Jewellery demand in India to contract in Q2 and Q3 of FY2023 on the back of tepid demand conditions due to factors including the recent hike in import duty on gold, high volatility in prices and lower disposable incomes in the hands of the consumers due to inflationary pressures, according to
NSE 1.43 %. While demand is likely to contract by 8% YoY in Q2 FY2023, the contraction is expected to be higher at 15% in Q3 FY2022 due to the extraordinarily high base of Q3 FY2022, following the post-pandemic reopening of the economy and the substantially high demand in the wedding and festive seasons in FY2022.
Nonetheless, the overall industry is expected to grow by a moderate 10% YoY in FY2023 on the back of strong performance in Q1 FY2023 and steady demand in wedding and festive season in the current fiscal. Within the jewellery retail industry, the revenue of organised retailers is likely to grow at a higher pace of ~14% YoY in FY2023, driven by continued store expansions and increasing share of organised retailers.
Elaborating on the short-term demand contraction, Mr. Jayanta Roy, Senior Vice President and Group Head, ICRA said:
“In addition to the aforementioned factors, an increase in other discretionary spending on things like travel due to lower restrictions and a likely reduction in the share of jewellery purchases in overall wedding expenditure, which was higher last year due to restrictions around gatherings, are also factors that can affect demand. Rural demand for gold is also likely to be impacted by uncertain monsoons in the current year and higher interest rates on agricultural loans which could dent disposable incomes.”
The jewellery retail sector is estimated to have grown by a robust ~88% YoY in Q1 FY2023, higher than ICRA’s earlier expectations of 45% growth, driven by the strong demand during the
Akshaya Tritiya season and continued momentum in wedding purchases. This strong growth comes on a relatively low base of Q1 FY2022. The industry consumption surpassed pre-pandemic levels in Q1 FY2023, given the sharp recovery following the pandemic-induced disruptions witnessed during Q1 of the last two fiscals. Banking on the robust growth in Q1, demand in FY2023 is likely to be ~30% higher than the pre-Covid levels seen in FY2020.
