Credit Source
Revenue growth in the gems and jewellery industry is expected to slow down this fiscal year, with export demand falling for the second consecutive year due to a slowdown in key markets even as domestic demand remains positive.
Small and medium enterprises (SMEs), which contribute almost 70 per cent of the industry revenue, had logged robust growth in revenue and profit in fiscal year 2022 due to the release of pent-up demand and resumption of large-scale weddings and festivities after two pandemic-hit years.
In fiscal year 2023, while financial information of SMEs is yet to flow in, we estimate the revenue of domestic players to have slowed down following an increase in gold prices and that of exporters to have fallen due to a drop in demand for cut and polished diamonds.
In fiscal year 2024, exports of cut and polished diamonds, which constitute over 60 per cent of India’s gems and jewellery exports, are set to fall for the second consecutive year after declining 10 per cent in dollar terms in fiscal year 2023 and by almost a third during the first two months of the current fiscal year.
Recessionary pressures in the US, which is the largest market for cut and polished diamonds, are likely to impact demand and, in turn, revenue and profitability.
SMEs in this industry are more susceptible to fluctuations in end-user demand and are expected to be impacted severely.
Meanwhile, international gold prices are likely to rise further in fiscal year 2024 as global macroeconomic headwinds increase the safe-haven appeal of gold. Moreover, expectations of the US Federal Reserve pausing rate hikes contribute to the attractiveness of investing in gold.
While the inverse relationship between interest rates and gold prices is likely to support the realisations of jewellery manufacturers, a sharper-than-expected rise in gold prices may have a bearing on domestic demand, which usually peaks during the festive-cum-harvest December quarter.
Cluster-wise performance in the industry is likely to vary depending on segmental expertise and exposure to the export market. With global diamond demand remaining subdued, the Surat cluster, which is the diamond processing hub of India, is expected to clock a 13-18 per cent contraction in revenue. In comparison, the Domjur, Coimbatore, and Thrissur clusters, which specialise in gold jewellery and primarily supply to the domestic market, are likely to outperform export-oriented clusters.
Small and medium enterprises (SMEs), which contribute almost 70 per cent of the industry revenue, had logged robust growth in revenue and profit in fiscal year 2022 due to the release of pent-up demand and resumption of large-scale weddings and festivities after two pandemic-hit years.
In fiscal year 2023, while financial information of SMEs is yet to flow in, we estimate the revenue of domestic players to have slowed down following an increase in gold prices and that of exporters to have fallen due to a drop in demand for cut and polished diamonds.
In fiscal year 2024, exports of cut and polished diamonds, which constitute over 60 per cent of India’s gems and jewellery exports, are set to fall for the second consecutive year after declining 10 per cent in dollar terms in fiscal year 2023 and by almost a third during the first two months of the current fiscal year.
Recessionary pressures in the US, which is the largest market for cut and polished diamonds, are likely to impact demand and, in turn, revenue and profitability.
SMEs in this industry are more susceptible to fluctuations in end-user demand and are expected to be impacted severely.
Meanwhile, international gold prices are likely to rise further in fiscal year 2024 as global macroeconomic headwinds increase the safe-haven appeal of gold. Moreover, expectations of the US Federal Reserve pausing rate hikes contribute to the attractiveness of investing in gold.
While the inverse relationship between interest rates and gold prices is likely to support the realisations of jewellery manufacturers, a sharper-than-expected rise in gold prices may have a bearing on domestic demand, which usually peaks during the festive-cum-harvest December quarter.
Cluster-wise performance in the industry is likely to vary depending on segmental expertise and exposure to the export market. With global diamond demand remaining subdued, the Surat cluster, which is the diamond processing hub of India, is expected to clock a 13-18 per cent contraction in revenue. In comparison, the Domjur, Coimbatore, and Thrissur clusters, which specialise in gold jewellery and primarily supply to the domestic market, are likely to outperform export-oriented clusters.
Add A Comment