Jewellery retail needs express bailout package to survive

Retail sales of jewellery collapsed as gold retailers downed shutters across the country to comply with the lockdown norms. The shutdown came as a tipping point for the gold retailers who were already struggling to keep head above water as sky-high prices and shrinking demand were crimping sales.

A little more than a month ago, organized jewellery retailers were hoping for a turnaround in business leading to better sales and revenue growth during the months ahead. The industry was pinning its hopes on a bump in retail demand, especially from the hinterland, driven by brisk sales during the wedding season and festive buying by households upending its future and fortune. However, the outbreak of the Covid-19 pandemic and the subsequent nation-wide shutdown dashed these hopes. Retail sales of jewellery collapsed as gold retailers downed shutters across the country to comply with the lockdown norms.

The shutdown came as a tipping point for the gold retailers who were already struggling to keep head above water as sky-high prices and shrinking demand were crimping sales. The abnormal and elevated import duty and tax structure still remain as an albatross around the neck of the drowning industry. Needless to say, after the Covid-19 outbreak and the subsequent nation-wide lockdown organized jewellery retailers landed in a rock and a hard space situation with zero sales due to cancelled weddings and postponed festive occasion buying and rising operational overheads.

Since the jewellery retail industry is one of the largest contributors to the governments’ tax revenue – both Centre and State governments – and employs a large number of workers, it is only natural for the industry to solicit a little help from the government to tide over the crisis. In the industry’s reckoning, it is feasible for the government to provide the much needed tax relief by rationalizing import duty structure and GST rates on the final jewellery. This will shrink the operating cost of the business substantially.

Further, the industry is staring at an impending liquidity collapse following zero net sales and negative cash flows. Therefore, the Reserve Bank of India (RBI) may relax lending norms to the segment on the lines of Covid-19 regulatory package extended to certain sections of the business to keep liquidity flowing to the segment. This is necessary for the industry to pay its workers wages and salaries without default as well as meeting necessary overheads. Rescheduling the payment of loans – both term loans and working capital loans – along with interest for at least 90 days is equally important for the industry to remain solvent. RBI should also take a relook at the classification norms of loans to the gold retail segment to keep them as standard assets. The inter-play of these measures will avert an impending liquidity collapse facing the industry and keep the business as a going concern till normalcy and sanity return to the market.

Courtesy: economictimes.in