Jewellers bank on bumper harvest for revival of demand

Kharif sowing is underway in the country and harvesting will begin from September end.

India is an agriculture-driven economy and consumer demand is by and large dependent on a good harvest.

"If the monsoon is good, then we can expect a rise of 30 per cent to 35 per cent in gold jewellery sales in the November-December period, which is the time for harvesting of the kharif season crop," Sohil Kothari, director of Mumbai-based Fine Jewellery, said.

A good monsoon is expected to increase farmers' disposable incomes, which they traditionally invest in gold jewellery, Kothari said.

Kharif harvest will coincide with marriage season and festivals such as Navratri, Dussera, and Diwali that fall in October, Kothari said.

"This will translate into an increase of 35 per cent to 40 per cent in gold and gold jewellery sales," said Balwant Badani, president, Rajkot Gold Dealers' Association.

The country's gold jewellery consumption has declined 30 per cent to 35 per cent quarter on quarter in April-June.

"The demand for gold and gold jewellery has gone down because of the liquidity crunch due to inflation. High price of gold is another reason for the slackness," said Prabhudas Parekh, director, All India Gem and Jewellery Trade Federation.

However, the slowdown is likely to continue in July-September as it is not a marriage season and there are no major festivals, apart from Ganesh Chaturthi in September, during the period, jewellers said.

"Ganesh Chaturthi will boost demand in Maharashtra but not in Gujarat," said Badani.

India's headline inflation rate rose to an over seven-year-high of 8.75 per cent in the week ended May 31 from 8.24 per cent a week earlier. This is the highest inflation rate, the country has witnessed since February 2001 when it touched 8.77 per cent.

Since the beginning of this year, both international and domestic gold prices have appreciated over 20 per cent.