Jewellery Consumption Set To Rise 10-12% In Value In FY24 Due To Surging Gold Prices: ICRA

However, ICRA noted that the growth rate is projected to moderate to 6-8 per cent in the second half of the current financial year, owing to continued tepid rural demand amid persistent inflation

Jewellery consumption, in terms of value, is anticipated to increase by 10 to 12 per cent in the current fiscal year, owing to a surge in gold prices, a report by ICRA Ratings said on Friday. The rating agency gave an upgraded outlook for growth in domestic jewellery consumption, in value terms, in the 2023-24 fiscal year of 10-12 per cent, against earlier estimates of 8-10 per cent. 

The agency said that jewellery consumption is estimated to have grown by over 15 per cent on a year-on-year (YoY) basis in the first half of FY24, helped by consistent demand during ‘Akshaya Tritiya’, which marks a festive period considered auspicious for purchasing precious metals, and elevated gold prices, reported PTI. 

However, ICRA noted that the growth rate is projected to moderate to 6-8 per cent in the second half of the current financial year, owing to continued tepid rural demand amid persistent inflation. The report underlined that gold prices remained volatile between December 2022 and April 2023, and then continued to be relatively stable in the first half of FY24. However, the prices remained higher by 14 per cent than the average prices seen during the corresponding period a year earlier. 

These high prices supported the revenue boost in most jewellery retailers amid muted volume growth. It stated that the current tensions in the Middle East and the changing global macroeconomic environment could keep gold prices high in the near term. 

The surge in gold prices after early October 2023 and persistent inflationary headwinds stood as crucial risks to demand. The report further said that jewellers of the organised market are predicted to log a healthy revenue growth of 15-18 per cent on a YoY basis in FY24, owing to planned retail expansions and a gradual change in consumer preferences towards branded jewellers.

ICRA VP and Sector Head, Sujoy Saha, noted, “The organised jewellery retailers are expected to outperform the industry over the medium term supported by tailwinds from accelerated formalisation of the industry.”

Regarding the operating margins in the industry, ICRA said that it projects some moderation in the operating margins of organised players in the current fiscal year, due to the front-loaded operating costs for planned store additions and elevated advertising expenses amid increasing competition. 

“The momentum is likely to continue over the near to medium term with an estimated increase in store count by 18-20 per cent YoY in FY24, supporting their revenue growth,” Saha added.