India stirred but not shaken by demonetisation

Aruna Gaitonde

It is more than two months since demonetisation of high-value currency notes in India took effect, but the resilient gems & jewellery industry, though stirred, stands strong and stoic in the face of adversity. Obviously, the luxury sector of which the gem & jewellery industry is part of would be the first sector to get hit due to discretionary consumer spending acutely affecting the retail market.

Industry-wise, it is of course the SMEs (small & medium size enterprises) that have been negatively impacted as they trade with majorly small jewellery players in the unorganised players who deal in hard cash. It is reported that local demand for rough as well as polished diamonds declined in December indicating a 4.96% dip in rough imports. Even diamonds miners reported a slowdown in demand for lower-value rough (mostly imported by India) during the past 2 months, due to liquidity issues among SMEs.

The large diamantaires and jewellers in the organised sector, however, are not impacted much. Exports of cut & polished diamonds have revived with renewed demand from US, UAE and other consuming markets. Moreover, larger organised players remain unaffected as they deal in US dollars with only employee expenses requires Indian Rupee. The market leader, KGK Group’s Vice Chairman, Sanjay Kothari assessed the situation candidly: “It’s a wonderful decision whose long-term multiplied effects will be unquestionably rewarding. Initial disquiet is supremely temporary and that, too, for a particular group. But while following the global path, India has promisingly announced the channelized reformation under the dynamic leadership of PM Modi, which ultimately leads to survival of the fittest and that is delightfully commendable. Putting an end to lawbreaking formats will not only earn great benefits for luxury retail brands like Entice, but will determinedly augment the entire economy of the nation.

Not surprising that the Indian domestic market – with 70-75% of the domestic gold jewellery market facing downturn – is still negatively affected due to demonetisation in their business activities of trading, as well as due to subdued demand from retail consumers. In the long-run, however, this move could turn out to be positive for jewellery retailers on the whole as they would benefit from a more organised set up country-wise. According to retailers in the domestic market, the sector has received a big blow as demand for gold has dropped down by nearly 80 percent. Gold jewellery stores are reportedly seeing a drastic drop in jewellery buyers.

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Source Rough&Polished