India’s organised gold jewellery retail sector is likely to witness its weakest sales volume in a decade this fiscal, excluding the pandemic-hit year of FY21, as record-high gold prices and a sharp increase in customs duty weigh heavily on consumer demand, according to a report by Crisil Ratings.

The sector, which includes jewellery, gold bars and coins, is expected to see sales volume decline 13-15% year-on-year in FY27 after an 8% contraction in the previous fiscal. Total sales volume is projected to fall to 620-640 tonnes, the report said.

However, despite shrinking volumes, organised retailers are expected to post robust revenue growth of 20-25% this fiscal because of elevated gold prices and higher realisations.

Domestic gold prices surged nearly 55% last fiscal amid geopolitical tensions, rising global bullion prices and a weakening rupee against the US dollar. Gold prices are currently hovering around ₹1.6 lakh per 10 grams for 24-carat gold.

“In fiscal 2026, India imported around 720 tonnes of gold leading to foreign currency outflow of nearly $72 billion,” the report noted, adding that the Centre’s recent decision to raise customs duty on gold was aimed at curbing imports and narrowing the trade deficit.

Himank Sharma, Director, Crisil Ratings, said, “The central government's decision to more than double the customs duty on gold to 15% from 6% will be a significant deterrent to demand for gold jewellery.”

“While we see a notable shift towards gold bars and coins driven by investment demand, that is unlikely to fully offset the decline in overall demand,” Sharma added.

The report said consumers are increasingly shifting towards lightweight and lower-carat jewellery in the 16-22 carat range as affordability weakens. Demand for studded jewellery has also risen. At the same time, investment demand has accelerated over the past two fiscals, with sales of gold bars and coins rising more than 50%, while jewellery sales declined around 25%.

Higher prices to support earnings

The report said elevated prices are expected to improve retailers’ revenues and cash accruals even as demand weakens. Realisations are likely to remain 35-40% higher year-on-year this fiscal.

Although retailers may offer deeper discounts and incur higher promotional expenses to stimulate sales, overall profitability is expected to improve. Absolute earnings before interest, taxes, depreciation and amortisation (Ebitda) are projected to rise around 20% this fiscal.

The gains, however, will partly be offset by rising inventory costs as retailers hold larger inventories at elevated prices. Inventory days are expected to increase to 160-180 days this fiscal from around 150 days last year.

Debt to rise, but credit profiles seen stable

The report said organised jewellers are continuing expansion through franchise-led models, especially in Tier-II and Tier-III cities, to improve capital efficiency and broaden market reach.

Gaurav Arora, Associate Director, Crisil Ratings, said, “Organised retailers are expanding cautiously through franchise-led models, which is improving capital efficiency and widening their reach into Tier 2 and 3 cities.”

“While overall debt will increase by a third this fiscal to maintain higher inventory levels for new and existing stores, credit profiles will remain stable supported by improved revenues from higher realisations, and healthy cash accruals,” he added.

According to the report, the total outside liabilities-to-adjusted net worth ratio of organised retailers is expected to rise to around 1.5 times by March 2027 from 1.2 times a year earlier. However, debt protection metrics are expected to remain comfortable, with median interest coverage estimated at 5-6 times this fiscal compared with around 7 times last year.

Crisil said volatility in gold prices, further changes in import duties or regulations, potential restrictions on gold purchases and shifts in consumer sentiment will remain key monitorables for the sector.