export of gems and jewellery from india (1)

8/7/2019 EXPORT OF GEMS AND JEWELLERY FROM INDIA (1)

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Indian Gems and Jewellery IndustryExport of Gems and Jewellery

Employment GenerationGovernment Policies

Findings

RecommendationsConclusion


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Introduction Indian Gems and Jewellery Sector

Structure

Market Overview


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A gemstone or gem (also called a preciousor semi-precious stone, orjewel) is apiece of mineral, which, in cut and polished

form, is used to make jewelry or otheradornments.

Used in combination with precious metalslike silver, gold, platinum and other non

precious metals.


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one of the fastest-growing sectors in India. talented craftsmen, superior practices in cutting and polishing

fine diamonds and precious stones and cost-efficient.

2008-09, the sector accounted for around 13% of the countrystotal exports.

sourcing, manufacturing, and processing, which involvescutting, polishing and selling precious gemstones and metals.

Gold jewellery is the most preferred form of jewellery indemand in India.

gold occupies the second position among all investment

instruments and is considered as the safest investment option


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India is the largest consumer of gold as per WorldGold Council.

2008, India consumed 22.71% of the total goldconsumed all over the world most of which was

used in producing gold jewellery. After 2008, gold demand remained weak, yet 2009

accounted for 20.87% of the total gold consumedall over the world.

India is one of the largest diamond processors. specialised skills in processing small diamonds (below 1

carat) Craftsmen are excellent in cutting and polishing small

diamonds. most of the cutting and polishing manual

diamonds processed in India account for 85% in volume,92% in pieces and 60% in value of the total worlddiamond market.

G&J sector is highly export-oriented, labour-intensive and a major contributor to the foreignexchange earnings.


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highly-fragmented and unorganised,characterised by family-owned operations.

96% of the gems and jewellery players havefamily-owned businesses

categorised as gemstones, jewellery and pearls,further segmented into- , coloured stones(precious, semi-precious and synthetic), studded

jewellery, costume jewellery, gold and silver. diamond and gold are the two most important

segments .


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2008, total market size of the sector - US$ 23.44bn out of which exports largest share of 90.45%at US$ 21.20 bn.

2006-07 market share of just around 3% in the

global gems and jewellery sector, which wasworth around US$ 80 bn annually. Market characteristics

Unorganised SectorWorking Capital-Intensive Labour-Intensive Raw Material-Intensive Import Dependency for Raw Materials


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Competition

Others include countries such asNamibia, Brazil, Sierra Leone, Tanzaniaand Ghana


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The Gems and jewellery sector is a majorforeign exchange earner.

Sectors contribution towards the total exportsIn 2009 & 2010 was 15.10% & 16.40% resp.

Government is making policies in order topromote this sector.


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FY G&J Exports (in

Bill. Rs)

% Growth over

prev. Year

Total Exports (in

Bill. Rs)

% to Total Exports

1973 0.79

1991 26.44 177.63 14.89

1992 47.46 79.48 288.90 16.43

1993 63.12 33.02 369.54 17.08

1994 84.17 33.33 449.51 18.72

1995 141.31 67.89 826.37 17.10

1996 176.44 24.86 1062.89 16.60

1997 168.72 -4.38 1188.17 14.20

1998 198.67 17.75 1298.50 15.30

1999 249.45 25.56 1401.40 17.80

2000 325.09 30.32 1593.58 20.40

Source: ICRA Report & GJEPC Data


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FY G&J Exports (in

Bill. Rs)

% Growth over

prev. Year

Total Exports (in

Bill. Rs)

% to Total Exports

2001 337.33 3.77 2032.11 16.60

2002 348.45 3.30 2086.53 16.70

2003 437.01 25.42 2555.61 17.10

2004 485.86 11.18 2926.87 16.60

2005 618.34 27.27 3747.52 16.50

2006 688.30 11.31 4558.28 15.10

2007 835.65 21.41 5497.70 15.20

2008 950.92 13.79 7203.94 13.20

2009 1251.99 31.66 8291.32 15.10

2010 1679.56 34.15 10241.22 16.40



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Gems & Jewellery Export Promotion Council (GJEPC) Trade Facilitator Advisory Role Nodal Agency for Kimberley Process Certification SchemeTraining and Research

Varied Interests

Gem & Jewellery Trade Council of India (GJTCI): Resolving any issue arising from trade in gems and jewellery. Nodal Agency for

The Bureau of Indian Standards responsible for hallmarking gold jewellery in India.


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Prior to 1991 several restrictions on the export and importof gold from and into India were imposed.

Only the State Bank of India (SBI) and the Metals TradingCorporation of India (MMTC) were allowed to import gold.

The reasons for imposing these restrictions were: To reduce demand for, as well as availability of gold To alter the savings preferences of the population in favour of investments other

than gold/silver To stop smuggling of gold To conserve foreign exchange resources To prevent generation of or to unearth black money. It was thought that since gold

was one of the most obvious choices for keeping undeclared/ill-gotten income andwealth, a policy to restrict supply of gold would be effective in curbing black money.


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The government abolished the Gold Control Act .

Exporters in the export processing zones wereallowed to sell 10% of their produce in the domesticmarket.

In 1993, gold and diamond mining were opened upfor private investors and foreign investors.

In 1997, overseas banks and bullion suppliers were

also allowed to import gold into India.


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The result of the liberalization of thegold, jewellery and gems sector hadgrown exponentially as the previous

slide graph is becoming parallel to Yaxis..

, As indicated in the previous slide

graph which is approaching zero ataround 1990-91, the exports whichwas negligible before 1991,


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At present, the Indian government allows 100%(FDI) in gems and jewellery through theautomatic route.

For exploration and mining of diamonds andprecious stones FDI is allowed up to 74% underthe automatic route.

For exploration and mining of gold and silver andminerals other than diamonds and preciousstones, metallurgy and processing, FDI is allowedup to 100% under the automatic route.


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The Kimberly Process was set up to discuss waysto stop the trade in conflict diamonds and toensure that diamond purchases did not fundviolence.

The Kimberley Process Certification Scheme(KPCS) was implemented in India on January 1,2003 to verify the legitimacy of the import /export of rough diamonds as per the UNresolution and to curb the entry of conflictdiamonds into the global trade flow.


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The system of verification and issuance of KPCis administered from the Mumbai and Suratoffices of GJEPC.

In Indias Foreign Trade Policy 2009-14, thefollowing measures related to the KimberleyProcess Certification Scheme (KPCS) havebeen adopted: No import or export of rough diamonds shall be permitted unless

accompanied by the KP certificate as specified by the GJEPC.

The export and import of rough diamonds to and from Venezuelahas been prohibited by the Indian government owing to thevoluntary separation of Venezuela from the KPCS.


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Following Fiscal Stimulus Measures(December 2008) for G&J sector were taken.

Increasing the post-shipment Rupee export credit period from90 days to 180 days from November 28, 2008

Increasing the pre-shipment rupee export credit period from180 days to 270 days from November 15, 2008

Providing an interest subvention of 2% up to March 31,2009.

Allowing exporters to avail refund of service tax on foreign

agent commissions of up to 10% of FOB value of exports.


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Due to Fiscal Stimulus Measures (December2008) the import of gold had increased from

800 ton per annum in 2007 to 850 ton per

annum in 2008 as shown in the diagram next

slide.

I t f ld i I di (S F P I di )


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Import of gold in India (Source Free Press India)



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Customs Duty on Gold and Silver Customs duty on serially numbered gold bars (other than tola bars)

and gold coins to be increased from Rs 100 per 10 gram to Rs 200per 10 gram

Customs duty on silver to be increased from Rs 500 per kg to Rs1,000 per kg

Central Excise Duty Excise duty on branded articles of jewellery to be reduced from 2% to

nil.

All categories within HS code 71 except the diamonds whether or notworked but not mounted or set (HS code 7102)

The category diamonds whether or not worked but not mounted orset (HS code 7102) currently does not attract any excise duty.


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Due to increase in duty on gold and alsoincrease in price of gold the import of goldhas decreased from 825 ton per annum to625 tons per annum as indicated in abovechart.


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To promote the exports of gems and jewellery, thegovernment has set up various SEZs with specific incentives.Highlights of SEZs in the gems and jewellery sector arebelow:

No import or export of rough diamonds without Kimberley Process Certificate issued bythe Development Commissioner.

Cut and polished diamonds and precious and semi-precious stones (except roughdiamonds, precious or semiprecious stones having zero duty) shall not be allowed to betaken outside the SEZ for sub-contracting.

A gem and jewellery unit may receive plain gold or silver or platinum jewellery from theDomestic Tariff Area or from an EOU or from a unit in the same or another SEZ inexchange of equivalent content of gold or silver or platinum contained in the said

jewellery after adjusting permissible wastage or manufacturing loss allowed under the

provisions of the Foreign Trade Policy read with the handbook of procedures. The DTA Unit undertaking sub-contracting or supplying jewellery against exchange of

gold or silver or platinum shall not be entitled to export entitlements.


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Employment Prediction


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a. Entitlement for Duty Free imports of Gems and Jewellery sampleshave been enhanced to Rs. 3 lakhs in a financial year or 0.25% of theaverage of the last three years exports turnover or gems andjewellery items, whichever is lower. Earlier this limit was Rs. 1lakh.

b. Supply of gold of 0.995 and above purity has also been allowed forrelease by nominated agencies for export purposes. Earlier thisfacility was only available for supply of gold in the domesticmarket.c. The notional rate for fixing the US $ rate for calculating goldjewellery exports shall now be based on a certificate which is not

older than 7 working days from the date of shipping. The presentprovisions mandated that the notional rate certificate issued by thenominated agency should not be older than 3 working days.

STRENGTHS


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d. Exporters of plain/studded/precious metal jewellery will be allowedto import plain/ studded/precious metal jewellery (Gold jewellery of18 carat and below/platinum and sterling silver jewellery) for thepurposes of exports.

India is targeting a 40 per cent jump in its trade with the ASEAN to$70 billion in 2012 with the signing of Free Trade Agreement with the

10-nation trade groupingASEAN consists of Brunei Darussalam, Cambodia, Indonesia, Lao PDR,Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.The agreement that provides for both India and ASEAN reducing tariffon agreed goods has come into force with all but Cambodia andPhilippines.

"The agreement mainly consists of exchange of tariff concessions byIndia and ASEAN countries during January 1, 2010, and December 31,2024,"


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France is the third largest jewellery consumer in Europe and is a huge marketfor large gold plated and custom jewellery.Though Italy has the largest spending power on jewellery in Europe andhas invented mixing sterling with white gold.

The $16 million domestic jewellery market is expanding rapidly and

there are about 50 brands. The sector has the potential to reach $26million by 2012.

India's gems and jewellery exports jumped by about 22 percentyear-on-year to $2.86 billion in January on the back of healthy demandfrom Western markets like the US and Europe."We are witnessing good demand for gems and jewellery exports from theUS, European and Gulf markets. In fact, we are expecting the jewelleryexports to surpass the target of USD 30 billion in 2010-11," Gems andJewellery Export Promotion Council (GJEPC) Chairman Rajiv Jain said.The council also feels that the country's gems and jewellery exportsmay rise by 17.8 percent to $33 billion in the current fiscal vis-a-vis the lastfinancial year.

Opportunities


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"The local consumption of gold and silver jewellery may hurt owing to theincrease in excise duty and this in turn may affect skilled workers in thissector,"The increase in the duty will now encourage smuggling in the market.

1. Rising Gold Prices.

2. Dependence on raw material import.

3. Emerging threat from other countries.

Nevertheless, the budget could have helped the industry by loweringthe rate of presumptive profit under benign tax procedure, which hasbeen GJEPCs demand for a while, as it would have helped India totruly establish itself as an international hub for diamonds, gems andjewellery.

THREATS


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Trends

1. Growing organized retail space

2. Aggressive marketing and advertising.

3. Large scale shows and exhibitions.

4. Domestic players acquiring foreign companies.

5. Investments from PE firms.

6. Corporate houses entering the market.

According to Miss Paola De Luca, TJF Co-founder and creativedirector,

emerald green and aqua blue are going to be in vogue in thecomingseason and black and white diamonds are still relevant. Clearwhite and icy diamonds are much in demand and 1920-inspiredjewellery is back.

export of gems and jewellery from india (1)

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