GEMS AND JEWELLERY SECTOR

HS CODE 71

BY: SAGAR GARG MANSI CHUGH MEHAK BATLA ROMIL SINGH VISWAROOP NIKHIL SURI ABHISHEK GUPTA ANSHU CHABRA

*
The Indian gems and jewellery sector is largely unorganised at present. There are over 15000 players across the country in the gold processing industry. The industry is dominated by family jewellers, who constitute nearly 96 percent of the market. Organised players such as Tata with its Tanishq brand, have, however, been growing steadily. As Indias jewellery market matures, it is expected to get more organised and the share of family jewellers is expected to decline. The braded jewellery sector is estimated to reach US$ 2.2 billion by 2010 on the back of quality consciousness among target consumers Statistics
Total No. of Units in Gems And Jewellery - 11136 No. of Units in Organized sector - 817

No. of Units in Small Scale sector - 10319

SIZE Large market for Gems & Jewellery with domestic sales of over $2.24 billion. 4% of the global Gems and Jewellery market . One of Indias leading foreign exchange earning sectors over the year has witnessed a considerable growth in the volume of exports from export figures of US$ 29358.49 million in the FY 2009-2010, to US$ 43139.24 million in FY 2010-2011, thus indicating a net increase of 46.89% in the total Gem & Jewellery exports. The performance of this industry is critical as it contributes 16.67% to Indias total merchandise exports India is the largest consumer of gold jewellery in the world. Accounts for about 20% of world consumption. India is the largest diamond cutting and polishing center in the world. 60% value share, 85% volume share and 92% share of the world market by number of pieces. Third largest consumer of polished diamonds after USA and Japan.

*STRUCTURE
The Indian Gems & Jewellery industry is highly fragmented with a large number of
domestic private sector companies. A large portion of the market is in the unorganized sector . India is gaining prominence as an international sourcing destination for high quality designer jewellery . Walmart, JC Penney etc. procure jewellery from India

Sourcing Processing Manufacturing Selling

SEZ ( Special Economic Zones)

GOLD DIAMOND PLATINUM

EPZ ( Export Processing Zones) SEEPZ ( Electronic Exports Processing Zone)

COSTUME JEWELLERY

G & J Industry comprises of:

EXPORT comprises of:

Main Products

POLICY

100% FD is permitted in the Gems & Jewellery sector through the

automatic route. SEZs and Gems and Jewellery Parks have been set up to promote investments in the sector. OPPORTUNITY

India is one of the largest exporters of gems and jewellery

diamond polishing capital of the world.

India is the

OUTLOOK
sales.
.

India is the fastest-growing jewellery market in the world. Branded jewellery likely to be the fastest-growing segment in domestic

*POTENCIAL
India has several well recognized strengths which have made it a
significant force in the global Gems and Jewellery business. Highly skilled, yet low-cost labor. Established manufacturing excellence in jewellery and diamond polishing. India is the most technologically advanced diamond cutting center in the world. Opportunity to address one of the worlds largest and fastest-growing Gems and Jewellery markets. Opportunity to leverage Indias strengths to address the global market .

The products in the sector can be categorized as gemstones, jewellery and pearls, which can be further segmented into diamonds, colored stones (precious, semi-precious and synthetic), studded jewellery, costume jewellery, gold and silver. Diamond and gold being the two most important segments of the Indian gems and jewellery sector

IMPORT OF RAW MATERIAL

VALUE CHAIN OF GEMS AND JEWELLEY

Key Brands in the Indian Jewellery Segment:

GILI Established by Gitanjali in 1984 after Gold Control Act by Govt.

TANISHQ Established in 1984 A tata group Company CARBON Established in 1996 within the Peakok Fold. In 1991. Bangalore based Peakok Jewellery was incorporated. OYZTERBAY Began in March 2001. Seeks to build a National Brand and aspires to be the largest branded company in the country. TRENDSMITH By Tribhovandas Bhimji Zaveri. Concept store.

*
ANDHRA PRADESH: Mining major, including De beers, are exploring areas for minerals and diamond. Alexandrite, cats eye and rubies are also found here. CHHATTISGARH : De Beers has invested several million dollars in exploration that suggests a huge diamond reserve (the Indian Bureau of mines estimated a reserve of 1,30,0400 carats. JAMMU & KASHMIR : J&K is known for blue Sapphires. The state mining corporation is currently exploring various stones in the padar area. KARNATAKA :has been known a continuous supply of star rubies over the years. Diamond prospecting is also carried out here.

* KERALA

: Mainly chrysoberyl as well as some fine qualities of cats eye and alexandrite.
: known for the panna diamond mines- the only active diamond producing centers in India. is known as the Brazil of India and consist of major gemstones and a diamond belt. Everything from corundum, rubies, sapphires, emeralds, star and cats eye are found here. :best known for emeralds, but there are other gemstones and brown concentrated.

* MADHYA PRADESH * ORISSA :

* RAJASTHAN

* TAMIL NADU :sapphires, corundum, rubies, cats eye, feldspar

sunstone with a cats eye effect are found here.

MANUFACTURING & PROCESSING CENTRES

SURAT :is an important diamond processing center, which exports around 80% of the production and has more than 3,500 diamond processing units. MUMBAI: is the centre for machine-made jewellery. The city is also Indias largest wholesale market, in terms of volume. : HYDERABAD: is the centre for precious and semi-precious studded jewellery and pearls called Hyderabad rice pearls. NELLORE: Nellore (Andhra Pradesh)is a source for handmade jewellery and has been supplying to the Chennai market for quite a few decades. Belgaum in Karnataka and Nellore together specialize in studded jewellery using synthetic stones. COIMBATORE specialize in casting jewellery.
.

TRICHUR: Trichur in Kerala is another source for lightweight gold jewellery and Diamond cutting.
KOLKATA :is popular for its lightwight plain gold jewellery. This categories of jewellery finds a large market in Tamil Nadu. JAIPUR: is a key centre for polishing precious and semi- precious gemstones. The city is particular famous for cutting and polishing of emeralds along with topaz and diamonds. DELHI: is famous for manufacturing silver jewellery and articles

 Exports from this sector constituted around 17% of the total exports from India during FY00 to FY09 India has been one of the largest importers of gemstones, rough diamonds and precious metals over the years and most of these imports were used for value addition and exports India is also one of the largest consumers of gold in the world, as it accounts for more than 20% of the world gold consumption.

Exporting trends in the gems and jewellery sector

The Gems & Jewellery sector has experienced high growth over the years on the back of a buoyant performance in its exports. Total exports of Gems an d Jewellery has registered an impressive growth from US$ 2.99 bn in FY91 to 21.12 bn in FY09 which translates into a C AGR of around 11.47%. However, during FY01-FY02, the slowdown in the US, which is the largest importer of India's gems and jewellery, and some other importer countries, led to a demand contraction and a subsequent decline in the export growth rate for the sector; while the decline was mainly in exports of cut and polished diamonds (C PD), gold jewellery exports had remained resilient as it registered a positive growth. Net exports during FY01 and FY02 fell to US$ 7.8 bn and US$ 7.6 bn, respectively, as compared with US$ 8.1 bn during FY00. The government took important policy initiatives, including de -licensing of the import of rough diamonds (with effect from April 1, 2002), which was a long standing need, to give a boost to this sector. This was reflected in the growth in the exports during FY03. Exports during FY03 grew by 21.36% as compared to a decline of around 3% during the previous financial year. during FY06 and FY07 the sector witnessed a deceleration in the rate of growth (6.5% during FY06 and 2.7% during FY07) in net exports due to the dismal performance in the cut and polished diamonds segment.

Sluggish demand from the US continued during FY07 as well. The exporters also faced delay in payments especially from the US. Moreover, there was a decrease in the diamond trading activities of bonded warehouses. In FY08 the gems and jewellery sector showed resilience amid turbulent market conditions. The facility of duty-free treatment under the General Scheme of Preferences (GSP) for precious metals (other than silver) and articles of jewellery enjoyed by the Indian exporters was terminated by the US from July 1, 2007. However during FY08, Indias exports of gold jewellery recorded a significant moderation. Due to the volatility in gold prices in FY08 and global economic downturn, a slowdown in demand for gold jewellery was witnessed worldwide. Growth in the exports of gold jewellery moderated to 6.67% during FY08 as compared with a high growth rate of 34.18% during FY07. During FY09, the global economic slowdown, which manifested during the second half of FY09, severely hindered the purchasing power of the jewellery customers, both external as well as domestic. In spite of this, the growth in the net exports during FY09 remained in the positive territory mainly due to the robust performance during the first half of the year. Despite the slump in exports of C PD segment (the C PD segment witnes sed a decline of around 8% in exports in dollar terms), the sector was able to achieve a marginal growth rate of 1.32% in dollar terms on account of gold jewellery export sales, which clocked a high growth rate of 23.29% during FY09.

The overseas demand erosion, mainly from US led to postponement or cancellation of orders resulting in inventory build up, erosion of profit margins, shutting down of manufacturing units and retrenchment in the sector. However, the March 09 export figures point out to the fact that the pace at which the exports were declining has been arrested to some extent. Exports during March 2009 registered a decline of 16.75% on a y -o-y basis, while they were down by about 33.94% (y-o-y) during January 2009

MAJOR ITEMS EXPORTED

As one of the largest cutting and polishing centre of diamonds in the world, the Indian CPD segment has always held the largest share in the total exports of gems and jewellery. India primarily focussed on exports in cut and polished diamonds owing to its traditional expertise in diamond cutting and polishing. Growing by around an annual average growth rate of 9%, this segment held an average share of around 83% in the net exports of gems and jewellery during FY92 to FY02. CPD exports grew from US$ 7.11 bn in FY03 to US$ 13.02 bn in FY09; however, over the years, the fall in the share of CPD exports has been increasingly replaced by the growth in exports of gold jewellery.

The share of gold jewellery in India's net exports of gems and jewellery increased from merely 6.80% in 1990-91 to 16.50% in FY03 and to 32.47% in FY09. Exports of gold jewellery (as shown in the graph below) also witnessed an increase from US$ 1.51 bn in FY03 to US$ 6.86 bn in FY09 at a CAGR of 28.69%.

Recognising the growing acceptance of Indian gold jewellery in the world market the government had initiated several measures including a medium term strategy in FY06 . The following measures were a part of this medium-term strategy: a. Hallmarking and certification of gold to aid the development of Indian brands in the jewellery market. b. Integration throughout the jewellery supply chain from mining of raw materials to retailing of end products as well as joint venture manufacturing with the leading suppliers of the world. c. Developing market intelligence with a focus on key markets including NRIs. Measures such as gradual liberalisation of gold import in the country and openi ng of gold trading in exchanges had also provided a boost to the gold segment. The sustained buoyancy in exports of gems and jewellery over the years reflects the effects of continuing policy initiatives taken by the government over the years. As raw mater ials for the sector are largely imported, the government has focussed on reducing the barriers to import raw materials. Identified as a thrust sector which has prospects for export expansion and for employment generation under the Foreign Trade Policy of 2004-09, special policy initiatives had been announced to increase the competitiveness of the Gems and Jewellery sector.

The share of exports of coloured gemstones in Indias net exports is very small. Moreover, India is a net importer of pearls and synthetic stones. In fact, rough coloured gemstones, synthetic stones and raw pearls are largely imported for value addition and for preparation of final products, which are then sold either in the domestic or international market. India has a rich resource of highly skilled and low cost labourers which is effectively utilised by the Indian manufacturers in this sector for creation of highly value added goods. Even though platinum jewellery is highly sought-after in the international markets, India does not export the same because it lacks natural resources for platinum; however, platinum bars are imported into India, though in very low quantities, as the demand for platinum jewellery is restricted to high-end customers and is not very robust.

Export from India for last five years

Year

Total Exports of Gems and Jewellery ( US $ Million)

% Share to Total Exports

2010 - 2011

40,058

15.95%

2009 - 2010

29,203

16.33%

2008-2009

28,466

15.36%

2007-2008

19,824

12.15%

2006-2007

16,091

12.79%

Export Trend Graphical

PRODUCT WISE EXPORT

PEARLS NATURAL PEARLS CULTURED PEARLS UNWORKED CULTURED PEARLS WORKED

2010-11 0.48 0.20 0.36 1.04

2009-10 3.28 0.09 0.21 3.58

2008-09 1.43 1.65 0.31 3.39

DIAMONDS SORTED INDUSTRIAL DIAMONDS UNSORTED INDUSTRIAL DIAMONDS NON-INDUSTRIAL DIAMONDS UNWORKED DIAMOND CUT (OTHR THN INDSTRL DIAMOND) OTHERS

2.29 0.09 0.248 25090.09 110.83 25,828.88

18.41 3.62 474.27 17527.33 14.28 18,042.20

7.47 0.16 632.84 15,199.32 23.66 15,883.75

PRECIOUS & SEMI PRECIOUS STONES EMERALS,UNCUT 1.13 RUBY AND SAPPHIRE,UNCUT 1.03 OTHR PRCS STONE (E.G.AQUAMARINE CHRISOBARYLE-TOPAZ ETC) UNCUT 8.72 FELSPAR (MOON STONE)UNCUT 0.01 GARNET UNCUT 0.03 AGATE UNCUT 0.34 GREEN AVENTURINE,UNCUT 0.00 OTHER SEMI PRECIOUS STONE UNCUT 20.31 OTHERWISE WRKD RUBIES SAPPHIRES & EMERALS 81.39 FELSPAR (MOON STONE) CUT 0.27 GARNET CUT 0.38 AGATE CUT 1.13 CHALOIDONY CUT 0.02 OTHER STONE CUT(TOPAZ AQUAMARINE ETC) 211.38 326.11

6.63 0.18 2.98 0.00 0.02 0.18 0.01 6.92 94.81 1.08 2.92 0.41 0.00 193.09 309.24

0.83 0.03 0.82 0.09 0.00 0.19 0.52 6.52 103.31 3.86 1.66 1.30 0.05 163.25 281.91

SILVER
SILVER IN POWDER FORM UNWROUGHT SILVER STEEL PLATES & PIPES OF SILVER ALL OTHER SEMI MANUFACTURED FORM

2010-11
4.92 0.13 0.58 19.58

2009-10
0.07 0.05 0.68 88.20

2008-09
0.02 2.06 1.07 11.74

25.20 IMITATION JEWELLERY

CUFF LINKS & STUDS OF BASE METAL 0.63 BANGLES 33.27 GERMAN SILVER JEWELLERY 0.22 OTHER 43.90 JEWELLERY SET WITH IMITATION PEARLS 9.73 OTHER IMITATION JEWELLERY FOR PERSONAL USE 84.96 171.42

89.00

14.88

1.12 23.66 0.07 40.89 31.05 84.96 181.75

1.54 15.20 0.55 33.66 22.51 79.87 153.34

ARTCLES OF JEWELLERY
SILVER FILLIGREE WORK 22.77 SILVER JEWELLERY SET WITH GEMS 361.69 OTHR ARTCLS OF SILVER JWELLERY 75.41 PARTS 6.42 JEWELLERY OF GOLD UNSET 2826.96 JEWELLERY OF GOLD SET WITH PEARLS 96.39 JEWELLERY OF GOLD SET WITH DIAMOND 3407.53 JEWELLERY OF GOLD SET WITH STONES 411.59 JEWELLERY OF PLATINUM GROUP METALS UNSET 2.42 8,928.78 24.86 127.34 74.52 10.76 2278.83 86.54 3229.78 370.42 0.36 8,863.61 21.58 114.20 59.57 2.58 2321.77 479.34 3253.23 430.65 360.35 8,008.81

INDIAS TOTAL EXPORT

251,135.89

178,751.43

185,295.36

DESTINATION WISE EXPORT

Indian handmade jewellery enjoys immense popularity among the Indian emigrant population. Over the years, the US, Hong Kong, UAE, Belgium, Israel, Japan Thailand, UK and Singapore have been the major export markets for the Indian gems and jewellery sector. The US is the largest importer of Indian gems and jewellery as it accounted for more than 29% of the total exports during FY06 to FY07. However, when the US economy was engulfed in recession, its share in Indias total gems and jewellery exports fell to 26.10% in FY08 from 31.47% in FY07. Also the 5.50% basic import duty imposed by US with effect from July 1, 2007 on the jewellery imported from India, that ended the US-GSP benefit on Indian jewellery, affected Indias export to the US

over the last 2 years, exports to Hong Kong and UAE have grown rapidly. Exports of gems, jewellery and precious stones to UAE have grown steeply during the last three years. Indias export to UAE registered a growth of 34.94% during FY07 and 30.63% in FY08

*
1. ITALY Its one is the largest producer of fine Jewellery 8,200 factories which produce annually approx. 6.4 billion USD . Its strength lies in PLAIN gold jewellery . 2. HONG KONG Produces a substantial portion of the world jewellery market. China and Hong Kong are strong In both gold and studded jewellery. 3. THAILAND Major global supplier of quality jewellery over the last two decades. Thailands strength is in gemstone jewellery. 4. UNITED STATES While a growing number of American manufacturers export their goods around the world, the sheer size of the domestic market keeps a large portion of the goods at home

*
The Government has extended the following facilities to this sector:

* Import of gold of 8 carat and above has been allowed under the replenishment scheme subject
to the import being accompanied by an Assay Certificate specifying the purity, weight and alloy content.

* Duty-free import entitlement of consumables for metals other than gold and platinum at 2 per
cent of FOB value of exports during the previous financial year.

* Duty-free import entitlement of commercial samples fixed at US$ 686. * Duty-free re-import entitlement for rejected jewellery fixed at 2 per cent of FOB value of
exports.

* Cutting and polishing of gems and jewellery to be treated as manufacturing for the purpose of
exemption under Section 10A of the Income Tax Act.

* Import of precious metal scrap/used jewellery has been allowed for melting, refining and reexport of jewellery. However, such imports will not be allowed through hand baggage.

* Exporters of gems and jewellery have been allowed to export jewellery on consignment basis
and export cut and polished precious and semiprecious stones for treatment and re-import as per rules.

* Value additions norms for different categories of gems and jewellery products have been
reduced from 7% to 3%.

GEM AND JEWELLERY EXPORT PROMOTION COUNCIL OF INDIA

Set-up in 1966, the GJEPC has over the years effectively moulded the scattered efforts of individual exporters to make the gem and jewellery sector a powerful engine driving India's export-led growth. This apex body of the gem & jewellery industry has played a significant role in the evolution of the Indian gem and jewellery industry to its present stature. GJEPC is continuously working towards creating a pool of artisans and designers trained to international standards so as to consolidate the Indian jewellery industry and establish it as a prominent global player in the jewellery segment. With strength of 6,500 members' spread all over the country, the Council is primarily involved in introducing the Indian gem & jewellery products to the international market and promotes their exports. To achieve this, the Council provides market

information to its members regarding foreign trade inquiries, trade and tariff regulations, rates of
import duties, and information about jewellery fairs and exhibitions. ROLE OF GJEPC:-

Trade Facilitator Advisory Role Nodal Agency for Kimberley Process Certification Scheme Training and Research Varied Interests

INITIATIVE BY GJEPC TO INCREASE THE EXPORT OF GEM AND JEWELLERY IN INDIA

The Gem and Jewellery Export Promotion Council (GJEPC), a representative body of the trade, have taken several steps to improve exports of gems and jewellery and enhance competitiveness:

* A medium-term export strategy for various sectors, including gems and jewellery,
prepared by Ministry of Commerce and Industry.

* GJEPC and Government constantly exploring the possibility of direct procurement of

rough diamonds from mining countries.

* Promotion of the image of Indian diamonds and jewellery by GJEPC abroad through
advertisements, publicity and participation in international fairs, buyer-seller meets, and direct approach to market retailers.

* Market study by GJEPC through experts in the field to identify new markets. * Deployment by GJEPC of Indian designers to various international trade fairs and
exhibitions to study the latest trend in designs.

* Promotion of export of 'hallmark' jewellery from India to assure foreign customers of

quality and purity of jewellery made in India.

Provision of infrastructure facilities for training to enhance the quality, design and global competitiveness of Indian jewellery. A training institute of international level Indian Institute of Gem and Jewellery-has been set up. The Government plans to organize buyer-seller meets abroad to showcase the quality and variety of Indian products under the Market Development Assistance and Market Access Initiative scheme of the Government.

*
All India Gems & Jewellery Trade Federation (GJF) is both a center of knowledge for

the Indian Gems & Jewellery Industry and an advocate for professionalism Keeping this in mind GJF has created a brand TRUST MARK based on high standards. TRUST MARK- is an assurance to a customer of the commitment of the jeweller for his quality & best business practices Must be registered with BIS

Must sell only certified precious stone jewellery

Must be experienced & reputed (Minimum 15 yrs).

The Bureau of Indian Standards: The Bureau of Indian Standards (BIS), the National Standards Body of India, is a statutory body set up under the Bureau of Indian Standards Act, 1986 and is responsible for hallmarking gold jewellery in India.
HALLMARKING QUALITY STANDARDS FOR GOLD JEWELLERY

CARATS 24 Carat 22 Carat 18 Carat

PERCENTAGE 100% 91.67% 75.00%

STANDARDS FOR SILVER JEWELLERY

Fine Silver Jewellery

99.9% 92.5% of silver and 7.5% of copper

STANDARDS FOR DIAMOND JEWELLERY CLARITY

IF VVS 1 VVS VS 1 VS 2 SI 1 SI 2 I1 I2 I3

*
GEMS & JEWELLERY UNDER FTP 2009-2014 The following measures have been announced for gem & jewellery sector:

a) To neutralize duty incidence on gold jewellery exports, it has now been decided to allow Duty Drawback on such exports b) Import of Diamonds on consignment basis for Certification/Grading & re-export by the authorized offices/agencies of Gemological Institute of America (GIA) in India or other approved agencies will be permitted c) To promote export of Gems & Jewellery products, the value limit of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million d) The number of days for re-import of unsold items in case of participation in an exhibition in USA has been increased to 90 days e) In an endeavour to make India a Diamond International Diamond Trading Hub, it is planned to establish Diamond Bourses f) With an objective to meet the Dollar Credit needs of exporters, a Committee has been constituted with Finance Secretary, Commerce Secretary and Chairman IBA.

A new scheme under paragraph 4A.2 has been introduced in the Foreign Trade Policy 2009-2014 (FTP) for import of diamonds for certification and grading and re-export thereof. (i) This scheme is presently allowed to the authorized offices/agencies in India of Gemological Institute of America (GIA) in India only; (ii) GIA shall furnish a general bond to the satisfaction of the Asstt./Dy Commissioner of Customs at the port of import; undertaking to properly account for the diamonds, to follow the specified procedure and to re-export diamonds within the prescribed period; (iii) The import shall be allowed under bill of entry having the detailed description of the diamonds, including inter alia, the dimensions, weight, colour, caratage, specification, approximate value etc of each piece of diamonds; (iv)The bill of entry should carry the endorsement only for certification and grading; (v) GIA, while taking the diamonds in their unit, shall allot a unique control number for identification purposes and maintain a separate account for such diamonds; (vi)After the grading/certification, the diamonds shall be re-exported under a shipping bill containing the detailed description as was mentioned at the time of import;

Duty Free Import Entitlement (based on FOB value of exports during previous financial year)of Consumables, Tools and additional items allowed for: Jewellery made out of: Precious metals (Other than Gold & Platinum) 2% Gold and Platinum 1% Rhodium finished Silver 3% Cut and Polished Diamonds 1% Personal carriage of Gems & Jewellery products in case of holding / participating in overseas exhibitions increased to US$ 5 million and to US$ 1 million in case of export promotion tours. In an Endeavour to make India a diamond international trading hub, it is planned to establish Diamond Bourse(s).

The word "Bourse" refers to a private stock, bond, or commodities exchange similar to the NYSE. Diamond Bourses are basically trading exchanges for loose, cut and uncut diamonds. The largest diamond trading center in the world is located in Antwerp, Belgium but there are also Diamond Bourses in Israel, Hong Kong, London, Moscow, and Shanghai. Almost 85% of the world's rough diamonds, and about half of the polished diamonds, are sold in Antwerp every year, and the city is the hub of the global diamond trading industry Two of the oldest Diamond Bourse in Antwerp were the 'Diamond Club of Antwerpand the Beurs voor Diamanthande Bharat Diamond Bourse (BDB) is world largest diamond bourse(exchange) based in Mumbai, Maharashtra, India. Spread over 20 acre plot, the Complex is designed to house around 2,500 small and large Diamond Traders in addition to Custom House, Banks and other service providers who will cater to the Gem and Jewellery Trade The facilities at BDB will include offices of diamond traders, four walk-in vaults, 24,500 safe deposit boxes, a 6,200-square-foot (580 m2) trading floor, strong rooms, lockers, customs clearance facilities with all the modern facilities required to carry day to day business.

BLOOD DIAMONDS

There are a lot of organizations around the world that strive to stop the manufacturing of blood diamonds. They say that human life is far more important than a simple jewel. Blood diamonds or conflict diamonds (as some people call them) originate in Africa where rebels force workers to mine them. Since they dont mine the diamonds themselves but rather use the African population by forcing them to work in the mines; these diamonds got their reputation as blood diamonds. Because diamonds are so rare and in such high demand their prices are exorbitant. The money accumulated for these diamonds are used to sustain and fund the wars between different countries from the same area

KIMBERLEY PROCESS (KP) The Kimberley Process came into force when the South African diamond producing nations met at Kimberley in South Africa in May 2000. 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. As of November 2008, the KP had 49 members, representing 75 countries. 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 Indias 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.

*
Unorganized Sector
Around 90% of the players operate in the unorganized sector mostly in family-run operations. Also, being largely unorganized, the sector mainly uses labor-intensive and indigenous technology that affects their growth prospects

Threat from China

China is the second-largest diamond processing centre in the world after India; however, it is slowly catching up and is threatening to displace the Indian gems and jewellery sector from its dominant position in the world. India also faces threat from China in terms of technology adoption, which allows China to process diamonds at a more competitive price.

Predominance of the US market and Exchange Rate/Currency Risk

The Indian gems and jewellery sector is pre-dominently dependent on the US markets, which is its top export destination. The growth of gems and jewellery sector is heavily dependent on the growth of demand in the US market. However, the recent appreciation of the rupee vis--vis the US dollar and a slowdown of the US economy have aggravated the concerns for the sector.

Decreasing Diamond Reserves

The supply of rough diamonds is expected to fall in the near future as the diamond reserves are decreasing. There has been no major diamond reserve discovery since 2003, when reserves were last discovered in the Diavik Diamond Mine in Canada. The reduced supply will push up the prices of rough diamonds, which will further put pressure on margins.

Issue of Conflict Diamonds

India is the largest importer of rough diamonds and a leading player in cutting and polishing of the same, therefore, it runs the risk of dealing with conflict diamonds. Conflict diamonds are those that are mined illegally in African countries such as Angola, Liberia, Sierra Leone and the Democratic Republic of Congo to fund illegal military wars. In spite of the KP certification, there are issues related to fake KP certificate. These fake certificates put diamond importing countries at a risk of dealing in conflict diamonds.

The issues that need to be addressed by the Government of India immediately are as follows:
Exclusion from the powers of the Authorized Officer, the power to seize any bullion, precious or semiprecious stones or jewellery which is held as stock in- trade of the business under the proposed Direct Tax Code (DTC). Continuation of all measures announced under Fiscal Stimulus packages for the Industry till end of 2011. Creation of a Diamond, Gem & Jewellery Dollar Fund to cater to the dollar credit needs of the exporters from the sector. Credit limits sanctioned to the exporters by banks as on 31/03/2009 may be continued to exporters of good track record (except for those whose accounts have been declared as NPA), till 31/03/2011 without putting additional conditions. Government should help in sourcing of rough diamonds from countries like Africa, Russia, Canada, South America & etc.

Allowance of consignment import of rough diamonds for trading, assortment, auction etc to make India an International Diamond Trading Hub.

*
Entering New Markets
The US has been the major market for Indian gems and jewellery sector over the years. However, with the current global slowdown, the dependence on the US market has affected the Indian gems and jewellery sector tremendously. The sector is exploring new locations to diversify business and to minimize the risk. Russia, Middle East and China are few of the emerging destinations that are witnessing an increase in jewellery demand. The Indian gems and jewellery players can tap these countries to diversify and increase their business.

Cutting and Polishing of Large-Sized Diamonds

India is one of the leading diamond processing centers of the world. Indias vast, low cost and extremely skilled workforce provides it with a competitive edge over other countries. However, it is predominantly involved in cutting and polishing of small-sized diamonds, which weigh less than one carat. India's cut and polished diamond exports have a high global share in terms of number of pieces; however, in terms of value the share is much lower. By moving up the value chain and processing larger stones India can further increase its value share in total exports. Large diamonds are less commonly found in nature, therefore, the price of a diamond rises exponentially with its size.

Value Addition
There exists a huge opportunity for Indian players to do value addition to the processed diamonds and to export diamondstudded jewellery. India is already a leader in processing small-sized diamonds and it also has inherent capabilities of manufacturing hand-crafted jewellery.

Jewellery Retail
The Indian retail sector is growing rapidly. This provides an excellent opportunity for the Indian players to manufacture and sell their jewellery through the retail channels that are fast catching up in the Indian markets. Further, this move will also provide an organized structure to the largely unorganized gems and jewellery sector and lead to further growth of the sector.

Outlook
The outlook for the gem and jewellery sector is positive. On account of the global recovery, the Indian gems and jewellery sector is also on a recovery mode. In December 2009, the exports from the sector grew by 45.35% as compared with the same period in 2008. According to GJEPC, the players received good orders for Christmas in 2009, which indicates a gradual recovery for the sector. The positive trend is expected to continue, as major economies are showing signs of recovery, which is resulting in fresh orders for the sector. Further, the gems and jewellery sector is also expected to grow in the domestic market, going forward. As the per capita consumption of jewellery is low in India, there exists an attractive opportunity to tap the domestic market. High interest rate being charged by the banks on export credit. Scarcity of dollar credit for sourcing of rough diamonds. Reduction in sanction on extension of credit limits to gem and jewellery exporters. Biased rating of gem &jewellery firms by Credit rating agencies in India.

Potential growth areas are in diamond studded jewellery & silver jewellery. Exports to non traditional markets like China, Russia and CIS will grow if they come up with trade friendly norms. 2009-10 will see around 5% growth from previous years exports and the same growth rate may continue in 2010-11. Sales in the Global Market expected to grow up to US$37 billion by 2015.

Diamond industry to grow over 95% between 2010 2015.

GJEPC initiated IIJS Signature to promote India as the preferred source for jewellery and eventually build brand India'. All India Gems & Jewellery Trade Federation (GJF) recently held the first of its kind leadership summit for the jewellery industry in an effort to corporatize the ways of working and streamlining policies.