India's gem and jewelry export market grows 22 percent, but difficult year ahead

According to Council chairman Sanjay Kothari, the growth in the sector could be attributed to "increase in trading activities as actual manufacturing has shown a decline."

While difficulty in availability of raw materials has led to the decline in local manufacturing activity, recessionary fears in the US, which accounts for half of the world's jewelry sales, and overall fall in international demand have led to drop in orders, Kothari said.

Exports in 2007-08 rose to $20.89 billion from $17.1 billion a year earlier, with cut and polished diamonds comprising $14.2 billion of the total, up from $10.9 billion. Exports of gold jewelry rose to $5.62 billion from $5.2 billion while that of colored gemstones rose to $276.42 million from $246.4 million. The gem and jewelry sector accounted for 13.41 percent of India's total merchandise exports in 2007-08, the Council said.

"Due to the volatility of gold prices and international economical scenario, demand for gold jewelry has witnessed a slow down worldwide," Kothari said.

The US recession, rupee appreciation, high interest rates, withdrawal of Generalized System of Preferences (GSP) benefits and general economic slowdown in major markets have led to the decline of the sector, he said, adding that it had led to a loss of some 150,000 jobs.

In comparison, total imports of gem and jewelry provisionally rose to $18.5 billion in 2007-08, growing 32.5 percent from last year.

India's gem and jewelry exporters rely a lot on clients of the US, China, Russia, Commonwealth of Independent States (CIS), and the UAE for a major portion of their revenue.

While the US and Hong Kong account for 26 percent of total gem and jewelry exports, the UAE account for 21 percent.

"The export destinations indicate how far the Indian industry has gone in its attempts to diversify its markets and reduce its heavy dependency on the US market alone," Kothari said.