Duty cut in Union Budget 2024 to add glitter to demand for gold, silver

Jewellery players such as Titan Company, Thangamayil Jewellery, and Senco Gold are seen to benefit, post Budget

The government has sharply reduced customs duty on precious metals such as gold and sliver bars and dores (raw materials for jewellery manufacturing) from 15 percent to 6 percent and 5.35 percent respectively. This amounts to a sharp 9 percent reduction in duties, which will be passed onto end-consumers and will benefit listed formal jewellery retail players such as Titan Company, Thangamayil Jewellery, and Senco Gold. The duty cut on imports is also positive for jewellery manufacturers like Sky Gold.

Raw material price differential between the formal industry (imports via authorised channels) and illegal imports (circumventing duty) will also reduce, considering the steep reduction in imports, which is beneficial for formal and organised jewellery players.

The price reduction on the final product to end-consumers will be to the tune of about 6 percent, considering that raw material costs form about 70-75 percent of the overall costs of jewellery companies.

Jewellery demand had been affected by a steep increase in gold prices (grew about 20 percent YoY) with leading players such as Titan Company and Senco Gold reporting a high single-digit growth in Q1FY25 compared to the historical robust double-digit growth trend. A reduction in the prices is likely to spur jewellery demand and encourage consumers who were waiting on the sidelines to buy jewellery.