 Indian Gems and Jewellery Industry

 Export of Gems and Jewellery

 Employment Generation

 Government Policies

 Findings

 Recommendations

 Conclusion
 Introduction
 Indian Gems and Jewellery Sector

 Structure

 Market Overview
 A gemstone or gem (also called a precious
or semi-precious stone, or jewel) is a
piece of mineral, which, in cut and polished
form, is used to make jewelry or other
adornments.
 Used in combination with precious metals
like silver, gold, platinum and other non
precious metals.
 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 country’s
total exports.
 sourcing, manufacturing, and processing, which involves
cutting, polishing and selling precious gemstones and metals.
 Gold jewellery is the most preferred form of jewellery in
demand in India.
 gold occupies the second position among all investment
instruments and is considered as the safest investment option
 India is the largest consumer of gold as per World
Gold Council.
 2008, India consumed 22.71% of the total gold
consumed 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 consumed
all 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 world
diamond market.
 G&J sector is highly export-oriented, labour-
intensive and a major contributor to the foreign
exchange earnings.
 highly-fragmented and unorganised,
characterised by family-owned operations.
 96% of the gems and jewellery players have
family-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 .
 2008, total market size of the sector - US$ 23.44
bn 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 was
worth around US$ 80 bn annually.
 Market characteristics
 Unorganised Sector
 Working Capital-Intensive
 Labour-Intensive
 Raw Material-Intensive
 Import Dependency for Raw Materials
 Competition

“Others” include countries such as

Namibia, Brazil, Sierra Leone, Tanzania
and Ghana
 The Gems and jewellery sector is a major
foreign exchange earner.

 Sector’s contribution towards the total exports

In 2009 & 2010 was 15.10% & 16.40% resp.

 Government is making policies in order to

promote this sector.
FY G&J Exports (in % Growth over Total Exports (in % to Total Exports
Bill. Rs) prev. Year Bill. Rs)
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

FY G&J Exports (in % Growth over Total Exports (in % to Total Exports
Bill. Rs) prev. Year Bill. Rs)
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

Source: ICRA Report & GJEPC Data

 Gems & Jewellery Export Promotion Council (GJEPC)
 Trade Facilitator
 Advisory Role
 Nodal Agency for Kimberley Process Certification Scheme
 Training 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.
 Prior to 1991 several restrictions on the export and import
of gold from and into India were imposed.
 Only the State Bank of India (SBI) and the Metals Trading
Corporation 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 and
wealth, a policy to restrict supply of gold would be effective in curbing black money.
 The government abolished the Gold Control Act .

 Exporters in the export processing zones were

allowed to sell 10% of their produce in the domestic
market.

 In 1993, gold and diamond mining were opened up

for private investors and foreign investors.

 In 1997, overseas banks and bullion suppliers were

also allowed to import gold into India.
Source: ICRA Report & GJEPC Data
 The result of the liberalization of the
gold, jewellery and gems sector had
grown exponentially as the previous
slide graph is becoming parallel to Y
axis..
 , As indicated in the previous slide
graph which is approaching zero at
around 1990-91, the exports which
was negligible before 1991,
 At present, the Indian government allows 100%
(FDI) in gems and jewellery through the
automatic route.
 For exploration and mining of diamonds and
precious stones FDI is allowed up to 74% under
the automatic route.
 For exploration and mining of gold and silver and
minerals other than diamonds and precious
stones, metallurgy and processing, FDI is allowed
up to 100% under the automatic route.
 The Kimberly Process was set up to discuss ways
to stop the trade in ‘conflict diamonds’ and to
ensure that diamond purchases did not fund
violence.

 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 UN
resolution and to curb the entry of conflict
diamonds into the global trade flow.
 The system of verification and issuance of KPC
is administered from the Mumbai and Surat
offices of GJEPC.
 In India’s Foreign Trade Policy 2009-14, the
following measures related to the Kimberley
Process Certification Scheme (KPCS) have
been 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 Venezuela

has been prohibited by the Indian government owing to the
voluntary separation of Venezuela from the KPCS.
 Following Fiscal Stimulus Measures
(December 2008) for G&J sector were taken.

 Increasing the post-shipment Rupee export credit period from

90 days to 180 days from November 28, 2008
 Increasing the pre-shipment rupee export credit period from
180 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.
 Due to Fiscal Stimulus Measures (December
2008) 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.
 Import of gold in India (Source Free Press India)

Import of gold in India (Source Free Press India)

Import of gold in India (Source Free Press India)
 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 200
per 10 gram
 Customs duty on silver to be increased from Rs 500 per kg to Rs
1,000 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 not
worked but not mounted or set’ (HS code 7102)
 The category ‘diamonds whether or not worked but not mounted or
set’ (HS code 7102) currently does not attract any excise duty.
 Due to increase in duty on gold and also
increase in price of gold the import of gold
has decreased from 825 ton per annum to
625 tons per annum as indicated in above
chart.
 To promote the exports of gems and jewellery, the
government has set up various SEZs with specific incentives.
Highlights of SEZs in the gems and jewellery sector are
below:

 No import or export of rough diamonds without Kimberley Process Certificate issued by

the Development Commissioner.
 Cut and polished diamonds and precious and semi-precious stones (except rough
diamonds, precious or semiprecious stones having zero duty) shall not be allowed to be
taken outside the SEZ for sub-contracting.
 A gem and jewellery unit may receive plain gold or silver or platinum jewellery from the
Domestic Tariff Area or from an EOU or from a unit in the same or another SEZ in
exchange 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.
Employment Prediction
STRENGTHS

a. Entitlement for Duty Free imports of Gems and Jewellery samples

have been enhanced to Rs. 3 lakhs in a financial year or 0.25% of the
average of the last three years exports turnover or gems and
jewellery items, whichever is lower. Earlier this limit was Rs. 1
lakh.

b. Supply of gold of 0.995 and above purity has also been allowed for
release by nominated agencies for export purposes. Earlier this
facility was only available for supply of gold in the domestic
market.
c. The notional rate for fixing the US $ rate for calculating gold
jewellery exports shall now be based on a certificate which is not
older than 7 working days from the date of shipping. The present
provisions mandated that the notional rate certificate issued by the
nominated agency should not be older than 3 working days.
d. Exporters of plain/studded/precious metal jewellery will be allowed
to import plain/ studded/precious metal jewellery (Gold jewellery of
18 carat and below/platinum and sterling silver jewellery) for the
purposes 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 grouping
ASEAN 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 tariff
on agreed goods has come into force with all but Cambodia and
Philippines.

"The agreement mainly consists of exchange of tariff concessions by

India and ASEAN countries during January 1, 2010, and December 31,
2024,"
Opportunities

France is the third largest jewellery consumer in Europe and is a huge market
for large gold plated and custom jewellery.
Though Italy has the largest spending power on jewellery in Europe and
has 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 $26
million by 2012.
India's gems and jewellery exports jumped by about 22 percent
year-on-year to $2.86 billion in January on the back of healthy demand
from Western markets like the US and Europe.
"We are witnessing good demand for gems and jewellery exports from the
US, European and Gulf markets. In fact, we are expecting the jewellery
exports to surpass the target of USD 30 billion in 2010-11," Gems and
Jewellery Export Promotion Council (GJEPC) Chairman Rajiv Jain said.
The council also feels that the country's gems and jewellery exports
may rise by 17.8 percent to $33 billion in the current fiscal vis-a-vis the last
financial year.
 THREATS

"The local consumption of gold and silver jewellery may hurt owing to the
increase in excise duty and this in turn may affect skilled workers in this
sector,"
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 lowering

the rate of presumptive profit under benign tax procedure, which has
been GJEPC’s demand for a while, as it would have helped India to
truly establish itself as an international hub for diamonds, gems and
jewellery.
 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 creative

director,
emerald green and aqua blue are going to be in vogue in the
coming
season and black and white diamonds are still relevant. Clear
white and icy diamonds are much in demand and 1920-inspired
jewellery is back.