New Delhi

TheIndian organised gold jewellery retail sector, comprising jewellery, coins and bars, is poised to achieve a robust revenue growth of 20-25 per cent year-on-year this fiscal (FY27), driven by higher realisations, despite the expected decline in volume due to high prices of gold and recent policy measures to curb imports of the metal, a new report showed on Friday.

High prices of gold will lead to increased inventory holding costs and higher bank borrowings. However, an increase in both revenues and cash accruals will offset higher reliance on debt, resulting in stable credit profiles, according to a Crisil report.

However, the organised gold jewellery retail sector is expected to see sales volume decline a further 13-15 per cent on-year this fiscal, after an 8 per cent contraction last fiscal, due to high prices of gold and recent policy measures to curb imports of the metal.

In fiscal 2026, India imported 720 tonnes of gold, leading to foreign currency outflow of $72 billion. Amid sustained high gold prices and as a measure to reduce the trade deficit and support the currency, the central government recently raised customs duty on gold.

This aims to reduce demand for the precious metal and curb its imports. Consequently, the sector is expected to see its sales volume hit the lowest level in a decade, excluding the Covid-impacted fiscal 2021, said the report.

“The central government’s decision to more than double the customs duty on gold to 15 per cent from 6 per cent will be a significant deterrent to demand for gold jewellery. While we see a notable shift towards gold bars and coins driven by investment demand, but that is unlikely to fully offset the decline in overall demand,” said Himank Sharma, Director, Crisil Ratings.

As a result, volume of the gold jewellery retail sector will decline 13-15 per cent on year to 620-640 tonnes this fiscal, a level not seen in the past decade, he mentioned. Although the uptick in realisations will yield inventory gains for retailers, some of these gains may be passed on to customers in the form of deeper discounts to incentivize volume sales.

Additionally, increased promotional expenses and the trading of gold bars and coins will weigh on retailers’ gross margins, said the report. Steep fluctuations in gold prices, further changes in regulations and import duty on gold, potential government restrictions on gold purchases, and changes in consumer sentiment will bear watching, it added.