Gems and Jewellery Industry in India

Brief History: Before the liberalization of the Indian economy in 1991, only the Minerals and Metals Trading Corporation of India (MMTC) and the State Bank of India (SBI) were allowed to import gold. The abolition of the Gold Control Act in 1992, allowed large export houses to import gold freely. Exporters in export processing zones were allowed to sell 10 percent of their produce in the domestic market. In 1993, gold and diamond mining were opened up for private investors and foreign investors were allowed to own half the equity in mining ventures. In 1997, overseas banks and bullion suppliers were also allowed to import gold into India. These measures led to the entry of foreign players like DeBeers, Tiffany and Cartiers into the Indian market. In the 1990s, the number of retail jewellery outlets in India increased greatly due to the abolition of the Gold Control Act. This led to a highly fragmented and unorganized jewellery market with an estimated 100,000 workshops supplying over 350,000 retailers, mostly familyowned, single shop operations. In 2001, India had the highest demand for gold in the world; 855 tons were consumed a year, 95% of which was used for jewellery.

India's gems and jewellery industry is a bright star of the economy, and one of the important foundations of the country's export-led growth. The consumption of gold and jewellery products in India has grown rapidly over the years at the rate of 10-15 per cent per annum and today, the domestic Indian market is estimated to be over US$ 30 billion. According to a recent study, India and China are now emerging as one of the leaders in the global jewellery industry in terms of consumption, besides production and trade. The countries jointly would account for over 30 per cent of global diamond market in 2015.

India possesses world's most competitive gems and jewellery market due to its low cost of production, highly skilled, low-cost and best artisan force for designing and crafting jewellery, along with strong government support in the form of incentives and establishment of special economic zones (SEZs). Industry Structure Indian gems and jewellery sector is expected to grow at a compound annual growth rate (CAGR) of around 16.26 per cent during the period 2011-12 to 2016-17 on account of increasing government efforts and incentives coupled with private sector initiatives, according to a report of the working group on 'Boosting India's Manufacturing Exports', by Ministry of Commerce & Industry. Shipment of gems and jewellery makes up about 14 percent of India's total exports, and the sector employs about 3.4 million workers, with the Middle East taking most of the market. Gold Jewellery Gold with its intrinsic luster and ease of fabrication has always been the jewellers' favourite metal. Gold jewellery enjoys the leading position in various markets across the world and forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond and gemstone studded jewellery. Gitanjali Group, the world's largest integrated branded jewellery retailer-manufacturer, plans to set up additional 300 shops in India by the end of current year in order to expand its retail business, as per Mehul Choksi, Chairman and Managing Director, Gitanjali Group. Tanishq, the jewellery wing of Titan Industries Ltd, plans to invest more than Rs 1,000 crore (US$ 184.89 million) to expand its network across the country in 2013-14. Diamonds India has the distinction of being one of the first countries to introduce diamonds to the world. Diamonds manufactured in India constitute 65 per cent by value, 85 per cent by volume and 92 per cent by pieces of the world diamond production, making the country not only the leading global manufacturer but also one of the highest consumers of rough diamonds in the world. The increase in imports of rough diamonds by 12.65 per cent indicates an increase in cutting, polishing and other manufacturing activities in India.

Developed by the De Beers group of companies, the diamond brand Forevermark has benefited from more than a century's worth of innovation, creativity as well as technological advances. Today, the brand joins the group in celebrations for 125 years of diamond excellence and expertise. Likely to come into commercial production in 2017, discovery of the Bunder diamond project in 2004 by Rio Tinto, signals a new chapter in an alliance with Rio Tinto presenting a unique opportunity for India to mine, manufacture and market its own diamonds. Once developed the Bunder project is expected to place Madhya Pradesh in the top ten diamond producing regions of the world. Coloured Gemstones The coloured gemstone sector is a fast growing segment of the Indian gems and jewellery industry. India is a leading source for a spectrum of gemstones, progressing from its traditional concentration on emeralds and Tanzanites to now manufacturing a dazzling array of coloured gemstones. Jaipur is considered as the country's hub for the cutting, polishing, manufacturing and trading of all types of precious and semi-precious gemstones as manufacturers of Jaipur continue to successfully apply modern technology and exceptionally brilliant craftsmanship to produce highest quality gemstones. China and Hong Kong are leading export destinations for the Indian colored gemstones and the global demand for these has been growing consistently over the last five years. The coloured gemstones from India have gained immense international recognition which is clearly demonstrated by the steady growth in exports each year, as per Mr Vipul Shah, Chairman, Gems & Jewellery Export Promotion Council (GJEPC). Export of Gems and Jewellery Indian gems & jewellery industry saw an increase in manufacturing activities indicated by the 33 percent growth in the export of gold jewellery contributing significantly to India's foreign exchange earnings and supported balance of payments. Total gems and jewellery exports for the FY13 stood at Rs 212,638.89 crore (US$ 39.31 billion) as compared to Rs 206,080.09 crore (US$ 38.10 billion) last fiscal. The exports of cut and polished diamonds from India during April 2012-February 2013 stood at Rs 81958.50 crore (US$ 15.15 billion), gold at Rs 90235.98 crore (US$ 16.68 billion), coloured gemstones at Rs 3255.31 crore (US$ 601.77 million) and silver jewellery at Rs 3900.57 crore (US$ 721.05 million), besides others, according to the provisional data released by Gem & Jewellery Export Promotion Council of India (GJEPC). Government Initiatives

The Government of India has allowed 100 per cent foreign direct investment (FDI) in gems and jewellery sector through the automatic route FDI up to 74 per cent is allowed under the automatic route for exploration and mining of diamonds and precious stones. Further, 100 per cent FDI is allowed for exploration and mining of gold and silver and minerals other than diamonds and precious stones, metallurgy and processing, etc. In the Union Budget 2013-14, the Government has reduced basic custom duty on pre-forms of precious and semi-precious stones (other than diamonds) from 10 to 2 per cent Duty free limit on import of jewellery under the baggage rules increased to Rs 50,000 (US$ 924.28) in case of male passenger and Rs 100,000 (US$ 1,847.9) in case of a female passenger subject to conditions

Foreign Trade Policy (2009-2014) Initiatives The government has announced several measures for the promotion of the gems and jewellery sector in the New Foreign Trade Policy (2009-2014), some of the important ones being:

The number of days for re-import of unsold items in the case of participation in an exhibition in the US has been increased to 90 days Duty free re-import entitlement for rejected jewellery shall be 2 per cent of free on board (FOB) value of exports The value limit of personal carriage has 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

Road Ahead The outlook for 2013-14 looks positive with an estimated growth of 12 to 15 percent in the overall gems & jewellery exports in the current fiscal. The US and Japanese jewellery markets will bounce back with an estimated 5 per cent growth while China will remain stable at 10 per cent growth, as per Mr Vipul Shah, Chairman, GJEPC. Currently, the Indian gems and jewellery market is dominated by the unorganized sector; however, the trend is set to change in near future due to the growing acceptance of branded jewellery market. Exchange rate used: INR 1= US$ 0.01848 as on May 07, 2013

References: Media Reports, Gems and Jewellery Export Promotion Council (GJEPC), The Union Budget 20132014, Press Releases