The World Gold Council shared an interesting research report on the Indian Gold Market. Sharing insights on Jewellery demand and trade. Here are some of the key highlights:
India is the second largest jewellery market
- The gold market forms a deeply intrinsic part of India. For the population of 1.4bn, gold, and specifically gold jewellery, plays a central role, acting both as an adornment and a form of investment. It is therefore not surprising that for decades India was the largest consumer of gold before being overtaken by China in 2009. In 2021 India bought 611t of gold jewellery, second only to China (673t) but comfortably ahead of all other gold-consuming markets
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Much of the Indian gold market is very traditional, reflecting important cultural and religious ties. This can be seen in the long-standing preference for 22-carat jewellery and the dominance of bridal jewellery. But the gold market is evolving, with changing tastes and designs driven by economic growth, globalization and changing consumer preferences. In recent years, for example, demand has grown for lightweight and studded jewellery.
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Other markets often reflect on the long-established nature of India’s gold jewellery markets – both in scale and importance. The reasons behind gold’s history and longevity lies in how these metals are inextricably linked to Indian customs and religion.
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The combination of the wedding season, harvests and festivals means that demand tends to be concentrated in two periods: April to June, and September to January
Weddings, religious festivals and agriculture drive gold demand in India
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Gold is deeply embedded in Indian culture and purchases are often driven by tradition.
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Bridal jewellery dominates the gold jewellery landscape, enjoying 50-55% of market share; weddings, together with festivals, constitute the two major gold purchase occasions in India. In the absence of official records, the country is estimated to have around 11-13 million weddings per year. With women marrying at an average age of 22 and with more than half of the country’s 600 million population below the age of 25, demand for bridal jewellery looks set to remain strong over the long term. The importance of this type of jewellery in India stems largely from the fact that the gold gifted to a woman for her wedding is solely her property and is therefore an important form of financial security.
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During the festivals of Diwali and Akshaya Tritiya it is considered extremely auspicious to buy gold. Dhanteras (the first day of Diwali) usually falls during October or November, and Akshaya Tritiya between late April and early May.
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On average around 40-60t of gold is sold in India during these two auspicious festivals alone. And with prominent overseas Indian populations, the Middle East and East Asia also see significant gold buying at these times.
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Finally, agriculture makes up an important part of Indian gold demand. Even though the sector now accounts for less than 19% of the Indian economy, a large swathe of rural India is still dependent on agriculture and related industries. Put another way, while there has been rapid urbanization across much of the country, 65% of the population still lives in rural India, highlighting the importance of agriculture as a key driver of gold demand. Gold demand in rural communities usually picks up after the harvest season. Harvesting of Kharif crops runs from September until November and about 70% of Indian agricultural production takes place during the Kharif season.
Some numbers and other Key points
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Gold Jewellery exports grew by 84.56% to US$ 9.13 billion in FY 2021-22 as compared to 2020-21 as per Gem and Jewellery Export Promotion Council
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India’s gold jewellery exports have grown over the years, rising from US$7.6bn in 2015 to US$12.4bn in 2019, before the pandemic impacted the trade in 2020.
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Plain gold jewellery maintains 80-85% of market share, the majority of which is 22-carat although the market for 18-carat jewellery is growing.
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The country exhibits distinct regional preferences. Studded jewellery – known as Polki, Kundan or Jadau – has an estimated market share of 15-20% overall, although in Northern India this share is considerably higher. In the South, consumers are more inclined towards plain gold products, 60-70% of which are studded with diamonds and the remaining 30-40% set with precious or semi-precious stones.
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India remains one of the world’s largest exporters of gold jewellery. In recent years, the US has surpassed the UAE as the largest export destination for Indian gold jewellery. This reflects two developments. First, the imposition of extra tariffs on Chinese jewellery exports to the US, which has made Indian exporters more competitive and, second, the implementation in the UAE of a 5% import duty in January 2017 and 5% Value Added Tax (VAT) in January 2018, both of which negatively impacted competitiveness.
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Looking ahead, there is a greater need for Indian gold jewellery exporters to develop new markets; currently, nearly 90% of exports go to just five countries (UAE, US, Hong Kong, Singapore and UK )