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India’s Jewelry Market Shows Signs of Recovery
Feb 8, 2017 10:32 PM
By Avi Krawitz
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RAPAPORT... Jewelry orders improved at this week’s Signature India International Jewellery Show (IIJS), following a government demonetization program that had frozen activity since November.
“The market is picking up, and things are starting to normalize,” said Sunil Mittal of Surat-based diamond jewelry wholesaler Shailja’s. “Buyers are coming in for the wedding season.”
Retailers have refrained from buying stock, as their sales plummeted when Prime Minister Narendra Modi announced a plan to abolish high currency notes on November 8. The program, which went into immediate effect, aimed to eliminate the high volume of fake currency being used for money laundering in the country.
Jewelers depleted their inventory after steady sales during the busy Diwali festival – which preceded the demonetization order – and in an initial rush by consumers to exchange now-obsolete currency with jewelry. But sales dipped afterward, and activity in the wholesale market went silent.
“For two to three months, there was no business, but activity started to pick up again in late January,” said Vishal Jain, a partner at Sensuel, which supplies couture jewelry to the local market. “Now retailers need stock as the wedding season continues until late April, and there are always festivals in India when people traditionally buy jewelry.”
Still, exhibitors at IIJS Signature estimated sales were down about 20 percent from this time last year. They expect it will still take another six months for the market – and liquidity – to return to its old levels. Consequently, wholesalers are discounting in order to move inventory, and there continues to be a shift in demand toward lower price points, Mittal observed.
Temporary Gold Blip
Gold sales were better than studded jewelry at IIJS Signature, and there was very little loose-diamond trading. None of the large diamond suppliers participated, as their businesses are typically driven by exports.
 In the gold section, buyers moved toward lighter-weight gold in view of last year’s national squeeze on liquidity.
Indian gold jewelry demand by volume fell 22 percent to 514 tonnes in 2016, according to the World Gold Council (WGC).
Overall, 2016 was a difficult year for jewelry retailers, Jain explained. In addition to demonetization, retailers shut doors for nearly two months in April and May to protest a 1-percent excise duty on jewelry sales. Many also felt the impact of the Income Declaration Scheme, which gave tax defrauders an opportunity to avoid litigation by declaring their assets and paying the tax with a penalty.
Most expect the drop in demand to be temporary and liquidity to improve as invalid currency is replaced with new INR 500 and INR 2,000 notes.
Already, the WGC is seeing some improvement. The monsoon was good, and incomes in rural areas – where the war on cash hit households the hardest – are correspondingly healthy, which is positive for gold and jewelry demand, the group reported.
“The number of digital transactions should start to creep higher on the government’s push to increase transparency in the gold market,” the WGC said in its annual report. “This may already be taking effect [as] national jewelry chain stores outperformed smaller, independent stores during the [fourth] quarter.”
Jewelry suppliers were certainly encouraged by activity at the Signature show – a smaller version of the popular IIJS show, which takes place pre-Diwali in August. While traffic was light, it attracted serious buyers, mainly those smaller independents looking for goods.
“There was no window shopping at the show, which means traffic was low in quantity but high in quality,” said Sudeep Juniwal of Juniwal Diamond, a manufacturer of designer jewelry for the local market. “It will still take time for the effects of demonetization to fully settle, but people are starting to buy again.”
* Pictures courtesy of Gem & Jewellery Export Promotion Council (GJEPC). |
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Tags:
Avi Krawitz, diamonds, GJEPC, gold, IIJS Signature, India, jewellery, Jewelry
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