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Last Updated: April 13, 2015
MD, International Gemological Institute-India
Updated: February, 2015
The Gems and jewelry sector in India plays a significant role in the Indian economy, contributing around 6-7 per cent of the country’s GDP. One of the fastest growing sectors, it is extremely export oriented and labour intensive. The government of India has declared the sector as a focus area for export promotion based on its potential for growth and value addition. The government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote brand India in the international market.
The domestic gems and jewellery industry had a market size of Rs 251,000 crore (US$ 40.45 billion) in 2013, and has the potential to grow to Rs 500,000–530,000 crore (US$ 80.59-85.43 billion) by 2018, according to a study by a leading industry body. The study also projected that the country's gems and jewellery market could double in the next five years. The growth will be driven by a healthy business environment and the government's investor friendly policies. 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 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.
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. In FY14, India's gems and jewellery sector contributed US$ 34,746.90 million to the country's FEEs.
According to a report by Research and Markets, the Jewelry Market in India is expected to grow at a CAGR of 15.95 per cent over the period 2014-2019.
The gold jewelry exports from India were US$ 554.45 million in December 2014, while silver jewellery exports were US$ 148.49 million, according to the latest data released by the Gems and Jewelry Export Promotion Council (GJEPC).
The cumulative foreign direct investment (FDI) inflows in diamond and gold ornaments in the period April 2000-December 2014 were US$ 476 million, according to Department of Industrial Policy and Promotion (DIPP).
FY14 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 witnessed a rise of 11.98 per cent in imports of rough diamonds with figures of US$ 16,716 million. India imported 163.11 million carats of rough diamonds worth US$ 16.34 billion and exported 36.46 million carats of polished diamonds valued at US$ 20.23 billion in 2013. The country exported gems and jewellery worth US$ 36.04 billion in 2013.
Also, platinum jewellery could breach the Rs 2,500 crore (US$ 402.95 million) mark in FY15, according to research by IKON Marketing Consultants.
The sector is witnessing changes in consumer preferences, as the westernisation of lifestyle is responsible for changes in the buying habits of the consumer. Consumers are demanding new designs and varieties in jewellery, and branded jewellers are able to fulfill their changing demands better than the local unorganised players. Increase in per capita income has led to an increase in sales of jewellery, as jewellery is a status symbol in India.
The Reserve Bank of India (RBI) has liberalised gold import norms. With this, star and premier export houses can import the commodity, while banks and nominated agencies can offer gold for domestic use as loans to bullion traders and jewelers. Also, India has signed a Memorandum of Understanding (MoU) with Russia to source data on diamond trade between the two countries. India is the top global processor of diamonds, while Russia is the largest rough diamond producer. The Government of India is planning to establish a special zone with tax benefits for diamond import and trading in Mumbai, in an effort to develop the city as a rival to Antwerp and Dubai, which are currently the top trading hubs for diamond.
In another significant development, the Gems and Jewellery Skill Council of India is planning to train over four million persons till 2022 as the sector is facing shortage of skilled manpower. The council aims to train, skill and enhance 4.07 million people by 2022.The council will tie-up with the existing training institutes including Gemological Institute of America (GIA) and Indian Gemological Institute (IGI), alongwith setting up of new institutes in major diamond cutting and processing centres, Gems & Jewellery Export Promotion Council (GJEPC) said in a statement here.
In the coming years, growth in the industry would be highly contributed with the development of the 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. These players are also offering financing schemes to consumers to further boost sales. 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.
Rate Used: INR 1= US$ 0.016 as on February 25, 2015
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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