Gold Import Duty Hike Threatens Decade-Low Volumes for Jewellery Retailers in FY27, Warns Crisil
The organised gold jewellery retail sector in India is facing a severe downturn. According to a new report from credit rating agency Crisil, volumes are expected to drop by 13 to 15 percent in the financial year 2027. This would push sales to a decade-low level. The main reason is the government’s recent decision to raise the import duty on gold to 15 percent.
Gold prices have already been climbing globally. The import duty hike adds another layer of cost. For jewellers, this means higher prices for raw gold. For customers, it means paying much more for the same piece of jewellery. Many buyers are now stepping back from making purchases. They are waiting for prices to stabilise or come down.
Why the Import Duty Hike Hurts So Much
India does not produce enough gold to meet its own demand. Almost all gold used in the country is imported. When the government raises the import duty, the cost of every gram of gold goes up. This cost is passed directly to consumers. The duty was raised from 10 percent to 15 percent in the last budget. That is a 50 percent increase in the tax on imported gold.
For a typical gold necklace that costs Rs 1 lakh, the duty hike adds thousands of rupees to the price. Many families in India buy gold during weddings and festivals. These are often planned months in advance. The sudden price jump has forced many to postpone or scale down their purchases.
Rising Prices and Weaker Affordability
Gold prices have been on an upward trend for over a year. Global factors like inflation, geopolitical tensions and central bank buying have pushed prices higher. The import duty hike has only made things worse. For the average Indian household, gold is already a big expense. With prices at record highs, many are finding it hard to afford jewellery.
Crisil notes that weaker affordability is a key factor behind the expected volume decline. When incomes do not rise as fast as gold prices, people buy less. This is especially true for middle-class buyers. They are the main customers for organised jewellery retailers. If they cut back, the impact on sales is immediate.
Shift Toward Coins and Bars
Another trend is hurting jewellery retailers. Many buyers are now choosing gold coins and bars instead of jewellery. Coins and bars have lower making charges. They are also easier to sell later. For investors, gold is a safe asset. But for jewellers, selling coins and bars is less profitable than selling jewellery.
This shift is happening because people are more price-sensitive now. They want to own gold, but they want to pay less for it. By buying coins or bars, they avoid the high making charges that come with jewellery. This reduces the revenue for jewellery retailers even further.
What This Means for Jewellery Retailers
The organised jewellery retail sector had been recovering after the pandemic. Many players had expanded their stores and invested in marketing. Now, they face a sharp drop in demand. Crisil warns that the volume decline to a decade low will put pressure on their revenues and profits.
Smaller retailers may struggle more than large chains. Big players have stronger brands and more loyal customers. They can also offer discounts or schemes to attract buyers. But even they will find it hard to offset a 13 to 15 percent drop in volumes.
Some jewellers are trying to adapt. They are offering more lightweight and affordable designs. They are also promoting gold exchange programs where customers can trade old jewellery for new. But these measures may not be enough to reverse the trend.
Outlook for the Next Financial Year
The current financial year, FY26, is also expected to be weak. But the worst impact will be felt in FY27. That is when the full effect of the duty hike will show in sales data. If gold prices remain high and the duty stays at 15 percent, the sector could face a prolonged slowdown.
For investors, this is a warning sign. Companies that rely heavily on gold jewellery sales may see their earnings fall. Those with diversified businesses, like silver or diamond jewellery, may fare better. But overall, the outlook for the organised gold jewellery retail sector is grim.
Crisil’s report makes it clear: the import duty hike is not just a temporary shock. It is reshaping consumer behaviour and market dynamics. For the next two years at least, jewellery retailers will have to navigate a tough environment. Lower volumes, weaker margins and changing buyer preferences will test their resilience.
