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Wedding season keeps jewellery industry afloat

Sales dip 60% in one month after demonetisation

Marriages and other ceremonies are proving to be the saving grace for the jewellery industry, reeling under demonetisation. “Liquidity crunch in the market has caused about 20% slump in cash-driven sales. But genuine demand is strong as we are in the wedding season,” M P Ahammed, chairman, Malabar Gold and Diamonds, told DH.

S Venkatesh Babu, former president of the Jewellers Association Bangalore (JAB), said, “Demonetisation is a major setback. In the last one month, there is a 60% decline in sales in Bengaluru, as people don’t have easy flow of money. Industry is surviving on inevitable purchases like for marriages, otherwise no investment is happening.”

Industry experts feel that in Hindu tradition, people are forced to buy gold for occasions like naming ceremony, engagement and weddings. When asked about rumours that people were buying gold at premium rate to convert old currency, Venkatesh, who is mentor (advisor) for JAB, said, “Some people would have misused the opportunity on November 8, which I am not completely aware of. That day, old notes were valid till midnight. The announcement made out of the blue created a panic. Like Akshaya Trithiya, people rushed to jewellery stores to convert old currency into jewellery.”

Babu blamed media for misreading the law on limited purchase of gold for married women (500 gm), unmarried women (250 gm) and unmarried men (100 gm). “This is absolutely not a new law. It is an existing law which came into effect in 1994, under wealth tax. Because of some query, a clarification was issued.”

“This is misinterpreted by media as a new law, adding more panic. People are free to purchase any amount of gold as long they produce required documents. Nobody can dictate how much jewellery one has to purchase, it is your hard-earned money,” Babu said.

“Genuine customers need not worry as they can declare all jewellery they possess. Those who have been hoarding gold ornaments in their personal custody and bank lockers will have to abide by the system. This means gold import will come down significantly,” Ahammed said. Babu welcomed demonetisation, which is a temporary phenomenon. It will help the sector to be more organised.

“A majority of players in our sector are unorganised. Now, either you organise or perish. Karnataka has over 25,000 jewellery outlets, 6,000 in Bengaluru alone. It will be difficult to guess the volume of transactions taking place.”

Y S Ravi Kumar, president of the Jewellers Association Bangalore, said, “On November 8, when Prime Minister Narendra Modi announced the scheme, all points were not announced. For example, that a homemaker can deposit Rs 2.5 lakh in her account. Due to non-clarity on many issues, people having cash did try to buy whatever was available, such as white goods, electronic gadgets, gift vouchers and jewellery. If this was announced on the same day, such a panic reaction could have been avoided.”

“A majority of our consumers are homemakers who buy jewellery from their savings from household expenses and the rural masses who depend on cash for their transactions. So, demonetisation dented jewellery sales. Many consumers are testing the use of e-payment and e-wallets for the first time. Once they are comfortable with these methods, we should see an improvement in sales,” Kumar said.