India's love for gold stagnates; it's time to take cue from China

India’s demand for gold has remained stagnant for the last five years while investment has fallen
China is the world’s largest gold consuming nation, a title that it has been holding for the last five years. The major reasons behind China outstripping India in the demand for gold include innovations in jewellery making and design, aggressive marketing and the formalisation of trade channels.

India’s demand for gold has remained stagnant for the last five years while investment has fallen. Experts say that the jewellery industry in India is passing through a phase of consolidation and is facing challenges such as new tax measures, a liquidity crunch, among others. 

In contrast, China’s demand for gold has grown on the back of an ever-widening product range, new designs and technology innovations in manufacturing. As Chirag Sheth, Senior Research Consultant, South Asia, at Metals Focus, a precious metals consultancy, points out, “China’s jewellery demand is rising because jewellers have introduced several innovations to cater to all types and age groups of customers.”

One such innovation is the “antique crafted gold” (ACG) range of products which are made in an antique design and finished using a process that gives the jewellery a deep matt gold colour. The styles are based on traditional imperial and Buddhist themes and boast of superior craftsmanship. This type of jewellery is a hit with customers in the 35 -50 year age group. 

Most of the jewellery in China are made with 24-carat gold, as opposed to India, where they are mostly of 22 carat purity. A premium 24-carat product in China is “mirror gold”, which has a smooth, mirror-like surface and find favour with younger customers. 

China also does a 3D-printed “hard gold”, a fast-moving segment, where the jewellery looks big on the outside, but is hollow on the inside. These pieces have 33-50 per cent of gold content compared to traditional pieces and are  cheaper as well.

Unlike China, the Indian market for fine gold, also called four nines gold (999.9 purity) or 24-carat gold, is very small. You do get some gold coins of four nines purity, but they don’t have a good resale value. In some smaller towns, where customers have an appetite for higher purity jewellery, five nines gold (999.99 purity) has been promoted aggressively. However, on the whole, jewellery made with fine gold does not have too many takers in India. In China, on the other hand, the market for jewellery crafted from four nines gold is growing by leaps and bounds. 

Experts say that the main reason the demand for jewellery gold has remained sluggish in India is that the industry has had to deal with several compliance measures such as PAN, the introduction of the Goods and Services Tax and the reduction in cash transactions. Earlier, the restriction on gold imports had also hurt the growth. The industry expects that mandatory hallmarking will become the norm later this year, which will force jewellers to focus more on quality than on increasing sales.

Surendra Mehta, National Secretary, Indian Bullion Jewellers Association, said, “The biggest challenge before the Indian jewellery industry today is older buyers running away from ‘ghar ka sunar’ (family jeweller) and young buyers more interested in spending money on phones and iPads rather than on gold.”

Mehta felt that young buyers can be attracted with innovative gold products, while older customers, the traditional buyers of gold, could be tempted with gold idols and articles, apart from usual gold coins and jewellery. In China, there is a substantial market for products like idols, figurines and photo frames made with gold.

Advantage China
  • Fast growth of 24-carat jewellery
  • Innovations in products and styles
  • Antique-crafted gold range of products
  • ‘Mirror gold’, featuring a smooth mirror-like surface
  • 3D-printed 'hard gold' that is cheaper than traditional pieces

 

Challenges before Indian jewellers
  • Most people with surplus cash  prefer gold bars over jewellery
  • There’s a wide preference for gold-plated jewellery
  • Compliance measures like PAN and GST a deterrent
  • Govt's thrust on less-cash economy also a dampener
  • Mandatory hallmarking to kick in soon



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