India has substantial reserves of gold, diamond, ruby and other gemstones. The gems and jewellery sector has been playing a very important role in the Indian economy and contributes about six–seven per cent to the country's gross domestic product (GDP), apart from large scale employment generations and foreign exchange earnings (FEE). Sensing its immense potential, the Government of India has declared the sector as a thrust area for export promotion. In FY 2013–14, the Indian gems and jewellery sector contributed US$ 34,746.90 million to India's FEE.
The two primary segments of the sector in India are gold jewellery and diamonds. India is the world’s largest consumer of gold, accounting for over 20 per cent of the global gold consumption. The country is also the world’s largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by government policies. India exports 95 per cent of the world’s diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). The industry is projected to generate up to US$ 35 billion of revenue from exports by 2015.
The domestic gems and jewellery industry had a market size of Rs 251,000 crore (US$ 41.61 billion) in 2013, with potential to touch Rs 500,000–530,000 crore (US$ 82.94–87.93 billion) by 2018, according to a joint report by FICCI –AT Kearney titled ‘All that glitters is Gold: India Jewellery Review 2013’.
FY 2013–14 saw an increase of 12.65 per cent in export of cut and polished diamonds with the segment reaching US$ 19,635 million. The industry also saw an increase of 11.98 per cent in imports of rough diamonds with figures of US$ 16,716 million, suggesting a growth in cutting, polishing and other manufacturing activities in the country.
Key exporting destinations for gems and jewellery in FY 2013–14 were UAE – 35 per cent of exports valued at US$ 12,195.34 million; Hong Kong – 28 per cent of exports valued at US$ 9,790.45 million; and the US – 14 per cent of exports valued at US$ 4,948.92 million.
The cumulative foreign direct investment (FDI) inflows in diamond and gold ornaments during April 2000–February 2014 stood at US$ 433.20 million, according to data published by Department of Industrial Policy and Promotion (DIPP), Government of India.
Some of the major investments and developments in the Indian gems and jewellery sector are as follows:
Jewellery and lifestyle products manufacturer Titan Company has plans to export its gold jewellery to top global retailers. Titan Jewellery, which comprises 75–80 per cent of Titan's US$ 2 billion revenue, will supply its Tanishq brand of gold jewellery to Damas (Dubai) and Mustafa (Singapore).
Titan’s jewellery division has opened India’s first karigar (artisan) centre for jewellery manufacturing in Hosur, Tamil Nadu. The centre is indicative of the company’s effort to better the lives of karigars from across the country. The karigars will craft hand-made gold jewellery for the division.
In its first gold mine venture, NMDC, India’s largest iron ore miner, plans to set up a pilot plant in Tanzania to process gold at an investment of around Rs 50 crore (US$ 8.29 million). In February 2012, Tanzania had granted NMDC four gold mining leases for an area of 38.83 square kilometre (sq km) up to a period of 10 years.
Gold jewellery exports from India increased for a second straight month in March 2014 as raw material supply improved following the Reserve Bank of India’s (RBI) ruling to allow more banks to import bullion, with industry analysts also saying that the positive trend will sustain. India shipped US$ 992.03 million worth of gold jewellery in March, an increase of 6.1 per cent year-on-year (y-o-y), according to GJEPC. The country exported US$ 718.36 million worth of jewellery in February, 2014.
In a bid to further liberalise norms for rough diamond imports, the RBI has lifted restrictions on several mines abroad; advance remittances can now be extended to these mines for such import of roughs. Based on recommendations from GJEPC, RBI had in 2007 notified five global miners of roughs to which an importer could make advance remittance without limit and without having to furnish a bank guarantee or standby letter of credit for import of roughs.
India has signed a memorandum of understanding (MoU) with Russia to source data on diamond trade between the two nations. India is the largest processor of diamonds, while Russia is the largest rough diamond producer in the world. The agreement was signed in Russia by the GJEPC and Russian Government-owned diamond mining firm Alrosa which accounts for around 25 per cent of the world output. India accounts for around 60 per cent of global polished diamond output in value terms. It imported 163.11 million carats of rough diamonds valued at US$ 16.34 billion and exported 36.46 million carats of polished diamonds valued at US$ 20.23 billion in 2013. Indian exported gems and jewellery were valued at US$ 36.04 billion in 2013.
A FICCI–Technopak report predicts that gems and jewellery exports will touch US$ 58 billion by 2015. The report also estimates that the domestic market for gems and jewellery will reach US$ 35–40 billion by 2015. The country’s success in the gems and jewellery global market can be attributed to the following factors – highly skilled, low-cost labour; excellence in jewellery and diamond polishing; and technologically advanced diamond cutting units.
The country is slowly starting to move towards branded jewellery and consumers are progressively accommodating modern retail formats. While this could impact traditional players, it also gives them the opportunity to upgrade to keep pace with evolving market trends. It is expected that traditional and modern players will coexist in future.
Exchange Rate Used: INR 1= US$ 0.0165 as on May 1, 2014
References: Media Reports, Press Releases