India is currently number two in gold jewellery consumption by volume, number four in platinum jewellery consumption by volume and number one in diamond jewellery consumption by volume. The country will remain the most important market for precious jewellery in terms of potential for many years to come. For one, demand for precious jewellery is already formidable because of strong cultural traditions and yet more than 90% of adults in India possess wealth valued below US$10,000. However, that is a story for the future. In the present, consumption of precious jewellery in India gained momentum in the aftermath of the Global Financial Crisis as Indians rode the wave of gold price inflation, encouraged by stronger economic growth and lower inflation. Consumption of precious jewellery subsequently lost momentum when the situation reversed. Economic growth is now weaker and Indian consumers are currently battling higher inflation. Jewellery sales in India will experience slower growth in the period 2013-2016 than in the period 2009-2012. The culprits will be ongoing weakness in consumer spending which has been hit by rising inflation, lower real wage growth and a poorer macro-economic environment. Demand for gold in jewellery manufacturing should oscillate in the 500-650 tonnes per year range, on the back of continued modernisation of sales channels in India and the expected rise in the number of middle class consumers. In the following pages, you will discover our views on the consumption of precious jewellery in India as well as discover our ideas on the likely direction of such consumption in the future. You will also get to find out why we selected India as the most promising market for precious jewellery for many years to come. For our purposes, we define precious jewellery as jewellery pieces made of gold, platinum or silver, in their pure form or combined with other lesser metals like copper. Such jewellery pieces can be in plain form or gemset precious jewellery. In the gemset category, this report provides extended study of polished diamonds consumption in India.

1. India
2015 Guide to Jewellery Market
Actionable market intelligence for jewellery businesses

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2014 Review
Source: Equity Communications
Retail sales of precious jewellery increased 2.8 percent to reach 2,535 billion rupees (US$41.57 billion) in
2014. Domestic changes in the way gold jewellery is traded helped make 2014 a record year for jewellery
sales.
Retail sales of gold jewellery increased 1.4 percent to reach 1,995 billion rupees (US$32.71 billion) in
2014. Consumption of gold jewellery increased 7.9 percent to reach 660.8 tonnes in 2014 according to
Equity Communications' preliminary assessment of retailer sales and this was offset by a 6.4 percent
reduction in the rupee gold price.
Retail sales of diamond jewellery increased 8.2 percent to reach 517 billion rupees (US$8.49 billion) in
2014. In general, demand for diamond jewellery is stronger and more competitive at steady gold prices
because consumers will be less concerned about potentially losing out on positive gold price movements.
Consumer demand for diamonds is more discretionary.
Retail sales of platinum jewellery increased 16.8 percent in 2014 to reach 17.84 billion rupees. Volume
take-up increased 23 percent to reach 172,000 ounces in 2014, boosted by successful marketing of men's

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Key sales driver: The story of gold jewellery sales in 2014
 80:20 gold rule introduced in third quarter of 2013 scrapped in fourth quarter of 2015 -
results in lower domestic premiums on gold
 Rupee gold price down 6.4 percent in 2014 - results in cheaper gold for consumers
 Companies Act rewrite forces retailers to restructure gold buying schemes - results in a flood
of redemptions before March 31, 2015
The gold rush of the second quarter of 2013 was always going to be a hard act to follow. Nevertheless,
sales in 2014 were actually helped by the forced review of retailer gold buying schemes because of new
Companies Act rules. This factor was the biggest contributor to record sales of jewellery in 2014.
Source: Equity Communications
Consequently, jewellery retailers are winding down standing instalment schemes with the view of
reintroducing them in compliance with new laws. Such schemes let consumers spread out purchases of
jewellery pieces they normally would not afford. Instalment schemes are estimated to make up to 25
percent of annual gold jewellery sales.
Forced early redemption of instalment schemes meant that gold jewellery sales in the third quarter of 2014
were almost similar to sales in the second quarter of 2014. A weakening of the rupee gold price during
August and September also supported redemption efforts.

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2015 Outlook
Fundamentally, there is strong investment incentive in consumption of jewellery in India. Gold continues
to be a dependable hedge against inflation and trusted store of value. Therefore, for as long as the pricing
fundamentals and economic backdrop are gold positive, consumers will first consider gold above any
other jewellery option.
Economic backdrop in 2015
 lower interest rates
 lower inflation
 faster gdp growth
On one hand, India's economic outlook for 2015 is more positive than it was in the period 2012 to 2014.
The abundance of economic good news seems likely to fuel an eventual recovery of the rupee vis-à-vis
the U.S. dollar in 2015-2016. At the same time, the price of gold in international markets is expected to
remain subdued in 2015-2016. These events should combine to send gold prices lower in local currency
terms for the period 2015.
Our view is that the economic backdrop is not gold positive in the short term therefore we anticipate
reduced appetite for gold as an investment. In theory, this should push gold demand lower.
On the other hand, the surprising plunge in oil prices helps narrow the current account and fiscal deficits.
By extension, this has led to a broad-based decline in different inflation measures (CPI, WPI & GDP
deflator).
With CPI inflation below the Reserve Bank of India's target (8 percent in January 2015), the bank has
greater room to cut its benchmark repo rate by a greater margin. Without doubt, this is a further boost to
India's growth outlook and the dividend will be higher investment flows into India.
The positive economic growth outlook could boost incomes for Indian consumers and this does help
consumption of gold for important cultural occasions and festivals. In theory, this should push gold
demand higher.

5. - 4 -
Nevertheless, in practice, India has just completed two straight years of very high gold jewellery demand
because of one-off exogenous events.
In 2013, when the price of gold first plunged to levels last seen in 2010, consumers of gold jewellery in
key markets quickly saw this as a buying opportunity and rushed to make purchases. Many reasoned that
the dip in gold prices was an anomaly and therefore expected gold prices to return quickly to their long-
term upward trajectory. However, this did not occurred and that is why investment demand for gold
jewellery subsequently remained muted in China in 2014.
A similar situation was anticipated for India but the forced redemption of gold buying schemes, in
compliance with new Companies Act regulations, actually led to another rush of gold jewellery purchases
in 2014. Such instalment schemes are very popular in the market. First, they let consumers spread out
purchases of higher priced gold jewellery pieces over many months. Second, they are also a lucrative
investment for consumers since jewellers typically sponsor the last month or two of an instalment period.
Instalment schemes are estimated to make up to 25 percent of annual gold jewellery sales. However, new
rules require redemption of outstanding gold buying schemes which were accepted before April 1, 2014,
as and when they become due or before the 31st of March 2015 (whichever is earlier).
For the above reasons, 2015 could actually witness reduced demand for gold jewellery owing to
consumer fatigue. In fact, our view is that consumption of gold jewellery could retreat by as much as 15
percent from 2014 levels. Gold consumption in 2013 and 2014 was substantially higher than the 546
tonnes annual average for the prior ten years.
For the last two years, consumption of gold positively diverted from trend in response to exogenous
events and our assessment is that consumers will likely take time out to rebuild gold buying liquidity.
Add to this, new gold buying schemes consistent with new companies act rules are half as appealing as
previous running gold schemes to retailers and their customers. The funding period is now limited to one
year and the investment return cannot be in excess of 12 percent per annum. Some retailers have found
creative ways to work around this but it will require at least the first half of 2015 for the industry to
rearrange gold buying schemes.
In the final analysis, retail sales of precious jewellery could retreat 4.5 percent to reach 2,421 billion
rupees (US$39.70 billion) in 2015. Greater sales of diamond jewellery will likely be offset by decreases
in gold jewellery sales volumes at lower gold prices.

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Trends in retail sales of precious jewellery 2003-2013
2014 review
What lies ahead
Demographic trends
Economic growth and income trends
Retailer business models and marketing
Precious materials price trends
Mobile internet and smartphone penetration
10
17
22
30
34
50
58
63
The basics of jewellery demand in India 7
Guide to India Jewellery Market 2015

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© Copyright 2015, Equity Communications Private Limited, ALL RIGHTS RESERVED.
Contents
page
Introduction 1
How you benefit from Equity Communications' analysis 4
Section A
1. The basics of jewellery demand in India 7
Gold rules in India 8
Push factors helping consumption of complementary jewellery 8
2. Trends in retail sales of precious jewellery 2003 and 2013 10
Trends in retail sales of precious jewellery 2003-2013 11
Retail sales of precious jewellery have been supported by 14
Real per capita gdp growth 14
Precious materials price growth 14
Rupee US dollar exchange rate 15
Trend in consumption of gold jewellery 15
Key Takeaways 16
Gold jewellery 16
Complementary jewellery - diamonds, platinum, silver, gemstone 16
3. 2014 review 17
2014 precious jewellery sales 18
2014 gold jewellery sales 19
Quarterly gold demand trends 19
2014 diamond jewellery sales 20
2014 platinum, silver and other gemstone jewellery sales 21
4. What lies ahead 22
Peer review 23
Gold demand in top four jewellery markets 24
Top four platinum jewellery markets 25
Top four diamond jewellery markets 25
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