The Diwali festival season is the year’s biggest sales opportunity for the Indian jewellery retail industry and this year, a combination of untimely rains in October, which is the harvesting season after the monsoon, an increase in bullion prices after the implementation of the goods and services tax (GST) and the lingering effects of the Indian government’s currency reform have adversely affected jewellery sales by 30 percent and more.
According to All India Gems & Jewellery Trade Federation (GJF) Chairman Nitin Khandelwal, the unusually long monsoon which has actually damaged standing crop, has already affected agricultural output enough to have impacted pre-Diwali sales adversely by as much as 30 percent. In areas where the crop damage has been extensive, he thinks the drop in jewellery sales may be as much as 50 percent.
Rural India accounts for as much as 30 percent of gold consumption in the country and the festival of Dhanteras, just two days before Diwali, which is traditionally a major jewellery sales driver, as it is linked to farming and symbolises prosperity, may also have been impacted severely, Khandlewal feels.
The effects of the currency reform, with the government withdrawing ₹500 and ₹1,000 notes from circulation, are still being felt in jewellery retail, which has traditionally had an overwhelmingly large cash sales component. The increase in bullion prices with the implementation of GST has been the final factor in significantly muting jewellery demand this year.