These manufacturing units employ approximately 6.5 million people.
Jewelery makers say job losses could be on the hook in the coming weeks if business continues to slump.
“Demand dropped significantly after the import duties were announced. We were forced to reduce working hours to reduce jewelry manufacturing,” Muthu Venkatram, chairman of the Coimbatore Jewelery Manufacturers Association, told ET.
India is the second largest consumer of gold in the world and the country has increased import duties on gold as surging imports put pressure on its current account deficit (CAD). The government aims to reduce gold imports and preserve foreign exchange reserves.
India’s gold imports in June nearly tripled from levels a year ago as prices corrected and jewelers restocked after robust sales during Akshaya Tritiya in May.
The country imported 49 tonnes of gold in June, compared to 17 tonnes a year ago.
“Demand has dropped significantly due to fears of high inflation and an expected recession. Consumers are seen as saving money for essentials and not spending money on jewelry,” said said Surendra Mehta, National Secretary of India Bullion & Jewelers Association. “Working hours for goldsmiths and other workers have been reduced due to lower demand.”
India consumes around 800 to 850 tonnes of gold per year.
Of this, 600 tons are used to make handmade jewelry, which is popular not only in India but all over the world. Currently, the total duty and tax on gold is 18%, which includes an import duty of 12.5%, an agricultural infrastructure development tax of 2.5% and 3% GST.
Although there has been a drop in demand, some of the trade believe this would be temporary.