On the back of the reduction in import duty on gold bars and the expected improvement in demand in coming quarters, India’s gold jewellery industry is set to witness revenue growth of 13 to 15 per cent in the financial year 2025 (FY25), according to Icra. The earlier estimate for the fiscal year was of 6 to 8 per cent revenue growth. The operating profit margin (OPM) of Icra’s sample set of 15 large jewellery retailers is estimated at 7.5 to 8 per cent for the year, up from 7.2 per cent in FY2024.
In FY2024, the prices of gold rose by more than 14 per cent and by 20 per cent on a year-on-year (YoY) basis in the first quarter of the current financial year. The import duty reductions have led to price correction, which is likely to lead the way in terms of recovery in demand for physical gold and jewellery in the coming quarters, according to Icra. Gold prices declined by around five per cent since the duty cuts on 23 July 2024, Icra reported.
Recently, the Centre notified about the reduction of import duties on gold bars from 15 per cent to six per cent during the presentation of the union budget for FY2025. The new duties at six per cent consist of five per cent basic customs duty and one per cent agriculture infrastructure development cess (AIDC), which were ten per cent and five per cent, respectively in the earlier structure of 15 per cent import duty. The duty cut is also expected to curb unofficial imports and accelerate shares of organised trade within the sector.
Even after the sharp rises in gold prices, the demand for gold jewellery has grown by two per cent in FY2023 and four per cent in FY24, in volume terms. Icra stated that a favourable monsoon in the coming months will boost the rural demand which accounts for nearly two-thirds of gold jewellery consumption in the country. The return on capital employed (RoCE) level is expected to remain around 20 per cent, as per Icra.
