An increase in income levels, coupled with steady interest from the younger generation, is likely to fuel India’s gold jewellery demand in the coming years, according to the World Gold Council (WGC).
In its report, “India’s gold market: evolution and innovation,” WGC said the rise of India’s middle-class consumers will play a vital role in the growth of the country’s gold jewellery industry.
“India is one of the world’s largest gold jewellery consumers, outstripping the combined jewellery demand of the Middle East, Europe and the US. Demand typically peaks in October and November, when the marriage season, harvest and Diwali overlap,” remarked WGC. “India’s diversity is reflected in its jewellery consumption, with rural India accounting for around 60 percent of jewellery demand. The outlook for jewellery demand is good. Consumer research indicates latent demand and a healthy interest from the younger generation of Indian consumers.”
In 2015, India bought 663 tonnes of gold jewellery, second to China, and ahead of the US, Europe and the Middle East combined, WGC said. Over recent years, India has consistently been one of the world’s largest gold jewellery consuming countries.
“Beyond its sheer size, India’s jewellery market is incredibly diverse: Heavy, chunky 22-karat gold chains are common in Kerala while lighter, bejewelled pieces are popular in Rajasthan. As well as the diversity in taste, appetite for purchasing gold jewellery also varies, with southern regions accounting for around 40 percent of all of India’s demand,” noted the council.
Around 50 percent to 55 percent of jewellery purchases in India are in the bridal category, followed by daily wear (35 percent to 40 percent) and fashion jewellery (5 percent to 10 percent). When measured by number of sales, bangles and chains are the most popular items, but when measured in gold content, necklaces are most important, remarked WGC.
WGC acknowledged uncertainties such as changing demographics, adding that younger generations of consumers may be tempted by other products. This risk, however, should not be exaggerated.
“It is only at the margin that other, competing products may tempt a prospective jewellery customer. Gold ownership continues to be deeply entrenched in Indian customs and traditions: After all, a third of people under the age of 33 would buy 22-karat gold jewellery if they were given Rs50,000 (around US$740),” it added.
When considering the consumer, there is room for the market to grow, led by underlying demand in urban India. Citing a consumer research, in which more than 2,000 Indian jewellery consumers were asked about their attitudes towards gold jewellery, WGC said gold jewellery’s “share of mind” – what luxury and fashion items they would consumers choose to buy in the absence of any barriers – and compared it to what was actually bought in the previous 12 months.
The research revealed that there is strong untapped demand in urban India, which jewellery firms should focus on converting into sales.
“And at a macro level, there are powerful forces that should support and boost demand. As a lower-middle income country, India is on a steady trajectory of income growth. Per capita GDP is expected to increase by around 35 percent by 2020, while India’s middle class is set to swell to over 500 million by 2025,” added WGC. “Millions are being drawn out of poverty. Rising income levels will support gold demand. The middle class is the most significant gold consumer and India’s middle class is set to become the world’s largest by 2030.”