Reinvigorated jewellers are also sending messages to customers and using social media platforms to make them aware of the price change. Jewellers are expecting a demand rise of 20% this quarter, with the first major purchase coming in for the Raksha Bandhan festival in the second week of August.


Customers are placing orders for heavy jewellery for weddings slated for November and December. Some are ordering for the upcoming Dhanteras and Diwali festivals, with jewellers coming out with advance booking schemes for gold following the duty cut.


"We are flooded with enquiries from our customers. The first tranche of demand is coming for Raksha Bandhan, which is the beginning of the festive season demand that continues till Diwali. Also, there are a few marriages in August for which the orders are being placed now," said Rajiv Popley, director of Popley & Sons, a jeweller based in Bandra, Mumbai.


Jewellers at Zaveri Bazaar noted heavy customer footfalls on Wednesday. "There is a lot of pent-up demand in the market and customers have now come out to fulfil it. They want to take advantage of the reduced import duty as there is fear in the market that the government might again increase the duty if there is a sharp rise in demand," said a senior gold trader.


The Centre had raised customs duty on gold in July 2022 after the trade deficit widened. Since India depends on gold imports to meet domestic demand, any increase in consumption of the yellow metal impacts the trade deficit if exports don't go up in tandem. Such an instance may force the government to increase customs duty on gold once again. India imports 800-850 tonnes of gold annually.


Suvankar Sen, managing director and CEO of listed jewellery firm Senco Gold & Diamonds, said customers have been placing orders for heavy jewellery since last evening.


"As of now, we have seen a 15% surge in demand for gold jewellery compared to the last few months. The demand is for heavy jewellery. However, we are expecting that footfalls for lightweight jewellery, which we christen as regular purchase, will increase over the weekend. We have already come out with advance booking facilities for our customers which will continue till Durga Puja."


Meanwhile, demand in South India, which consumes 40% of the country's gold, too is witnessing high demand since last evening. "Footfalls have increased at our stores, and we are expecting a 15-20% increase in demand. The demand is for heavy as well as lightweight jewellery. This quarter will be a good one for all the jewellers," said Baby George, CEO of Joy Alukkas.


At Kalyan Jewellers, executive director Ramesh Kalyanaraman said that they have been flooded with enquiries from customers since Wednesday morning about the latest gold rates and seasonal offers.


SOURCE: ECONOMIC TIMES


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