Jewellers have also been hit by the increasing entry of illicit gold, that avoids import duties and makes its way on to the ‘grey market’ where it is sold at a discount.
Smuggled gold can account for more than a third of demand this year in India, the world’s second biggest buyer after China.
The upsurge is expected to lead to pressure for a reduction in the 20 percent import duty and a rethink on levies on gold jewellery.
Three years ago India raised the duty on gold imports to 10 percent. Of course smugglers evade the duty and offer cheap gold to buyers dealers and jewellers.
The legal trade is also facing headwinds from a 26 percent rise in the gold price this year, that has discouraged overall buying and made smuggled gold available at deep discounts.