India’s recent policy shift to slash import duties on gold has led to a notable decline in the demand for diamond jewelry, as consumers and retailers pivot towards the more affordable yellow metal.
The initial surge in gold prices had dampened buying activity earlier in the year, but recent government action to reduce import tariffs on gold from 15% to 6% has sparked a resurgence in gold jewelry purchases, according to a recent report from investment banking firm JP Morgan. In contrast, the import tax on polished diamonds remains unchanged.
Kavita Chacko, head of research in India for the World Gold Council (WGC), highlighted the impact of the reduced import duty on gold. “The substantial cut in gold import duties and the subsequent drop in gold costs have significantly boosted gold demand across the country,” Chacko noted in a market update. Reports from various sources indicate a strong uptick in purchasing activity from both jewelry retailers and consumers following the tariff reduction.
At the recent India International Jewellery Show (IIJS), manufacturers observed a marked rise in gold procurement as retailers prepared for the festive and wedding season, which extends through December. Chacko reported that orders are at levels not seen in several years.
This increased appetite for gold jewelry has had a direct effect on the market for diamond-studded pieces. The decline in demand for jewelry adorned with natural diamonds has been noticeable, with a growing interest in synthetic diamonds also contributing to this trend.
JP Morgan’s report pointed out that the consumer shift towards gold jewelry, driven by its appreciating value, has led to a slowdown in sales growth for diamond-studded items. “There has been a noticeable moderation in sales, especially for high-value studded and solitaire pieces, due to price adjustments and the potential impact of lab-grown diamonds,” the report stated.
While the acceptance of synthetic diamonds by Indian consumers remains uncertain, some major jewelry retailers are beginning to explore this segment. Retailer Senco Gold, for instance, has launched four new stores featuring lab-grown diamonds and related products.
In addition to exploring synthetic options, large jewelry retailers are expanding their reach internationally to tap into the growing Indian diaspora and potentially attract non-Indian customers. By the end of the fiscal year, Titan Company plans to increase its Tanishq-brand store count from 16 to 25. Kalyan Jewellers is set to open its first US store ahead of Diwali, and Senco inaugurated its first international outlet in Dubai during the first quarter, as noted by JP Morgan.
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