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Credit Rating Agency ICRA in its latest report has said that the domestic jewellery industry, which recorded healthy sales during the festival period, is expected to witness 12 per cent growth during this financial year (FY23) compared to the previous fiscal.

According to the report, the domestic jewellery industry is estimated to have registered a healthy growth of 60 per cent in the second quarter of FY23 as against pre-Covid levels (Q2 FY20), which exceeded Icra's expectations of an 8 per cent YoY contraction and was driven by urban demand recovery following range-bound prices. However, on a Year-on-Year (YoY) basis, the demand recorded a contraction of 2 per cent in the quarter owing to a high base in the second quarter of FY22, which had grown by 70 per cent YoY, due to pent-up demand after the lifting of the pandemic-induced restrictions last year.

Going forward, it said while some contraction is expected in the current quarter, the industry growth in FY23 is likely to be 12 per cent YoY, driven by robust growth in the first quarter of FY23 and steady wedding and festive demand. While the jewellery sector has recorded healthy sales in the Dussehra and Diwali season, factors like high domestic inflation, cautious consumer sentiments towards discretionary spending, and weak rural economic recovery due to erratic monsoons are likely to continue to constrain demand growth in the near term. Nevertheless, the demand outlook for the sector in the medium to long term remains favourable.