India’s jewellery sales are set to plunge to the lowest in a quarter of a century as a lockdown to combat the rapidly spreading coronavirus brings the industry to a standstill.
Demand in the world’s second-biggest gold consumer has already tumbled, slammed by record high domestic prices and as the economy heads for the slowest pace of growth in 11 years. That pain is set to deepen as the virus spooks buyers and jewellery stores shutter their stores after Prime Minister Narendra Modi and state leaders imposed an almost-complete lockdown across much of the country.
Purchases are estimated to plummet 30% in 2020 from the 690 tons last year, N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council, said in a phone interview from Chennai. That would make it the smallest annual purchase since the 477 tons bought in 1995, according to data compiled by Bloomberg based on World Gold Council reports.
“2019 itself was a very bad year after July and this year we have already lost this month,” as a majority of stores across of the country will be closed for most of this week at least until further advisories from the government, he said, adding that 11 of his own stores in the southern Indian state of Tamil Nadu will be shut till March 26. “April is going to be the same, with May-June also expected to be weak,” for demand, he said.
Concerns about the virus have seen the local gem and jewellery sector come to a halt with virtually no footfall in stores and many jewelers shutting shops located in malls and shopping complexes. Titan Co., the nation’s biggest jeweler by market value, has shut stores and manufacturing units until March 29, and will review the situation at the end of the period, it said.
Mumbai’s Zaveri Bazaar, the largest bullion market in the country, will also be closed until further notice and that could cut demand by as much as 40% in the coming weeks, according to Prithviraj Kothari, president of the India Bullion and Jewellers Association Ltd.
The trade body along with the Gem & Jewellery Export Promotion Council are exploring ways to help the thousands of small workers employed in the industry who earn daily or weekly wages as many of them would lose jobs if the current situation is prolonged, Padmanaban said. The industry is seeking an extension for repayment of loans and a reduction in the import tax on gold to 4% from the current 12.5% to help jewelers, the trade group said.
“This is something that none of us in our generation have experienced and none of us know when this is going to end,” Chirag Sheth, a consultant at the London-based Metals Focus Ltd., said by phone from Mumbai. Demand in the next two quarters will remain muted, he said. “So essentially the savior for demand will be the fourth quarter — and how much is that quarter going to save?”
India’s stock indexes posted their worst losses on record Monday, as the world’s second-most populous nation went into a lockdown after the number of coronavirus cases in the country surpassed 400.
“A lot of people will be scarred, a lot of people will be scared,” Sheth said. “Look at the wealth destruction that has happened in the stock market and everybody is badly bruised. So will I buy gold? No.”