Despite demand, gold jewellery sales are likely to decline by up to 60 per cent this festive season due to a stock crunch following restrictions on imports, say industry experts.
"Demand is definitely there for gold jewellery and coins. However, we do not have enough stocks in the market to cater to the demand of this festive season as there were no import since the last 2-3 months," Kumar Jain, vice president of Mumbai Jewellers Association, told PTI in Mumbai on Thursday.
Customers are, therefore, buying silver or diamond, he said.
Due to a slew of government measures to contain the country's high current account deficit, there was no gold import in August and September. This month the yellow metal that was lying at customs warehouses was released into the market, Mr Jain said.
Some of the demand is being catered through earlier stocks and recycled jewellery, he added.
Echoing similar views, Suresh Hundia, former president of Bombay Bullion Association, said gold and gold jewellery in India, the world's largest consumer and importer of gold, will witness about 60 per cent decline in sales, while for silver the drop will be lower at 50 per cent.
"Due to price rise and high inflation the general sentiment for bullion is low, which is getting reflected during the festive season," he added.
There are reports of decline in footfalls at stores compared to last year and this will get reflected in drop in sales, Gitanjali Group chairman Mehul Choksi said.
"We are getting reports from across the country that there has been 30-35 per cent less footfalls in the jewellery showrooms compared to last year. This will have an impact on overall sales and we expect 30-35 per cent drop in sales in gold and 10-15 per cent in diamond jewellery," he said.
A combination of high prices and less stocks has created an overall vacuum in new designs in the industry, Mr Choksi further said.
All India Gems and Jewellery Trade Federation chairman Haresh Soni, however, said gold jewellery sales will remain moderate and at the same level as last year.
"Jewellery sales will remain same as last year. We, however, expect a decline of about 50 per cent in sales of gold coins and bars," he added.
On silver off-take, Mr Soni said it will be better than last year.
Naveen Mathur of Angel Broking said the stocks held back due to lack of clarity by the customs were released in October, which was late for the industry. The delay will affect the sales by about 30 per cent.
"The major reason for the decline in gold sales is lack of stocks and not the prices. Currently, whatever stocks are available is being bought into the market with very high premium. This will definitely help silver," he said.
"But overall the sentiment for bullion is negative as other investment options like equities have started doing well and people are moving away from gold and silver."
Higher gold import was one of the key reasons that pushed the current account deficit - the difference between inflow and outflow of foreign exchange - to a record high of 4.8 per cent of GDP, or $88.2 billion, last fiscal year (FY13).
This prompted the Centre to take several measures to curb import of the yellow metal. The government expects the gold import to come down to 800 tonnes this fiscal year (FY14) as against 845 tonnes in FY13.
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