Gold import restrictions pinch jewellers, but demand holds

Jewellers are set to bear the brunt of the government’s recent import curbs on gold, silver, and platinum articles, even as overall demand for precious metals is expected to remain largely unaffected, analysts said.

The curbs, announced on April 1, aim to check misuse of free trade agreements (FTAs) and apply regardless of prior contracts, letters of credit, or shipment status, according to the Directorate General of Foreign Trade (DGFT). The revised policy covers items under Chapter 71, including precious metals, stones, jewellery, and coins.

While the broader market impact may be limited, the jewellery segment is likely to face near-term disruption due to tighter import channels and reduced supply flexibility. “The decision… is unlikely to significantly impact underlying demand. However, in the short term, the absence of transitional arrangements may lead to temporary supply tightness as trade flows adjust,” said Saumil Gandhi, Senior Analyst — Commodities at HDFC Securities.

According to Renisha Chainani, Head of Research at Augmont, jewellery-specific supply is expected to tighten more than investment-grade products, leading to a temporary premium in domestic markets. “Restricted import channels reduce supply flexibility, and DGFT licensing delays will create a temporary squeeze,” she said, adding that premiums may widen until the import pipeline stabilises.

Higher input costs are likely to pressure jewellers’ margins or force price hikes, which could weigh on demand in price-sensitive segments. Maintaining inventory ahead of peak wedding and festive seasons may also become challenging, while higher gold prices will increase working capital requirements as more funds get locked into stock.

The impact will vary across the industry. Large jewellers, who previously benefited from duty-free import routes, may see margins narrow as that advantage fades. “All participants are now required to import at applicable duties, bringing more uniformity in procurement costs,” Gandhi said, noting that this could reduce pricing disparities.

However, smaller jewellers and artisan units may face sharper disruption. Chainani noted that those dependent on spot-market imports through informal ASEAN channels could see higher working capital costs and potential stock-outs ahead of the wedding season.

Despite these challenges, demand is unlikely to take a significant hit. “Import curbs will not have a major impact on gold and silver demand, as the recent euphoria in the precious metals has subsided,” said Deveya Gaglani, Senior Research Analyst — Commodities, Axis Securities. He added that investment demand is gradually slowing as investors shift toward other yielding assets such as bonds.

At the retail level, prices may see modest upward pressure due to tighter and more regulated inflows, though any prolonged disruption is unlikely as markets adjust through alternative sourcing channels. Jewellery demand, driven by cultural and seasonal factors, is expected to remain resilient, even as some investment demand may shift toward financial alternatives such as digital gold and ETFs.

Overall, while the policy aims to curb tariff circumvention, its immediate impact will be felt most acutely by jewellers through tighter supply, higher costs, and operational challenges. No jeweller was available for comment.

Meanwhile, the country's gold imports rose 28.73 per cent to $69 billion during April-February FY2025-26 on account of high prices of the precious metal, according to Commerce Ministry data