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Informist, Friday, May 22, 2026

KOLKATA - The organised gold jewellery retail sector in the country, comprising jewellery, coins, and bars, is expected to see a further decline of 13-15% on year in sales volume in the current financial year. It is on account of high prices of gold and recent policy measures by the government to curb imports of the metal, Crisil Ratings Ltd. said in a statement Friday.

During 2025-26 (Apr-Mar), sales volume in the sector had declined 8% on year due to high gold prices which negatively impacted demand.

However, despite the expected decline in sales volume, the jewellery sector is poised to achieve a robust revenue growth of 20-25% on year, driven by higher realisations. High prices of gold will lead to increased inventory holding costs and higher bank borrowings, Crisil said, adding that an increase in both revenues and cash accruals will offset higher reliance on debt, resulting in stable credit profiles.

During FY26, India imported 720 tonne of gold leading to foreign currency outflow of $72 billion, the ratings agency said. Amid sustained high gold prices and as a measure to reduce the trade deficit and support the currency, the central government recently raised customs duty on gold. This aims to reduce demand for the precious metal and curb its imports. Consequently, the sector is expected to see its sales volume hit the lowest level in a decade, excluding the COVID-impacted fiscal 2021.

"The central government's decision to more than double the customs duty on gold to 15% from 6% will be a significant deterrent to demand for gold jewellery," Himank Sharma, director at Crisil Ratings, said in the statement. 

Although the uptick in realisations will yield inventory gains for retailers, some of these gains may be passed on to customers in the form of deeper discounts to incentivise sales volume. 

Additionally, increased promotional expenses and the trading of gold bars and coins will weigh on retailers' gross margins. Nevertheless, overall cash accruals and absolute earnings before interest, taxes, depreciation and amortisation are expected to improve, supported by higher realisations.

"While we see a notable shift towards gold bars and coins driven by investment demand, but that is unlikely to fully offset the decline in overall demand," Sharma said. "As a result, volume of the gold jewellery retail sector will decline 13-15% on year to 620-640 tonne this fiscal, a level not seen in the past decade."

Domestic gold prices soared by an unprecedented 55% on year in FY26 due to a rise in global gold prices amid geopolitical uncertainties, as well as a depreciating rupee against the US dollar. The surge in prices has hit affordability, prompting a shift towards lightweight, lower-carat gold jewellery and studded jewellery. 

Conversely, investment demand gained traction over the past two financial years, with sales of jewellery plummeting 25% and those of gold bars and coins surging over 50%, Crisil Ratings said.

However, at the current price of INR 160,000 per 10 gram for 24 carat gold, realisations from sales will be 35-40% higher on year for jewellers and gold sellers in FY26, thereby improving cash accruals. Even as gold bars and coins generate lower value-added revenues, and higher promotional expenses and discounts are incurred to drive sales volume, gold jewellery retailers are expected to see a 20% on year increase in absolute EBITDA in FY26, the ratings agency said.

This will partly cover for the increase in inventory holding costs for retailers--as inventory days may rise to 160-180 days from 150 days in FY26.

Crisil Ratings will keep a watch on steep fluctuations in gold prices, further changes in regulations and import duty on gold, potential government restrictions on gold purchases, and changes in consumer sentiment in the current financial year.  End

Reported by Avishek Rakshit

Edited by Akul Nishant Akhoury

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