Demonetisation one month: Jewellers feel the heat of cash crunch as gold sales slump nearly 90%

Sulekha Nair December 08, 2016 15:14:40 IST
Demonetisation one month: Jewellers feel the heat of cash crunch as gold sales slump nearly 90%

Gold shopping in India is an activity indulged by both the rich and the poor. Demonetisation has dealt a body blow to the world’s second-biggest gold consuming nation and consequently to the demand for gold, a must-have accessory in Indian weddings. Demand for gold jewellery has dropped as much as 80 percent with jewellery shops witnessing drastically reduced footfalls and low volumes.

A month later, footfalls continue to be lacklustre, especially, at a time when weddings are held across the country starting by the year-end till mid-February. Business has thinned down to a mere 10 to 15 percent, say jewelers.

Demonetisation has been the biggest crisis ever for the business, said Ashok Minawala, partner in the 80-year-old Mumbai-based Danabhai Jewellers and Sons. Ticket sizes have dwindled to below Rs 2 lakh and that is the budget most weddings are also trying to adhere too with the cash crunch enveloping the entire country.

Jewellery is a high value purchase and customers are putting their decision to shop for the yellow metal on the back burner as they are focussed on taking care of the essentials items. People are focused on having cash reserves until they can access their money easily given the fact that banks and ATM are cash-strapped and are rationing money.

Demonetisation one month Jewellers feel the heat of cash crunch as gold sales slump nearly 90


Unless there is a wedding in the family which necessitates spending or buying a gift for a close relative's wedding, people are reluctant to enter jewellery stores. “We do not see our regular customers coming into the stores anymore,” said Minawala. He pegs the drop in business to almost 40-50 percent where cheques are given for gold purchases. Sales in cash purchases of gold has plunged to over 50 percent, he said.

Lacklustre half year

The jewellery industry has seen highs and lows in the current year. The industry had shut shop post the budget when the government reintroduced a one percent excise duty on jewellery after four years.

Industry estimates the loss incurred on account of the strike to be at Rs 18,000 crore.

Dhanteras brought a shine to the yellow metal which was otherwise lacklustre for nearly six months. The country's gold demand had fallen 30 percent to 247.4 tonnes during the first six months of 2016, from 351.5 tonnes in the year-ago period, as per World Gold Council.

India is the world's largest gold consumer and imports a sizeable chunk of its total annual consumption of around 900-1,000 tonnes.


Since 9 November, the rush for gold has petered down to a trickle. The demand is down to almost 90 percent now, said jewellers. The reason for the fall can be mainly attributed to the limited availability of cash at ATMs and the banks in the country, said Sreedhar GV, chairman, All India Gems and Jewellery Trade Federation.

“We are witnessing a drop of around 75-80 percent. If there is not much circulation of money in the country due to demonetisation, business cannot be buoyant,” he said.

A month after demonetisation, the situation continues to be grim. Shailesh Sangani, director, Gitanjali Group, creators of Gili jewellery, said that though the trade has undergone several challenges particularly in 2016, demonetisation was the worst of it all. “We have been affected as sales has been dismal.”

Most jewellers said that they had clocked sales of 80-90 percent during Diwali and post-Diwali too and also on the day the demonetisation announcement was made. Now there is hardly 10 to 15 percent growth, they said.

In the south, the wedding season is on only until December and then mahurats or auspicious days begin post-January 15 till mid-March. But demonetisation has brought down business to almost 90 percent in the South. But some of them are happy at the trickle of footfalls in their stores. “We thought there would be hardly any business post-demonetisation,” said Ananthapadmanabhan, MD, NAC Jewellers, a 43-year-old jewellery chain with nine stores in Chennai, but is thankful that the wedding season has brought in a business of 20-25 percent.

“Usually, the big ticket buyers purchase their jewellery months in advance. It is the middle and lower middle classes who make their purchases closer to the wedding dates,” he said, adding that the latter's purchases have been negligible so far. The footfalls to the store has begun to pick up to almost 20-25 percent because of small ticket purchases. After mid-December, non resident Indians arrive in the country to attend weddings or to buy jewellery, said Ananthapadmanabhan. He was worried wondering how their shopping behaviour would turn out to be under the prevailing circumstances post-demonetisation in the country.

Those jewellers dealing in small tickets like the south-based Muthoot Jewellers are seeing increased footfalls since the past week. The company deals in low-ticket purchases averaging 4 grams. “I don’t stock product and customers have to make bookings,” said Keyur Shah, CEO, Muthoot Pappachan Group, precious metals business. It has 3,500 stores across India.

Shah said that business was picking up and he was hopeful that it would be normalized by January 2017.

In the East in Calcutta too, limited shopping and footfalls have watered down the otherwise bright time of wedding season buys. P C Jewellers said the demand for wedding jewellery has fallen upto 60 percent due to demonetisation. The company expects the pent-up demand to drive revenue growth in the coming months.

Sangani said he expected this dismal phase in the gold jewellery business to continue until February.

In the south, in Tamil Nadu, Pongal is a big festival when jewellers are expecting sales to pick up. For rest of India, post makar sankranti (14 January), there is renewed interest. Until last year at least. However, the trader is not optimistic that trend will be evident in January 2017. “The only hope is Akshay Trithiya in April-May as of now,” said Sanghani.

Meanwhile, All India Gems and Jewellery Trade Federation (GJF), said the sales of jewellery have started to pick up slowly and there has been increase in cashless / credit and debit card / RTGS / NEFT / IMPS / cheques and pay order transactions over the last few weeks. Sreedhar of GJF  has urged the government to provide special consideration on cashless purchase of jewellery. "We urge the government to remove existing restrictive measures on cashless jewellery buying," he said.

Updated Date:

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