‘If customers stop buying gold for a year, many small businesses may not survive’: Karnataka jewellers after PM Modi’s appeal

The pressure intensified after the Centre Wednesday increased the import duty on gold and silver from 6 per cent to 15 per cent to curb imports and protect foreign exchange reserves. The revised structure includes a 10 per cent basic customs duty and a 5 per cent Agriculture Infrastructure and Development Cess (AIDC).

Following the duty hike, domestic gold futures surged sharply, crossing Rs 1.64 lakh per 10 grams on the Multi Commodity Exchange (MCX), further increasing affordability concerns for buyers and adding pressure on retailers already facing weak demand.

A Mysuru-based jeweller said the industry was already struggling even before the Prime Minister’s remarks. “We are already under pressure because of high gold prices and reduced customer spending. If sales decline further, it will affect salaries, loan repayments, taxes and even day-to-day survival,” he said, adding that smaller jewellers would be the worst affected.

Representatives from the Gem and Jewellery Council (GJC) said concerns over foreign exchange reserves are valid, but argued that long-term solutions should focus more on mobilising idle household gold through the Gold Monetisation Scheme (GMS) rather than discouraging culturally linked consumption.

GJC chairman Rajesh Rokde said India’s economic priorities must be balanced with consumption realities, noting that large quantities of gold remain unused in households. Vice chairman Avinash Gupta said the country should gradually move towards better utilisation of existing gold stocks and more sustainable consumption patterns.

Investment gold demand likely to decline, say traders

Industry members distinguished between investment-driven gold purchases and jewellery consumption linked to weddings and festivals. According to traders, the Prime Minister’s appeal is likely aimed more at speculative buying – including gold bars, coins and digital gold investments – rather than traditional jewellery purchases that continue to hold strong cultural significance across Indian households.

Karnataka Jewellers Association president T A Sharavana said the industry supports measures intended to strengthen the economy, but added that demand for jewellery tied to traditions is unlikely to disappear entirely.

“India depends heavily on imported gold because domestic production is limited. Reducing unnecessary imports can support the economy,” he said. “But jewellery purchases connected to weddings, festivals and family occasions will continue.” He added that more consumers may now prefer to recycle or exchange old ornaments rather than purchase entirely new jewellery sets.

Traders said while investment demand from affluent buyers and bulk purchasers could soften further, culturally driven consumption linked to weddings and festive buying cycles is expected to continue, though at a moderated pace.

Employment fears grow as traders seek support measures

Traders also flagged concerns over employment, stating that nearly 25 lakh people in Karnataka depend, directly and indirectly, on the jewellery industry, including goldsmiths, showroom employees, designers, polishers, logistics workers, and daily-wage artisans.

A Bengaluru-based trader said the industry was worried about the impact of a prolonged slowdown on smaller businesses and workers across the supply chain.

“If customers stop buying even for a year, many small businesses may not survive. Operational costs, taxes, staff payments – everything continues even when sales slow down,” he said.

Industry representatives have urged the government to focus on boosting exports, improving manufacturing competitiveness, and strengthening domestic production, rather than relying primarily on curbing consumption.

Some traders also pointed to relief measures provided during the Covid-19 period, including support for the Employees Provident Fund (EPF) contributions under the Pradhan Mantri Garib Kalyan Yojana, and suggested that temporary assistance for ESI, PF contributions or wage support could help businesses manage current economic pressures.

With the wedding season and festive buying cycles continuing to drive a large share of jewellery sales, traders said demand may moderate, but culturally linked consumption is unlikely to disappear despite the Prime Minister’s appeal.