 "Jewellers' margins to shrink in FY16, says ICRA")
Jewellery volumes for the first quarter of 2016 (calendar year) might decline by 40-50 tonnes, says a report by ICRA, though the overall volumes for the year would be better than the previous year. According to the report, jewellers’ operating margins might shrink 40 basis points during 2015-16.
ICRA says that that jewellery demand in value terms has fallen in recent years owing to declining prices and weak economic sentiments. However, in line with the recovery seen in the second half of 2016, the sector is likely to record five or six per cent value growth on the back of some uptick in rural demand and continued thrust on expansion by organised players.
In Budget 2016-17, the central government had levied a one per cent excise duty on jewellery manufacturing (excluding silver jewellery other than studded with diamonds and some other precious stones) with immediate effect. The proposal to re-introduce excise duty on gold and studded jewellery for jewellers with sales above Rs 12 crore during 2014-15 created a nation-wide stir following concerns on operational hurdles.
It may be noted that the government had proposed a similar one per cent excise duty on jewellery in the February 2012 Budget as well, which resulted in similar demonstrations by jewellers culminating in a 21-day strike. The duty was subsequently repealed in the finance Bill that year.
While jewellers are likely to pass on the additional cost of one per cent duty to consumers, it might not have a major impact on demand as prices have remained lower than past highs. Also, jewellers have adjusted to a sharper increase in duty (customs duty raised from four per cent to 10 per cent).
For the current calender year , ICRA estimates the industry to record a growth of five-six per cent in value, supported by one per cent growth in volumes and four-five per cent growth in gold prices, driven by some uptick in rural demand and continued thrust on expansion by organised players.
ICRA says that that jewellery demand in value terms has fallen in recent years owing to declining prices and weak economic sentiments. However, in line with the recovery seen in the second half of 2016, the sector is likely to record five or six per cent value growth on the back of some uptick in rural demand and continued thrust on expansion by organised players.
In Budget 2016-17, the central government had levied a one per cent excise duty on jewellery manufacturing (excluding silver jewellery other than studded with diamonds and some other precious stones) with immediate effect. The proposal to re-introduce excise duty on gold and studded jewellery for jewellers with sales above Rs 12 crore during 2014-15 created a nation-wide stir following concerns on operational hurdles.
It may be noted that the government had proposed a similar one per cent excise duty on jewellery in the February 2012 Budget as well, which resulted in similar demonstrations by jewellers culminating in a 21-day strike. The duty was subsequently repealed in the finance Bill that year.
While jewellers are likely to pass on the additional cost of one per cent duty to consumers, it might not have a major impact on demand as prices have remained lower than past highs. Also, jewellers have adjusted to a sharper increase in duty (customs duty raised from four per cent to 10 per cent).
For the current calender year , ICRA estimates the industry to record a growth of five-six per cent in value, supported by one per cent growth in volumes and four-five per cent growth in gold prices, driven by some uptick in rural demand and continued thrust on expansion by organised players.