Demand for gold jewellery in India has remained subdued in the current fiscal, but the trend is likely to change, and growth rates of 6-7% are expected in the medium to long-term, ratings agency ICRA, which is affiliated to Moody’s has said in a recent report.

The report noted that compared to last year’s growth of 9%, the current fiscal has seen demand affected by multiple factors. The traditional festive season between September and December has seen a slowdown, with demand being sluggish during the peak festival period on account of higher gold prices and the impact of floods in Kerala, a large consumer of gold, ICRA said.

According to the study, “Gold jewellery demand in India varies across rural and urban markets, right from the type of jewellery bought, timing of purchases." It added medium to long term demand growth will be supported by the “cultural underpinnings, evolving lifestyle, growing disposable income, favourable demographic dividend and the growing penetration of organised sector”.

ICRA said that India is a price-sensitive market, and higher gold prices, as witnessed this year, result in deferment of purchases by consumers. It also noted that the industry has faced increased scrutiny following cases of alleged bank fraud, and said that tightened credit has affected the store expansion plans and working capital position of industry players, especially the unorganised ones.

The report also noted a marked shift from unorganised to organised trade post currency demonetisation and implementation of Goods and Service tax (GST) and projected that such regulatory measures are expected to continue to accelerate the formalisation of the sector, and the market shares of organised players.