India has seen a notable increase in demand for plain gold jewelry following recent government cuts on import duties. This shift has led to a decrease in spending on diamond jewelry.
Gold purchases had slowed earlier this year due to rising prices. However, the Indian government’s decision to reduce gold import tariffs from 15% to 6% has boosted sales. This change, reported by JP Morgan last week, has not been extended to polished diamonds.
Kavita Chacko, head of research in India for the World Gold Council (WGC), commented, “The significant cut in import duty on gold and the resulting drop in its landed cost have greatly stimulated gold demand in the country.” She noted that both retailers and consumers have shown strong buying interest since the duty reduction.
At the recent India International Jewellery Show (IIJS), manufacturers reported a marked increase in gold purchases as retailers prepare for the festive and wedding seasons, which extend through December. Chacko observed that orders are reaching levels not seen in several years.
The growing demand for gold jewelry is linked to a decline in sales of diamond-studded jewelry. The drop in sales is attributed to lower prices for these items and a rising interest in synthetic diamonds.
JP Morgan noted that the shift towards gold jewelry has slowed the growth of sales for diamond-studded jewelry. This trend is particularly evident in high-value items and solitaires, which have been affected by price adjustments and competition from lab-grown diamonds.
The impact of synthetic diamonds on Indian consumers is still uncertain. However, major jewelry retailers are showing interest in these alternatives. For example, Senco Gold has opened four new stores featuring lab-grown diamonds and other accessories.
Additionally, large jewelry retailers are expanding their international presence to tap into the growing Indian diaspora market and attract non-Indian customers. By the end of the fiscal year, Titan Company plans to increase its Tanishq-brand store count to 25 from 16. Kalyan Jewellers is set to open its first U.S. store before Diwali, and Senco has launched its first international store in Dubai.
