Gems and Jewellery
Indian gems and jewellery industry has contributed US$ 34,746.90 million to India's foreign exchange earnings (FEEs).

India has done wonders with respect to polishing. The Indian cut diamonds have become world class now…

Tehmasp Printer
MD, International Gemological Institute-India

Gems and Jewellery Industry in India

Updated: August, 2014

Introduction

In a joint study named 'All that glitters is gold: India Jewellery Review 2013' by global consultancy firm AT Kearney and an industry body in 2013, it was projected that India's gems and jewellery market was likely to double in the next five years. A healthy business environment complemented by the government's policies is expected to drive this growth. The country is considered to be the hub and among the most competitive jewellery markets globally due to its low costs and the ready availability of high skilled labour.

India has large reserves of gold, diamond and other gemstones. The gems and jewellery sector has been contributing majorly to the country's foreign exchange earnings (FEEs). Sensing the potential, the Government of India has deemed the sector as a thrust area for export promotion. In FY 14, the Indian gems and jewellery industry has contributed US$ 34,746.90 million to India's FEEs.

Market size

The aggregate foreign direct investment (FDI) inflows in diamond and gold ornaments during the period April 2000-June 2014 was Rs 2,154.55 crore (US$ 356.53 million), as per data published by Department of Industrial Policy and Promotion (DIPP), Government of India.

The domestic gems and jewellery industry had a market size of Rs 251,000 crore (US$ 41.53 billion) in 2013, with potential to touch Rs 500,000-530,000 crore (US$ 82.75-87.71 billion) by 2018, as per the FICCI-AT Kearney study 'All that glitters is Gold: India Jewellery Review 2013'.

FY14 witnessed an increase of 12.65 per cent in export of cut and polished diamonds with the segment touching 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, signifying a growth in cutting, polishing and other manufacturing activities in India.

Key exporting destinations for gems and jewellery in FY 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 worth US$ 4,948.92 million.

India imported 163.11 million carats of rough diamonds valued at US$ 16.34 billion and exported 36.46 million carats of polished diamonds worth US$ 20.23 billion in 2013. Indian exported gems and jewellery worth US$ 36.04 billion in 2013.

Investments

Surat plans to house a world-class diamond bourse that will offer a trading facility and also bring all those interested in the diamond business under one roof. This development is likely to be as big as Mumbai's Bharat Diamond Bourse (BDB). While BDB is spread across two million sq ft, the Surat bourse is planned to encompass an area of 1.8 million sq ft.

Platinum jewellery could cross the Rs 2,500 crore (US$ 413.78 million) mark in FY 15, as per research by IKON Marketing Consultants. The platinum jewellery market was valued at Rs 1,880 crore (US$ 311.15 million) in the previous fiscal. Changing population demographics with increase in disposable income and the rise of organised retail are among the top growth drivers. Reduction is price gap between gold and platinum have also resulted in a 45 per cent compounded annual growth rate (CAGR) year-on-year (y-o-y), as per the report's estimates.

In order to bring down the risk in extending loans to diamond and jewellery companies following a series of loan defaults in the last few years, some leading banks in India want the Gems and Jewellery Export Promotion Council (GJEPC) to be the mediator in recommending the financial standings of diamond organisations that seek business loans and current credit limit enhancement.

Titan's jewellery division has opened India's first karigar (artisan) centre for jewellery manufacturing in Hosur, Tamil Nadu. The centre, which is indicative of Titan's efforts to improve the lives of karigars from across the country, will have karigars who will craft hand-made gold jewellery for the division.

In its first gold mine venture, NMDC Ltd, India's biggest iron ore miner, plans to set up a pilot plant in Tanzania to process gold at an investment of about Rs 50 crore (US$ 8.27 million). In February 2012, Tanzania had granted NMDC four gold mining leases for an area of 38.83 sq km for a period of 10 years.

Government Initiatives

The Reserve Bank of India (RBI) has liberalised gold import norms under the 80:20 rule. Though the ratio remains the same, star and premier export houses can now import the commodity, while banks and nominated agencies can provide gold for domestic use as loans to bullion traders and jewellers , as per a notification issued by RBI.

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 and Russia have signed a memorandum of understanding (MoU) to source data on diamond trade between the two nations. India is the world's biggest processor of diamonds, while Russia is the largest rough diamond producer globally. The agreement was signed in Russia by the GJEPC and Russian Government-owned diamond mining firm Alrosa, which accounts for about 25 per cent of the world output. India accounts for around 60 per cent of the world's polished diamond output in value terms.

Road Ahead

Exports from the gems and jewellery industry could touch US$ 58 billion by 2015, as per a joint report by Technopak and an industry body. The report estimates that the value of the domestic market for gems and jewellery will be around US$ 35-40 billion by then. Further, Indian consumers are increasingly accepting branded jewellery and organised format, which is driving modern retail formats as well as conventional jewellers.

Also, the costume jewellery industry in India increased at 20-30 per cent in the first half of FY14, with women gradually preferring this type of jewellery over gold, for wedding functions and parties. This market is projected to touch Rs 15,000 crore (US$ 2.48 billion) by December, 2015, which is a perceptible increase from the Rs 8,000 crore (US$ 1.32 billion) in December, 2012, as per an industry study.

Exchange Rate Used: INR 1= US$ 0.0165 as on August 25, 2014

References: Media Reports, Press Releases, GJEPC Report

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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