Trade Analytics
Gems and Jewellery
Indian gem and Jewellery industry contributed US$ 39.9 billion in terms of foreign exchange earnings in FY 2014-15.

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

Latest update: February, 2017

  • Net Gems and Jewellery exports for 2015-16 was to the tune of US$ 32 bn as compared to US$ 36.2 bn in 2014-15
  • In terms of segments, exports for 2015-16 were as follows: Cut and polished diamonds: US $ 20 bn, Gold Medallions and coins: US$ 5.2 bn, Silver Jewellery: US$ 3 bn
  • The fall in exports have been due to slowdown in global economy and lack of demand for luxury good
  • The export performance for current year is also expected to be under pressure, though improvement of business sentiment would exist in America, which is the world’s largest consumer ; as well as 50 per cent of India’s diamond jewellery production
Gems and Jewellery Industry in India
Gems and Jewellery Industry in India

 

Last Updated: February, 2017

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. 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 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). 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

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. India’s gems and jewellery exports to the US rose 7.81 per cent year-on-year during October-December 2016 due to a revival in the overall economic activity in the US.

The overall net exports of Gems & Jewellery during April-December 2016 stood at Rs 175,879.24 crore (US$ 26.28 billion), whereas exports of cut and polished diamonds stood at Rs 113,171.17 crore (US$ 16.91 billion). Exports of gold coins and medallions stood at Rs 25,819.48 crore (US$ 3.86 billion) and silver jewellery export stood at Rs 18,010.72 crore (US$ 2.69 billion) during April-December 2016. According to GJEPC, gems and jewellery exports are likely to witness a growth of about 10 per cent this fiscal due to increasing demand in the US and Europe.

According to a report by Research and Markets, the jewellery market in India is expected to grow at a Compound Annual Growth Rate (CAGR) of 15.95 per cent over the period 2014-2019.

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-September 2016 were US$ 851.34 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. They also have plans to invest Rs 900 crore (US$ 133.55 million) over the next three years to expand its presence in the international markets like Sri Lanka, Singapore and Malaysia.
  • 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.
  • Rajesh Exports Limited (REL), a jewellery exporter and retailer, has won an export order contract worth Rs 1,045 crore (US$ 154.85 million) of designer range of gold and diamond-studded jewellery and medallions from Singapore.
  • KSS Limited, a digital and entertainment major, has forayed into the jewellery retailing business under the franchise model and is looking to open 500 stores under brand 'Bjewelz' which is owned by Birla Jewels Limited, a wholly owned subsidiary of KSS Limited.
  • Melorra, a Bengaluru-based online jewellery start-up, has raised US$ 5 million funding from venture capital firm Lightbox Ventures, to build its brand, enhance its technology platform, and talent acquisition.
  • Major mining companies such as Rio Tinto, De Beers and Alrosa have decided to participate in the Indian Diamond Trading Centre (IDTC) which has been set up to eliminate the middlemen in diamond trade and allow Indian manufacturers to deal directly with miners.
  • India Bullion and Jewellers Association (IBJA) has signed an pact with the Bombay Stock Exchange (BSE) for setting up India’s first bullion exchange through a Special Purpose Vehicle (SPV), wherein IBJA and its constituents will hold 70 per cent and BSE will hold 30 per cent stake.
  • Global luxury brand Montblanc International has entered into a joint venture with India’s largest watch maker Titan Co Ltd and plans to start the retail operations in India by opening five Montblanc boutiques in Mumbai, Delhi, Hyderabad and Pune.
  • Jewellery major Joyalukkas plans to invest Rs 1,500 crore (US$ 220.08 million) on setting up 20 stores in India and 10 overseas. The new stores, which will come up almost in a year’s time, will add to the Thrissur-headquartered company's existing 95 outlets.
  • London-headquartered Gemfields, a multi-national firm specialising in colour gemstones mining and marketing, is planning to acquire colour gemstone mines in Odisha and Jharkhand, and participate in the exploration of the Kashmir sapphire mines in Jammu & Kashmir.
  • The India arm of US private equity (PE) firm Warburg Pincus picked up a minority stake in Kerala-based Kalyan Jewellers for Rs 1,200 crore (US$ 176 million). The jeweller plans to use the proceeds to fund its retail and manufacturing expansion plans.
  • Creador, a PE firm focused on long-term investments in growth-oriented businesses in Indonesia, India, Malaysia and Singapore, invested Rs 135 crore (US$ 20.28 million) for a minority stake in PC Jeweller Limited.

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.
  • The Reserve Bank of India has announced norms for gold monetisation scheme, which allows individuals, trusts and mutual funds to deposit gold with banks in return for interest, to help reduce gold imports and alleviate pressure on trade balance.
  • 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 jewellers.
  • 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.
  • Due to shortage of skilled manpower, the Gems and Jewellery Skill Council of India is planning to train over four million people till 2022. The council aims to train, skill and enhance 4.07 million people by 2022. The council plans to tie-up with the existing training institutes including Gemological Institute of America (GIA) and Indian Gemological Institute (IGI), along with setting up of new institutes in major diamond cutting and processing centres, GJEPC said in a statement.
  • The GJEPC has also proposed to develop a jewellery park on Thane-Belapur Road which is around five kilometers from Mumbai with a view to boost the Mumbai-based jewellery industry by providing modern facilities and services.
  • Indian Institute of Gems & Jewellery (IIGJ) Mumbai, a project of the GJEPC, has come-up with three-year Graduate Program in Jewellery Design & Manufacturing Techniques with an introduction to Management studies in collaboration with Welingkar Institute of Management.
  • In September 2015, the Government of India approved the gold monetisation plan in the form of revamped Gold Deposit Scheme (GDS) and the Gold Metal Loan (GML) Scheme to mobilise tonnes of gold stored in households and temples across the country. The Union Cabinet also approved the introduction of Sovereign Gold Bond Scheme, under which gold bonds denominated in grams of gold will be issued to individuals by the Reserve Bank of India (RBI), in consultation with Ministry of Finance.

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.

Exchange Rate Used: INR 1 = US$ 0.015 as on February 9, 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

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

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