New Delhi: Dhanteras may finally start looking rosy again. Jewellery sales, which were subdued, have started to pick up in the last 2-3 days as customers start spending on gold, silver and other jewellery. Jewellers are cautiously optimistic about the trend continuing.
“The last 2 days have seen a pickup in the sales of gold jewellery,” Nitin Khandelwal, Chairman of the All India Gems & Jewellery Trade Federation, told News18. “Before that it was the worst period. Sentiment was down and sales were very bad,” he added.
Dhanteras, which falls 2 days before Diwali, is considered an auspicious day to purchase jewellery, especially gold. However the day, which marks the 13th day in the month of Kartik, is the culmination of a consumer spending cycle that starts before Dussera and continues till Diwali and beyond.
However, spending has been subdued this year for a number of reasons.
The foremost among these is that sales have been depressed this festive season. The twin shocks of Demonetisation and GST have had the effect of suppressing purchasing power. “Many traders, small business owners and other segments do not have the disposable income to spend on gold or other jewellery,” Bachhraj Bamalwa, a partner at one of Kolkata’s premium jewellers Nemichand Bamalwa & Sons, told News18. “Ultimately sales are driven by sentiments,” Bamalwa, the former Chairman of the Gems & Jewellery Trade Federation, added.
The second factor that has depressed sales has a more direct link to GST. The GST rate for gold articles and polished diamonds has been fixed at 3% and 0.25% for rough diamonds. This is marginally higher than the 2% rate before GST. Although the increase in the tax rate does not seem very much, it does end up hurting the consumers wallet because prices of gold are high: 10 grams of the yellow metal will set you back by Rs 29, 250, so even a 1 percentage point increase in tax makes a difference.
“A lot of consumers pre-poned their gold purchases to June, before GST came in, to avoid paying a higher rate,” Khandelwal said. “In effect, the Dhanteras demand for jewellery got shifted to forward and therefore the demand is weak now,” Bamalwa added.
However, with sales picking up and the wedding season round the corner, both jewellers are hopeful that the sector will make some kind of recovery.
The third reason has to do with the government placing the gem and jewellery sector under the ambit of the Prevention of Money Laundering Act in August. In August, the Central directed dealers in precious metals and stones having an annual turnover of Rs 2 crore to be notified as persons carrying on designated business under the Prevention of Money Laundering Act, (PMLA) 2002.
Transactions over Rs 50,000 attracted stringent know your customer (KYC) norms and the identity of the customer had to be verified. Other compliance norms had to be followed, which acted as a drag on jewellery sales. The sector was taken out of the ambit of the Act only in the second week of October, but the damage had already been done.
However, on the bright side, gold imports are slightly higher this year. Around 700 tons of the yellow metal has been imported from April-September compared to 650 tons in the year ago period, which jewellers see as a positive sign. They are hoping that Lakshmi finally comes to their homes and shops this season.
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