In a major blow to Indian diamond jewellery manufacturers and retailers, demand for domestic jewellery is likely to decline 50 per cent in the next five months due to a short buying season this year.
Unlike in past years, when the wedding season stretched from March to early June, it is expected to be concluded in a fortnight this year. A fourth of annual jewellery sales takes place during this season. Also, there is hardly any big festival in the next four months.
Hence, there’s a dry summer ahead for jewellery makers. “Jewellery retailers have been witnessing a 25-40 per cent decline in sales since October 2011, it is set to worsen in the coming months. There is a severe stress on jewellery sales this season, which may slump further in the next four-five months,” said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation (GJF), representing traders, manufacturers and retailers of the Rs 325,000-crore industry.
The Indian diamond processing industry has been struggling to get a boost since the Lehman Brothers debacle in September 2008. Overall sales plunged 25-30 per cent by March 2009, on poor offtake from foreign markets. Since the global economy continues to remain in slowdown, a recovery in sales is still awaited. Around 90 per cent of the world’s rough diamond output is processed in India.
“The sluggishness in domestic sales is unlikely to recover before July, when orders start flowing from overseas markets for preparing jewellery for the next Christmas season in the West. Much would depend on the jewellery show in Las Vegas, scheduled in early June,” said Praveen Shankar Pandya, chairman of Diamond India Ltd.
Jewellery sales, generally, decline after each year’s wedding season. Still, the decline would be extraordinary this year, due to falling disposable incomes among the middle class due to rising inflation, said Bamalwa.
India’s diamond jewellery industry is led by unbranded players, which contribute 94 per cent of domestic sales. The next four-five months are a lean period for India, when activity in the processing industry is reduced to need–based ones. Preparations for Diwali season sales begin in July-August, which may be a turnaround time, said Sanjay Kothari, vice–chairman of the Gems & Jewellery Export Promotion Council. Still, there have been exceptions. Emerging consumers’ shift to branded jewellery has helped Gitanjali Gems, a major name, to clock higher volumes even in the lean season. With discount offers of 20 per cent, it has seen up to 40 per cent growth in sales in recent months and expects the trend to continue. “Consumers want guarantees, which branded jewellery makers can offer,” said Mehul Choksi, managing director, Gitanjali gems.