Over the last few years the Indian gold market has grappled with numerous changes in the regulatory environment and in consumer behaviour. Looking ahead, gold jewellery demand will face further challenges. Changing demographics and the possibility that millennials will move away from gold as other luxury items demand their attention cannot be ignored.
Against these headwinds, gold jewellery demand will likely benefit from strong economic growth and growing urbanisation as incomes rise and the middle class grows. As more people are lifted out of poverty, gold jewellery demand will benefit.
E-commerce opportunities are increasing and as a more robust regulatory structure emerges to support online gold jewellery sales at home and abroad, manufacturers and retailers will be able to use this to extend their reach.
The Indian government seeks to boost manufacturing and exports, and as a consequence jewellery exports are likely to improve further over the coming years. Proposals to allow advance payments to overseas precious metal suppliers and to set up Mega Common Facility Centres (CFCs) in the Santacruz Electronics Export Processing Zone (SEEPZ) in Mumbai and Surat could stimulate growth in the sector if implemented.
The CFCs could facilitate sharing of manufacturing best practice and state-of-the-art machinery, which would bring the latest technology and resources within reach of small manufacturers. If these efforts are supported by appropriate communications around both quality and craftsmanship, the future of India’s gold jewellery market will be assured.
US overtakes UAE as the largest export destination India remains one of the world’s largest exporters of gold jewellery. In recent years, the US has surpassed the UAE as the largest export destination for Indian gold jewellery. This reflects two developments.
First, the imposition of extra tariffs on Chinese jewellery exports to the US, which has made Indian exporters more competitive and, second, the implementation in the UAE of a 5% import duty in January 2017 and 5% Value Added Tax (VAT) in January 2018, both of which negatively impacted competitiveness.
But under a Comprehensive Economic Partnership Agreement (CEPA), which was introduced in May 2022,
90% of Indian goods will be allowed duty-free access to the UAE. This will have far-reaching effects as goods sold there are re-exported to other countries and already this has resulted in a substantial rise in India’s gold jewellery exports.