India’s efforts to curb gold purchases have failed to weaken consumer demand, with the country’s largest jewellery retailer reporting sharply higher profits and increased customer traffic in the latest quarter.
Titan, part of the Tata Group, reported a 63% increase in profit alongside higher foot traffic, with jewellery accounting for most of its revenue. The results suggest that appeals by Prime Minister Narendra Modi for Indians to limit gold purchases have had little lasting effect on consumer behaviour.
Modi first urged Indians in May to pause gold purchases and subsequently more than doubled import duties on gold to 15% during the Iran conflict. He renewed his appeal earlier last week, asking people not to buy gold unless it was necessary. Yet demand continued to rise.
Ajoy Chawla, Titan’s managing director, said the measures had not produced a lasting impact, arguing that demand for gold depended more heavily on consumers’ perceptions of prices. Titan operates nearly 3,700 stores across India, selling jewellery, watches and eyewear.
The strength of demand is particularly significant given India’s importance to the global gold market. World Gold Council data shows that India accounts for about one-third of worldwide gold jewellery demand. During the June quarter, India’s gold jewellery sales rose by about one-third from a year earlier to $21 billion.
The increase has also been reflected in the performance of other major jewellery companies. The World Gold Council said in July that major listed Indian jewellers recorded strong quarterly results, with revenues rising between 30% and 60%. Religious festivals and the summer wedding season contributed to the increase in demand.
For Indian consumers, gold also retains a role beyond jewellery. Titan Chief Financial Officer Ashok Sonthalia said gold remained a favoured investment tool even as an increasing number of middle-class households invested in stocks and mutual funds.
The continued strength of gold demand has also benefited Titan’s position in the highly fragmented Indian jewellery market. The company controls nearly one-tenth of the country’s large jewellery market, giving it a significant presence despite the sector’s fragmented structure.
Investors have responded positively to the company’s performance. Titan’s shares have risen nearly one-quarter this year, sharply outperforming the Nifty 50 blue-chip index, which includes Titan and has fallen nearly 9% over the same period.
Nomura analysts said Titan was “well positioned” as consumer demand recovers after last year’s stagnation. The company’s performance indicates that higher duties and political appeals have so far done little to alter the underlying attraction of gold among Indian consumers.
With jewellery demand rising strongly and gold continuing to serve both cultural and investment purposes, the latest figures suggest that attempts to restrain purchases may face a formidable obstacle: consumers’ willingness to buy when they believe gold prices remain attractive.
