Diamond jewellery units look to newer markets

By Ramnath Subbu

MUMBAI, APRIL 22. The diamond and diamond jewellery industry which has been turning out sterling performance year after year in the recent past, has succumbed to global slowdown.

The Gem and Jewellery Export Promotion Council (GJEPC) has estimated that gem and jewellery exports were lower by 4.9 per cent at $7.747 billion in 2000-01.

This is largely attributed to the overall adverse market conditions. The U.S. has for many years been the major buyer, accounting for more than 38 per cent but the slowdown in the U.S. economy has had a deleterious impact on the industry.

The decline has been mainly in the cut and polished diamonds sector which contributes a large percentage of the overall industry. However, the gold jewellery sector which is the main thrust area has maintained growth of 4 per cent at $1.23 billion.

The figures for the first quarter of the current year are none too encouraging either. Exports were lower at $2.088 billion during January-March 2001 against $2.795 billion in the corresponding quarter last year. According to Mr. Sanjay Kothari, chairman, GJEPC, ``Looking at the first quarter figures we would be happy if we achieve the 2000-01 figures during the current year.''

The industry is, therefore, looking at newer markets such as Europe, Australia and others to reduce the over-dependence on the U.S. market. We have not been able to tap the European market for jewellery as we were unable to manufacture and match the high- class jewellery requirements in these markets. But now we are making concerted efforts. We have taken part in the recent Basel Fair of International Jewellers. There are encouraging signs that from nine Indian participants in 1999, the number was 33 this year,'' said Mr. Kothari.

It must also be realised that 1999-2000 was a record year and a lot has to be attributed to the `millennium' year. Also, the U.S. economy was robust then and accounted for around 40 per cent of exports followed by Hong Kong and Belgium.

The recent developments like the Exim policy initiatives announced last year for the establishment of bonded warehouses, the newly introduced diamond-dollar account (DDA) scheme and permission for personal carriage of import or export parcels should facilitate the country's development as a global diamond trading centre. The diamond dollar account was suggested by the GJEPC and allows internal trading in dollars although clearing trades still take one or two days.

The DDA's main plus point is that it allows the exporter to retain the export proceeds in dollars which can then be utilised to import rough diamonds. While permitting ease of transaction is one aspect, it will also protect exporters from exchange rate fluctuations.

The setting up of Special Economic Zones (SEZs) will offer immense scope for gem and jewellery exports from India. The change from EPZ to SEZ will help considerably as EPZs are governed by customs and government agencies while the SEZs are allowed a lot more liberty. Mr. Kothari said, ``This was a good move. But there is a scarcity of space and lot of companies want to open offices at the SEZs in SEEPZ, Mumbai. The State government has allotted area in Nhava Sheva and New Mumbai, but those are not useful as diamonds one cannot expect diamonds to be carried across.''

On the strategy adopted by the industry to cope with the changing scenario, Mr. Kothari said, ``India has achieved the world leader status and our strategy is to sustain and further the growth rate by focussing on new markets and increase the supply of roughs into India. Indian diamantaires have been seeking opportunities to establish trade ties with mining countries and companies for direct imports of rough diamonds. Earlier this year, Indian delegations had travelled to Canada, Russia and Congo.''

The customs duty on imports of cut and polished diamonds and platinum was reduced from 40 per cent to 15 per cent. This would help jewellery exporters in importing the required varieties of cut and polished diamonds for use as studdings in gold or platinum jewellery.

After initial teething problems of overcoming the Indian consumer's preferences for buying traditional jewellery from the family jeweller, branded jewellery is the next big opportunity for the Indian gem and jewellery industry.

The world-wide industry size of jewellery is around $100 billion of which India constitutes only a small portion in value terms; less than 2 per cent. India was basically a latecomer into this industry and the industry took off only after the setting up of export promotion zones in the early Nineties. In jewellery, designing is of crucial importance and in this direction, several initiatives are being taken. According to Mr. Kothari, ``Two institutes are being set up to train artisans in skills of jewellery making at MIDC, Mumbai and in Surat. Both the institutes are in the process of being set up and should be ready in a year.''

It is believed that China presents a threat to India's position as the pre-eminent player in the processing of diamonds. It has similar strengths as India - economic labour and a large skilled workforce. According to Mr. Kothari, ``China is very aggressive and has been making rapid strides. It must, however, be remembered that India has reached its position after 30 years in this industry. However, to hold on to our position in future, the Ministry has to help a lot and ensure a hassle-free atmosphere for the industry.''

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