After a lull of four years, the demand for gold is expected to go up this festive season, despite higher prices compared to last year.
Retailers and government officials expect to see higher demand this festive season on the back of a good monsoon and the implementation of the seventh pay commission, which will increase salaries of central government employees and pensioners by up to 23%.
Meanwhile, the price for every 10 gram of gold has gone up by 23% compared to last year.
“A good monsoon and hike in salaries of government employees will boost consumption this year and demand for gold will also increase,” said DK Joshi, chief economist at Crisil.
According to All India Gem & Jewellery Trade Federation, the jewellers lobby, sales of gold jewelry is expected grow by 40% in value and 20% in volume.
Keeping that in mind retailers, both online and offline, have increased their selection. Jewellery portal, CaratLane.com has added 150 new stock keeping units (SKUs), a measure of unique products, to its existing inventory of 4,000 units. “We see our sales doubling compared to last year. The sentiments are positive due to the increased spending power followed by lighter jewellery options available, starting Rs 3000,” said Atul Sinha, senior vice-president, marketing at CaratLane.com.
Kalyan Jewellers, one of the prominent jewellery chains, is already witnessing growth in sales. “While in the first quarter jewellery sales were tepid, we have seen an upward sales trajectory in September and expect festival sales to be robust with 10% growth over last year,” said T S Kalyanaraman, chairman and managing director of Kalyan Jewellers.
To capitalise on this demand, retailers will offer freebies, easy returns, gift vouchers and try-at-home options. While Kalyan Jewellers has announced two free gold coins on purchase of jewellery worth Rs. 25,000, Caratlane.com allows product return even after 30 days of purchase with 100% money back guarantee. Online store of Malabar Gold Diamonds offers gift voucher up to Rs 10,000, which could be redeemed only during online purchases.
Not only jewelley, automobile, consumer durables and appliance makers expect this festival season to be the best in four years.
Call it the virality. “Our expectations are same as in other sectors. We are ready to attract consumers with wide range of products starting as low as Rs 5000 and going upto Rs 25 lakh,” said C.K Venkataraman, CEO of jewellery division, Titan Company Limited.
The surge in demand of gold jewellery may not resonate well with the Narendra Modi-led BJP government, which seeks to reduce imports of gold to keep the current account deficit (CAD) under control. CAD happens when the value of imports is more than that of exports. It launched the sovereign bond scheme in November 2015, to wean away customers from buying physical gold.
Despite the government’s move of opening the sovereign gold bond scheme, which fetched over Rs 900 crore in July, the Indian consumer will step out and buy physical gold this Diwali.