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Gems and Jewellery

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Gems and Jewellery

November, 2011

Introduction

India possesses world's most competitive gems and jewellery market owing to its low cost of production and availability of skilled labour. Gems and jewellery form an essential part of the Indian tradition. The components of jewellery include traditional gold, diamond and platinum, accompanied by a variety of other precious and semi-precious stones.

The Indian gems and jewellery sector is expected to grow at a compound annual growth rate (CAGR) of approximately 13 per cent during 2011–2013, on the back of increasing Government efforts and incentives together with private sector initiatives, according to a report 'Indian Gems and Jewellery Market Forecast to 2013', by research firm RNCOS. As per the research report, with India's consumption pegged at nearly 24 per cent in 2008, the country remains world's largest gold consumer and this share is expected to grow further. Moreover, India also forms the largest cutting and polishing Industry for diamond in the world. The Government policies and the banking sector have provided a lot of assistance to this sector with around 50 banks providing nearly US$ 3 billion of credit to the Indian diamond industry.

India will soon overtake the US to become the third-largest men's luxury jewellery market in the world, according to Euromonitor International. The study estimated that the country's men's jewellery market stood at around Rs 954 crore (US$ 194.4 million), in sales and it is projected to grow by 36.4 per cent in 2012. "Although it's a niche market, it is growing. Nobody can ignore it now," as per GR Radhakrishnan, Managing Director, GRT Jewellers, who pegs the share of men's jewellery in its total sales at 20-25 per cent.

Indian sellers on eBay, a leading online marketplace, export an item internationally every 32 seconds, according to the company's Asian exporters' index. 44 pieces of jewellery are sold every hour by Indian sellers on eBay.

Ratings agency CRISIL has launched a Gold Index to track the performance of gold prices in the Indian market. This is the first index launched by CRISIL in the commodities space. The purpose of the CRISIL Gold index is to provide an independent, relevant and common benchmark for performance evaluation of investment products with gold as underlying investment, according to a release from CRISIL.

Swiss watchmaker Rado, a part of the world's largest watch conglomerate The Swatch Group, recently unveiled its luxury jewellery collection at the Rado boutique in Banjara Hills in Hyderabad. This range features beautiful diamond studded watches. The Rado jewellery collection brings together an exquisite selection of the brand's most celebrated products. The Swiss watch brand has been a pioneer in the use of innovative materials such as hard metal, high-tech ceramic, lanthanum and ceramos. It also features convex, dome-shaped sapphire crystals, affording innovative watch designs and shapes. The jewellery range is priced from Rs 30,000 (US$ 574.66) to Rs 4,000,000 (US$ 76,626.75).

"In the last 3- 4 years, a lot of Indians are investing in gold which is in the paper format. People should take a long-term perspective while investing in gold. ETFs as a concept is picking up," as per Jiju Vidyadharan, Head, Funds and Fixed Income Research, CRISIL Research.

Industry Structure

The gems and jewellery industry in India is greatly dominated by the unorganised players, but with the growing economy and increasing income levels, the organised segment and retailing of branded jewellery is fast catching up in the currently fragmented market which is worth US$ 16 billion and shows huge potential for growth in the future. The centre of trade in India's Gems and Jewellery industry is Mumbai. Most imports of gold and rough diamond arrives in Mumbai. However, most of the processing of diamonds takes place in Gujarat.

Key Industry Components

Diamonds: Currently India is the major polishing and cutting hub for diamonds. India is also the third largest consumer of polished diamonds. The surge of urbanization and rapidly growing middle class in India has led Indian consumerism to new heights, particularly in the diamond jewellery sector. Every 11 out of 12 diamonds sold around the world are processed in India regardless of the place they are mined.

Gold: The country became a leader in the table of most gold consuming nations with the consumption amounting to about 16,000 tonnes. The other key markets include Japan, China, Turkey, Italy, USA and UK. It is also estimated that about 600 tonnes of gold is used to make jewellery.

Costume jewellery: The Indian costume jewellery market is also witnessing growth in the international market, as per the Export Promotion Council for Handicrafts. The industry body further stated that the Government is also working towards formulating an international compliance code for manufacturing costume jewellery.

The current global costume jewellery and accessories market is estimated at US$ 16.3 billion, of which India only exports around US$ 53 million, thereby, providing a huge opportunity area for the Indian costume manufacturers.

Exports

India is the largest market for gold jewellery in the world, representing an amazing 746 tonnes of gold in 2010. The net exports of gem and jewellery grew from US$ 22,616.35 in April-October 2010 to US$ 26,160.04 in April-October 2011.

Gems and Jewellery Industry in India: Road Ahead

The enormous growth of the Indian gems and jewellery industry has seen the arrival of many new branded jewellery shops in various metros of this country. Brands such as, Damas Jewellery, Reliance Retail, Swarovski, and Joy Alukkas are either opening or have already opened their new branches. The availability of cheap labour and presence of well skilled people in various states of India is helping in the growth of diamond polishing and gold jewellery markets. According to experts in the jewellery industry the growing demand for expensive jewellery in India is a result of the strengthening Indian economy. India will soon overtake the US in the not so distant future, as per a statement given by Rapaport Group, the well known keeper of global diamond related data.

Exchange rate used: INR 1= US$ 0.01919 as on November 24, 2011

References: Diamondpriceguide, mineweb,media reports, IBEF, Gems and jewellery export promotion council, report by an industrial body, nsdcindia, Bharatbook, RNCOS, Bullionvault, World Gold Council, Indian Mirror