Kolkata, May 7 : Higher gold prices and tightened credit availability are expected to weaken growth in jewellery demand by 2-4 per cent during 2018, a credit rating agency said on Monday.
"The agency expects the jewellery demand growth to weaken by 2-4 per cent for CY2018 (Calendar year 2018), owing to higher gold prices and subdued financing environment.
The industry continues to remain susceptible to the regulatory risks, which has affected both demand and supply," ICRA said.
However, over the medium to long term, it expects the gold jewellery retail industry to record a 6-7 per cent volume growth, supported by stable rural and wedding demand, cultural affinity for gold, rising disposable income and favourable demographic profile.
"Gold prices have increased steadily in the last three months, which coupled with lesser number of auspicious days impacted jewellery demand.
Also, financing to the gems and jewellery sector has been under increased scrutiny in the recent months following reporting of fraud by few lenders on their exposures to the sector," its Vice President K.
Srikumar said.
According to him, lenders are more cautious on the sector with increasing due diligence and checks on credit and inventory quality.
"We expect the tightened credit availability to affect the working capital position of jewellery retailers, especially the unorganized ones," he said.
In contrast, gold jewellery demand for CY2017 grew by 12 per cent in volumes and 9 per cent in values amid headwinds in the form of higher tax rates post GST, inclusion of jewellery sector under the ambit of Prevention of Money Laundering Act albeit for a brief period and continued preference for other asset classes due to better returns.
The agency also said it expects the industry revenues to grow by 8-9 per cent in FY2019 supported by stable wedding and festive demand.
The growth is seen declining compared to FY2018 with elevated gold prices and supply side concerns amid cautious lending environment.
"Over the medium to long term, the industry revenues are likely to settle at 7-8 per cent growth led by socio-economic and cultural factors that are unique to the Indian market," it added.
--IANS
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Source: IANS
