Modi has failed to diminish gold's appeal in the Indian market

According to India's largest jewelry retailer, the Indian public has ignored the Narendra Modi government's calls to curb gold purchases.

Profits at Titan, a Tata Group company, have increased by 63%, with customer traffic also rising in the most recent quarter. The jewelry business accounts for the vast majority of the company's revenue.

Despite Prime Minister Modi's call in May for the public to pause gold purchases, and his move to more than double import duties on gold to 15% during the Iran conflict, demand for gold continues to grow.

Earlier last week, Modi renewed his appeal, urging Indians to refrain from buying gold “unless absolutely necessary.”

Titan Managing Director Ajoy Chawla said the impact of these measures was "not lasting" and that gold demand depends more on consumers' expectations of gold prices. Titan sells jewelry, watches, and eyewear at nearly 3,700 stores across India.

Chawla said: “The love that consumers have for jewelry and gold is still there and has not faded. They see gold as a means of preserving wealth. Even those who don't intend to sell their jewelry at all regard it as part of their investment portfolio.”

This year's oil price shocks have exposed India's reliance on energy supplies from the Gulf region, putting pressure on India's currency and foreign exchange reserves.

Curtailing gold purchases is part of the New Delhi government's efforts to reduce imports and support the rupee, which has been depreciating. According to the World Gold Council, India accounts for about one-third of global demand for gold jewelry; in the June quarter this year, India's gold jewelry sales rose by about one-third year-on-year to $21 billion.

In addition to raising tariffs, Modi has unusually called on Indians to avoid buying this precious metal, which holds deep cultural and religious significance at festivals and weddings and also serves as an investment good. "Within a year, no matter what event is held, we shouldn’t buy gold jewelry," he said at the time.

But this appeal seems to have fallen on deaf ears. The World Gold Council said in July that India's leading listed jewelers posted strong quarterly results, with revenue rising 30% to 60% year-on-year thanks to religious festivals and the summer wedding season.

Although an increasing number of middle-class Indian families are investing in stocks and mutual funds, Titan CFO Ashok Sonthalia said that gold remains a favored investment tool. "Even if I am a very financially savvy person, I would still invest in gold," he said.

Titan holds nearly a tenth of India's vast and highly fragmented jewelry market, and its stock has risen nearly a quarter this year. In comparison, the blue-chip index Nifty 50, which includes Titan, has dropped nearly 9% over the same period.

Nomura analysts say Titan is “well-positioned” as consumer demand recovers after stagnating last year.

Editor: Jiang Xuesi