Jewellery sales have experienced a slight rise following the recent decision by the central bank to withdraw Rs 2,000 notes from circulation. However, industry experts caution that this increase cannot be compared to the rush witnessed in 2016 when Rs 500 and Rs 1,000 notes were discontinued.
The Reserve Bank of India’s announcement to replace Rs 2,000 notes with lower denominations differs from the previous exercise in 2016, as the Rs 2,000 notes will remain legal tender. During the demonetization period, there was a panic-driven surge in the purchase of gold, which was then priced at half of its current value. However, the current situation is different, according to a leading jewellers association.
“There is no significant rush, only a marginal increase in customers. The demand is not comparable to that of 2016 because it’s not a note ban but a gradual phase-out of the Rs 2,000 notes,” said Surendra Mehta, national secretary at India Bullion and Jewellers Association Ltd.
Mehta also refuted reports suggesting customers are paying premium prices for jewellery. He acknowledged that isolated incidents may have occurred but explained that gold prices are already high, exceeding Rs 60,000, compared to the Rs 30,000 range during demonetization.
Government guidelines now require customers to provide KYC details for transactions above Rs 50,000, and a PAN card for transactions above Rs 2 lakh. Additionally, transactions exceeding Rs 10 lakh must be reported to the Financial Intelligence Unit of the government.
Despite the recent rise in gold prices, the note withdrawal move did not significantly impact gold sales in Mumbai’s Zaveri Bazaar, the country’s financial capital. The jewellers attribute this resilience to the shift towards digital payment methods since 2016, with only around 10% of transactions conducted in cash.
While some jewellers reported a substantial increase in customer footfall, citing the ongoing wedding season as a contributing factor, others claimed business remained as usual. Few customers paid in cash, and the impact of the note withdrawal was negligible.
However, there were individuals looking to dispose of their Rs 2,000 notes by purchasing jewellery. “I had Rs 2 lakh in Rs 2,000 notes. I am buying jewellery for my daughter’s wedding,” said a customer at a shop in Zaveri Bazaar.
In summary, the withdrawal of Rs 2,000 notes from circulation has led to a marginal increase in jewellery sales, but the impact falls short of the rush observed during the 2016 demonetization. The shift towards digital payments and the already high gold prices have mitigated the effects of the note withdrawal, resulting in a relatively stable market environment for jewellers.