India's glittering jewellery market

With exports of US$ 17.1 billion in 2006-07, India's gem and jewellery industry has been second only to textiles in earning foreign exchange for the country.

As per the Gem and Jewellery Export Promotion Council (GJEPC), the Mumbai-based apex body of the trade, exports of diamond merchandise alone touched US$ 9.77 billion last year.

According to Tehmasp Printer, MD of the fast growing India branch of the Antwerp-based diamond certification authority of the International Gemological Institute, no country can match India in the cutting of gemstones and crafting of fine jewellery.

According to the World Gold Council (WGC), India’s gold consumption this year could in fact cross the 1,000-tonne mark for the first time.

The booming domestic market along with export advantage of the industry and the Government's decision to allow foreign direct investment of up to 51 per cent in single brand retail stores has attracted a large number of players to the sector.

**Swarovski, the global crystal goods manufacturer and marketer, is on an expansion spree in India and hopes to achieve 5 to 10 per cent of its global turnover from the country in the next 10 years. The company plans to set up 30 stores by 2009, from the current 13.

**Damas India, part of one of the largest jewellery retail outlets in the world, is adding 16 new stores to its present dozen stores in India.

**Morgan Stanley, Citigroup, Goldman Sachs and BSMA Ltd. collectively purchased a 7 per cent stake in Gitanjali Gems for around US$ 27.8 million.

**Goldman Sachs and UBS Securities have acquired 6.28 per cent in Shrenuj & Co at around US$ 2.07 million and US$ 2 million, respectively.

**Gemology Headquarters International (GHI), a US-based gemological grading and research laboratory, has opened its first Indian branch at Opera House, Mumbai.

**Reliance Retail is planning an aggressive entry into the jewellery retail market through its about 400 to 500 jewellery retail outlets across the country.
Government Initiatives

In the New Annual Supplement to Foreign Trade Policy (2004-2009) announced on April 19, 2007, the Government has extended the following facilities to this sector:

Service Tax on services (related to exports), which are rendered abroad have been exempted.

Re-import of Diamonds & Jewellery (either in complete or partial lot) exported on consignment basis have been allowed.
In the light of increase in global prices of precious metal, duty free entitlement for consumables for export of rhodium plated silver jewellery has been increased to 3 per cent.

To reduce the transaction cost for the diamond sector, testing facility at International Diamond Laboratory (IDL), Dubai, has been incorporated in the list of laboratory/certifying agencies.

Duty free import entitlement of tools, machinery & equipment has been allowed. For metals other than gold, platinum, it will be 2 per cent and for gold and platinum, it will be 1 per cent of FOB value of exports during the previous financial year.

Categorisation of exporters as One to Five Star Export Houses has been changed to Export Houses and Trading Houses with rationalisation and change in export performance parameters.

In addition, the Government has decided to make gold hallmarking mandatory from January 1, 2008. It has also made the import of polished diamonds completely duty free. Also, special economic zones dedicated to gems and jewellery are to come up in Surat, Kolkata, Goregaon, Dhulia and Hyderabad.

The Government is also set to unveil the new mining policy to make it easier for foreign and domestic firms to invest in the exploration and mining of diamonds, gold and other metals. Currently, India produces merely 0.4 per cent of its gold consumption despite having 9 per cent of global gold reserves.

Looking Ahead

The booming economy along with the rapid increase in income levels is estimated to further accelerate the growth of this industry.

According to a KPMG study, India’s growing importance in the global jewellery market is only expected to increase in the future with total estimated jewellery sales of US$ 21 billion by 2010 and US$ 37 billion by 2015. Diamond jewellery consumption in India is also estimated to jump by 78 per cent in 2010.