Mumbai: India Ratings and Research (Ind-Ra) said Monday it expects jewellery sales to decline by 25 per cent in 2020-21 (April-March) on account of over 40 days of lockdown following COVID-19 pandemic and overall reduction in disposable income.
Jewellery demand, which is primarily driven by marriage season and a couple of festivals in the first quarter, has been significantly washed out due to the ongoing nationwide lockdown, Ind-Ra said in a report.
The demand for retail jewellery will remain muted in 1HFY21 (April-September), however, a sharp recovery is expected in the third quarter of FY21 (October-December) due to the festive and wedding season.
Gold jewellery demand had already slowed down in FY20 in terms of tonnage and revenue due to the economic slowdown and increased gold prices, the body said.
The possibility of a recovery of demand in FY21 has been derailed by the COVID-19 led lockdown and the subsequent continued economic slowdown in the country, it added.
Ind-Ra already has revised its FY21 GDP growth twice since January 2020 to 1.9 per cent. A further downward revision is possible if the pandemic continues to evolve, it said.
This can have a prolonged negative impact on gold demand because of the possibility of a further reduction in the overall discretionary spend. As a result, Ind-Ra said, there is likely to be an overall 25 per cent year-on-year decline in retail jewellery revenues in this financial year.
However, business from rural areas and weddings may remain resilient, Ind-Ra said, adding that from the fourth quarter of FY21 (January-March), sales are likely to improve due to the base effect and expected normalisation in economic activities. However, any further lockdown and prolonged impact of COVID-19 will lead to a further downward revision of estimates, it added.
The volatility in gold prices is also expected to hurt consumer sentiments, the report said.
In FY20, gold prices soared amid the worsening US-China trade war and interest rate cuts by various central banks worldwide.
In FY21 till date, gold prices have remained high, amid the COVID-19 outbreak and its adverse impact on economic activity and global markets, it said.
PTI