Jewellery retailers continue to face uncertainty over the impending GST rates even as demand is expected revive from the seven-year low of 522 tonnes recorded last year.
The demand last year was impacted by several one-off events such as nationwide jewellers’ strikes and severe liquidity crunch due to demonetisation. However, the underlying jewellery demand still remains robust, given India’s strong macro-demographics and the consumer’s affinity towards gold, said an India Ratings report.
Over the past two years, the Centre has implemented measures to curb illicit trade practices in the jewellery industry, which is likely to benefit organised jewellers at the cost of unorganised ones, said the report. Demonetisation is likely to have a limited impact on the organised retailers this fiscal, it added.
Favourable market dynamics and government regulations are likely to improve organised retailers’ revenue growth to double digits next fiscal, said the rating agency, maintaining a stable outlook on organised jewellers.
On the other hand, cut and polished (C&P) diamond exporters’ balance sheets are likely to remain stretched next fiscal with demand hit by various government measures.
Though C&P diamond exports have rebounded, Ind-Ra believes midstream players continue to face headwinds for diamond jewellery demand owing to the political and economic environment in key export markets. Additionally, they continue to operate on thin margins and carry inventory and price risk, it said.
Ind-Ra expects rough diamond prices to remain stable in 2017, unless C&P decline sharply due to muted demand and rough producers are forced to lower rough prices again.