Gold jewellery demand is expected to reach a 10-year low in FY27, with retail volumes projected to decline 13-15% this FY to 620-640 tonnes, according to ratings agency Crisil. This represents a significant shift from the 8% decline in FY26 and marks the lowest level since the Covid-impacted 2021 period. The data is based on analysis of 70 gold jewellery retailers that account for one-third of the organised sector's revenues. As per Crisil Director Himank Sharma, the move would act as a major deterrent for gold jewellery demand, with the recent customs duty increase expected to dampen demand across all segments. The decline is attributed to high prices and import duty hike, as reported by Crisil, with consumers now spending less on new pieces and focusing only on essential purchases.
The projected decline is primarily attributed to steep prices and import duty hike, as reported by Crisil. Earlier this month, the government raised import duty on gold to 15% from 6% to curb non-essential purchases and arrest foreign exchange outflows. This duty increase directly translates into higher retail prices as most of India's local gold consumption is met through imports. India imported nearly 720 tonnes of gold in FY26, resulting in a foreign exchange outflow of around $72 billion. The recent hike is expected to weaken demand across all segments, with persistently high gold prices along with the customs duty increase creating additional pressure on the industry. Jewellers expect the duty hike to dampen near-term demand, keeping entry level consumers away from the market for some time.
Despite the expected volume decline, the sector is poised to achieve robust revenue growth of 20-25% year-on-year, driven by higher realisations according to Crisil analysts. With gold prices currently hovering around ₹1.6 lakh per 10 grams for 24-carat gold, realisations are expected to remain 35-40% higher year-on-year this fiscal, supporting stronger cash accruals for retailers. The improvement in earnings is expected to partly offset the increase in inventory holding costs, as inventory days could rise to 160-180 days from 150 days last fiscal. Higher cash generation is also likely to support store expansion plans, with organised retailers continuing to expand cautiously through franchise-led models. At the current price levels, realisation is the average revenue made per unit and consumers are now paying more for the amount of gold they are buying.
While higher gold prices are expected to result in inventory gains for retailers, part of these gains may be passed on to consumers through deeper discounts aimed at supporting volumes. Rising promotional spending and higher sales of gold bars and coins are also likely to weigh on gross margins. However, investment demand for gold has strengthened over the past two fiscal years, with jewellery sales declining by around 25% while demand for gold bars and coins has risen more than 50%. Consumers are increasingly shifting towards lightweight and lower-carat jewellery in the 16-22 carat range as affordability weakens, while demand for studded jewellery has also risen. Despite the shift in consumer behavior, the sector's absolute EBITDA is still expected to rise around 20% on-year during the fiscal.
According to Crisil Associate Director Gaurav Arora, organised retailers are expanding cautiously through franchise-led models, especially in Tier-II and Tier-III cities, to improve capital efficiency and broaden market reach. While overall debt will increase by a third this fiscal to maintain higher inventory levels for new and existing stores, credit profiles will remain stable supported by improved revenues from higher realisations and healthy cash accruals. The total outside liabilities-to-adjusted net worth ratio of organised retailers is expected to rise to around 1.5 times by March 2027 from 1.2 times a year earlier, though debt protection metrics remain comfortable with median interest coverage estimated at 5-6 times this fiscal compared with around 7 times last year. Crisil notes that volatility in gold prices, further changes in import duties or regulations, potential restrictions on gold purchases and shifts in consumer sentiment will remain key monitorables for the sector.
