India’s gold market has witnessed a dramatic slowdown after the government sharply increased import duty on gold from 6% to 15%. The move, aimed at reducing pressure on foreign exchange reserves and curbing imports, has significantly impacted consumer demand across the country.
Demand Falls To Multi-Year Lows
According to industry estimates, gold demand fell by nearly 70% in the fortnight ending May 27 compared to the same period last year. Demand reportedly dropped from around 25 tonnes to just 7.5 tonnes, reflecting the immediate impact of the higher duty structure.
Jewellers across major cities have reported lower footfall, weaker purchases, and a noticeable decline in consumer interest. The sudden increase in gold prices following the duty revision has forced many buyers to postpone purchases.
Rising Costs Hurt Consumer Sentiment
The duty hike has come at a time when consumers are already dealing with higher expenses on fuelfood, and essential commodities. As household budgets tighten, discretionary spending on gold jewellery has taken a backseat.
Industry experts believe that the combination of rising living costs and expensive gold prices has created a challenging environment for retailers. Many customers are now limiting purchases to weddings and essential family occasions rather than making investment-driven purchases.
Unorganised Sector Faces Biggest Challenge
The unorganised jewellery sector, which accounts for a significant share of India’s gold trade, is reportedly among the worst affected. Smaller jewellers often depend on regular customer purchases and may struggle to absorb the impact of reduced demand.
Several retailers have also indicated that buyers are increasingly opting for lighter jewellery pieces or exploring alternative options such as silver and diamonds.
Long-Term Impact On The Market
While the government hopes the higher duty will reduce gold imports and support the country’s external finances, the jewellery industry fears prolonged weakness in demand. Some market observers have also warned that higher duties could encourage unofficial imports and smuggling activities.
Despite the current slowdown, experts believe India’s cultural and emotional connection with gold remains strong. Demand may eventually recover, but the pace of recovery will largely depend on gold prices, inflation levels, and overall consumer confidence.
Summary
India’s gold demand has plunged by nearly 70% after the government raised import duty from 6% to 15%. Higher prices, inflationary pressures, and weak consumer sentiment have significantly impacted jewellery purchases. While the move may help reduce imports, jewellers fear prolonged demand weakness, especially in the unorganised sector, as buyers shift towards lighter and more affordable alternatives.
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