A glance into the Gems and Jewellery Industry of India

A glance into the Gems and Jewellery Industry of India

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). The industry is projected to generate up to US$ 35 billion of revenue from exports in 2015.

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. In FY14, India’s gems and jewellery sector contributed US$ 34.75 billion to the country’s FEEs.

India’s domestic Gems and Jewellery market is equally strong. The domestic gems and jewellery industry had a market size of Rs 251,000 crore (US$ 40.45 billion) in 2013, with the potential to grow to Rs 500,000–530,000 crore (US$ 80.59-85.43 billion) by 2018, according to a study by a leading industry body. The study projected that the country’s gems and jewellery market could witness exponential growth driven by a healthy business environment and the government’s investor friendly policies.

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Market size

According to a report by Research and Markets, the Jewellery Market in India is expected to grow at a CAGR of 15.95 per cent over the period 2014-2019. The cumulative foreign direct investment (FDI) inflows in diamond and gold ornaments in the period April 2000-June 2015 were US$ 716.95 million, according to Department of Industrial Policy and Promotion (DIPP).

FY14 saw an increase of 12.65 per cent in export of cut and polished diamonds with the segment reaching US$ 19,635 million. The industry also witnessed a rise of 11.98 per cent in imports of rough diamonds with figures of US$ 16,716 million. India imported 163.11 million carats of rough diamonds worth US$ 16.34 billion and exported 36.46 million carats of polished diamonds valued at US$ 20.23 billion in 2013. The country exported gems and jewellery worth US$ 36.04 billion in 2013.

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.

    • Jewellery major Joyalukkas plans to invest Rs 1,500 crore (US$ 225.28 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 multinational 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$ 180.22 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.

    • Indian exports will now receive concessional duty treatment in the US as it has renewed the Generalised System of Preferences retrospectively from August 1, 2013 – December 31, 2017.

    • Bengaluru based Rajesh Exports Ltd acquired Switzerland based Valcambi SA in an all-cash deal for US$ 400 million through its Singapore subsidiary.

    • IndusInd Bank acquired the diamond and jewellery financing division of RBS in India. IndusInd Bank expects the diamond business in India to grow and currently has a smaller portfolio worth Rs 1,500 crore (US$ 225.28 million).

    Government Initiatives

    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. Also, 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 will 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, Gems & Jewellery Export Promotion Council (GJEPC) said in a statement here.

    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.

    Source : IBEF

    Image Source : Big Shop Ooty

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