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.

Indian exporters are also looking at African nations like Namibia and Angola for expanding their business activities like direct sourcing of rough diamonds, setting up factories and training institutes.

However, things are not going to be easy, Kothari said. "We are going to have a difficult year, even if efforts are made to other markets, it's not going to be that easy. For other countries to catch up, it is going to take a huge effort," he said.

On April 11, the Minister of Commerce and Industry, Kamal Nath, announced a series of export promotion measures aimed at boosting the gem and jewelry sector.

Some of the recommendations include raising the value of jewelry parcels for export to $75,000, the ability to export colored gemstones on consignment basis and the extension of the time period to re-import branded jewelry to one year.

But Kothari felt it was not enough. "The trade fraternity welcomes the new policy and would actively support the commerce ministry's overall export target of $200 billion set for 2008-09. However, the industry is disappointed with some key recommendations left out by the commerce ministry, which was vital for the growth of the trade," he said.

For instance, the government has reduced the turnover tax from 8 percent to 6 percent but it is not yet in par with Antwerp where the turnover tax is 1-2 percent, he added.

However, GJEPC has taken steps to stem the decline in the sector, Kothari said.

The Council is planning to reposition the Indian gem and jewelry as the "Epitome of Luxury" by developing programs such as the 'Brand India' promotions, he said. This program is the Council's initiative to promote Indian jewelry to the end users in markets like the US, China, Middle East, CIS, Russia and India.

The Council has also requested the International Diamond Manufacturers Association (IDMA) and CIBJO (World Jewelry Trade Federation) to present a report on the capacity of mines worldwide for supply of rough diamonds so that it will bridge the gap between the demand and supply of rough diamonds available.

The Council has also decided to focus on design and innovation and for that it has joined hands with NIFT (National Institute of Fashion Technology) and NID (National Institute of Design). This initiative will help develop talent with a focus on design and innovation, Kothari said.