India is one of the largest markets for gold, Demand for gold in India is interwoven with culture, a tradition considered a store of value, a symbol of wealth and status and a fundamental part of many rituals and the desire for beauty and the desire for financial protection.
Let’s analyse the drivers of gold supply and demand in India and assess the genuine economic contribution that gold makes to the Indian economy.
India’s gold industry is the world’s biggest market for the metal, contributing 29% to global jewellery consumption.
The market size of the sector is about $75 billion as of 2018 and is estimated at US$ 100 billion by 2025.
The sector is home to more than 300,000 gems and jewellery players, contributes about 7% to India’s.
Recently, India raised the import duties on gold and other precious metals on Friday in a surprise move that industry officials say could dampen retail demand and boost smuggling in the world’s second-biggest bullion consumer.
India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country.
In the coming years, growth in Gems and Jewellery sector would be largely contributed by the development of large retailers/brands.
Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2 per cent of the fine jewellery segment by 2021-22.
India’s demand for gold jewellery hit a four-year high in Q1CY19 at 125.4 tonnes. In the first quarter, 36% of India’s gold import in current fiscal from the last year to US$ 11.45 billion.
Gold demand in India rose 11% year-on-year to 760.40 tonnes during January-December 2018. Also, the Government of India has permitted 100% Foreign Direct Investment in the sector under the automatic route.
The US$ 35.77 billion household jewellery industry is probably going to get a major lift through the government’s decision for FDI in retail.
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