Education of India Part 2

Gems and Jewellery Industry in India

Latest update: October, 2017

• India's exports 93 per cent of its cut and polished diamonds produced.
• India exports 75 per cent of the world’s polished diamonds.
• Today, 12 out 14 diamonds sold in the world are either cut or polished in India.
• India’s exports of cut and polished diamonds rose from US$ 11.16 billion in FY 2004-05 to US$ 22.78 billion in FY 2016-17, thereby registering a compound annual growth rate (CAGR) of 6.13 per cent.
• India exported US$ 7.42 billion worth of cut and polished diamonds between April-July 2017.

Source: GJEPC

Introduction

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 6-7 per cent of the country’s GDP. It also employs over 2.5 million workers. One of the fastest growing sectors, it is extremely export oriented and labour intensive.

Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India’ in the international market.

India is the largest player in diamond cutting and polishing and also the largest consumer of gold.

India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. India is the world’s largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 75 per cent of the world’s polished diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). India's Gems and Jewellery sector has been contributing in a big way to the country's foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route.

Market size

Gold demand in India rose 30 per cent year-on-year to 298.4 tonnes between January-June 2017, backed by robust buying towards the end of quarter ending June 2017.$
India's gems and jewellery exports rose 11 per cent year-on-year to US$ 6.78 billion in April-May 2017, supported by increase in exports of silver jewellery, gold medallions and coins.#
Cut and polish diamond export constituted about 53 per cent of the total gems and jewellery exports in value terms in FY17.

The gems and jewellery market in India is home to more than 500,000 players, with the majority being small players.

India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. UAE, US, Russia, Singapore, Hong Kong, Latin America and China are the biggest importers of Indian jewellery. The demand for gold in India rose by 15 per cent year-on-year to reach 123.5 tonnes during January-March 2017, according to the World Gold Council (WGC). The Goods and Services Tax (GST) and monsoon will steer India’s gold demand going forward.

The overall net exports of Gems & Jewellery during April 2017 stood at US$ 3.2 billion, whereas exports of cut and polished diamonds stood at US$ 1.75 billion. Exports of gold coins and medallions stood at US$ 553.59 million and silver jewellery export stood at US$ 768.92 million during April 2017. India has become the second largest exporter of diamonds, gems and stones to China, as total exports grew by 28.48 per cent year-on-year to touch US$ 2.48 billion in 2016, as stated by Mr Prakash Gupta, Consul General of India in Shanghai.

Investments/Developments

The Gems and Jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewellers are able to fulfil their changing demands better than the local unorganised players. Moreover, increase in per capita income has led to an increase in sales of jewellery, as jewellery is a status symbol in India.

The cumulative Foreign Direct Investment (FDI) inflows in diamond and gold ornaments in the period April 2000 - March 2017 were US$ 895.96 million, according to Department of Industrial Policy and Promotion (DIPP).

Some of the key investments in this industry are listed below.

• The International Institute of Diamond Grading & Research (IIDGR) has invested US$ 5 million for expanding its synthetic diamond testing facility in Surat.
• Kalyan Jewellers plans to invest Rs 500 crore (US$ 75 million) to add 15 new showrooms in 2017, to add to their on-going expansion in Northern and Eastern regions of India as well as expansion in West Asia. 
• London’s ultra-luxury jeweller for the super-rich, Faberge, owned by the world’s top emeralds and rubies-miner Gemfields Plc., has decided to enter India; Delhi and Mumbai, India’s economic hotspots will be Faberge’s beachhead in the country, where the jeweller will sell its products by select trunk shows for the uber-rich.

Government Initiatives

• In the Union Budget 2017-18, the Government of India, offered tax cuts for the middle class and other sections of society (5 per cent for the Rs 250,000-500,000 tax slab; which was 10 per cent initially). All these measures will drive consumption, which will be favourable to the gems and jewellery industry.
• The Government of India’s proposal to cut corporate tax rates to 25 per cent for micro, small and medium enterprises (MSMEs) having annual turnover up to Rs 50 crore (US$ 7.5 million) will benefit a large number of gems and jewellery exporters from MSME category.
• The Government of India’s announcement on establishing gold spot exchange could help in India’s participation in determining gold price in the international markets.
• The demonetisation move is encouraging people to use plastic money, debit/ credit cards for buying jewellery. This is good for the industry in the long run and will create more transparency.

Road Ahead

In the coming years, growth in Gems and Jewellery sector would be largely contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry.

Mr Narendra Modi, Prime Minister of India, encouraged the diamond industry in Surat, Gujarat to come forward in making India number one in the gems and jewellery sector, by focusing on Design in India in addition to the Make in India campaign.

Exchange Rate Used: INR 1 = US$ 0.015 as of October 10, 2017.

References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Reserve Bank of India, Gem & Jewellery Export Promotion Council, Union Budget 2017-18, $ - World Gold Council (WGC), # - Gems and Jewellery Export Promotion Council (GJEPC)