India’s organised gold jewellery sector is heading for its worst sales year in a decade. A combination of persistently high gold prices and a steep customs duty hike on imports is expected to push volumes down 13-15% this fiscal year, following an 8% contraction last year, according to a Crisil Ratings report released on Friday.
The sector’s total volume, covering jewellery, coins, and bars, is projected to land between 620 and 640 tonnes this fiscal, a level not seen since the Covid-disrupted fiscal 2021, which is excluded from the comparison.
Why volumes are falling
The government recently more than doubled customs duty on gold to 15%, up from 6%, as part of efforts to rein in the trade deficit and stabilise the rupee. In fiscal 2026 alone, India imported around 720 tonnes of gold, resulting in a foreign currency outflow of approximately $72 billion, as per the report.
Himank Sharma, Director at Crisil Ratings, attributed the demand slowdown squarely to this policy shift. “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,” he said, adding that a shift toward bars and coins driven by investment interest is unlikely to fully compensate for the overall drop.
According to the report, high prices have already been reshaping buying behaviour. Domestic gold prices surged roughly 55% last fiscal, driven by global geopolitical uncertainty and a weakening rupee against the dollar.
Consumers have responded by trading down to lighter, lower-carat pieces in the 16-22 carat range, and increasingly favouring studded jewellery. At the same time, jewellery purchases fell around 25% over the past two fiscals, while sales of gold bars and coins shot up over 50%.
The silver lining for retailers
Despite the volume slump, Crisil‘s analysis of 70 gold jewellery retailers, together representing about a third of the organised sector’s revenues, suggests the financial damage will be contained.
With gold currently priced at around Rs 1,60,000 per 10 grams (24 carat), realisations per unit sold are expected to be 35-40% higher on-year. That price tailwind is powerful enough to drive revenue growth of 20-25% for the sector this fiscal, and lift absolute EBITDA by around 20%, even as margins face some pressure from deeper customer discounts, higher promotional spending, and a greater mix of lower-margin bars and coins.
Inventory holding costs will rise as days outstanding stretch to 160-180 days, up from 150 days last year. Overall debt is expected to grow by a third this fiscal year to support inventory requirements for both new and existing stores, the report added.
Expansion continues, cautiously
Despite the headwinds, organised jewellers are not pulling back from growth. According to Gaurav Arora, Associate Director at Crisil Ratings, retailers are leaning into franchise-led models to expand more capital-efficiently into Tier 2 and Tier 3 cities. “Credit profiles will remain stable, supported by improved revenues from higher realisations and healthy cash accruals,” he said.
On the leverage side, the total outside liabilities-to-adjusted net worth ratio for jewellers is expected to rise to around 1.5 times by March 2027, compared to 1.2 times as of March 2026. Interest coverage, while moderating, is projected to remain healthy at 5-6 times this fiscal, down from around 7 times last year.
Risks worth watching
Crisil flags several variables that could alter this relatively stable outlook. Sharp swings in global gold prices, further regulatory changes around import duties, potential government restrictions on gold purchases, and shifts in consumer confidence all carry the potential to upset projections in either direction.
For now, the sector finds itself in an unusual position: selling less gold than it has in years, yet earning more from every gram it does sell.