• After the second successive year of de-growth in 2018-19, India’s gems & jewellery exports have continued to disappoint in the quarter ending June 2019, falling by 10.32% YoY to reach US$ 9.18 billion.
• A general global slowdown, withdrawal of GSP and liquidity crunch are major factors impacting exports in the current milieu.
• Besides these impediments, the gems and jewellery sector is also constrained by an inability to keep in step with global trends.
• There is an urgent need for large-scale skilling initiatives, besides a strategic reorientation towards new potential markets.
India’s gems and jewellery segment is among the largest in the world, contributing 29% to the global jewellery consumption. It contributes about 7% to India’s Gross Domestic Product (GDP), about 15% of India’s total merchandise exports and is a source of livelihood for over 4.64 million employees.
Over the past few years, the India’s gems & jewellery exports are witnessing a decline. Exports dropped by 5.32% YoY to reach US$ 30.9 billion in 2018-19. The slump has worsened this year as well, and exports have fallen by 10.32% YoY to reach US$ 9.18 billion in the quarter ending June 2019. This has been traced to various factors including weak global demand, delays in getting GST refunds and liquidity crunch in the Indian market. Besides the general slowdown, the removal of GSP benefits is impacting gems and jewellery exports, since around 15% of these exporters took the benefit of GSP last year.
But apart from these causes, there are a string of other structural challenges which are preventing India from reaching its true export potential and catapulting itself as the top gems & jewellery exporter.
One of the major impediments to the growth of Indian gems and jewellery segment is the lack of skilled labour. Most of the workers are not adequately trained to adapt to the shift in production techniques from wax to metal moulds. Working with metal moulds tends to be tougher than working with wax techniques. Moreover, this kind of occupation tends to pass on from generation to generation, but needs to be complemented by addition of a fresh pool of talent.
While the sector’s on-the-job training model is of great help to the new joinees, it leads to longer training time. Due to this, India’s labour force tends to be less efficient than those of its counterparts like China, USA & Sri Lanka. Countries such as China & US have emerged as the leading gems & jewellery producers owing to their superior technology, efficient labour and industry-friendly policies.
Another major challenge faced by Indian gems & jewellery industry is the mismatch between demand & supply arising from the inability to keep up with changing jewellery trends. For instance, while in India there is a great demand for temple jewellery and jewellery made out of coloured gemstones, simple branded jewellery is the norm across the world.
The lack of a brand value seriously depreciates the value of Indian jewellery makers in international markets. Lack of design development centres makes it challenging to meet the demands of international clientele. As Mr. Dharmendra of Gandhi Dhaam Jewellers Association affirms in his interaction with TPCI, “About 80-90% of the production of jewellery in India is done by craftsmen and manual labour. Not only does this drive the production cost up in India, there are also differences in terms of designs and quality.”
Source: Department of Commerce; Data for 2018-19 for HS Code 7113 Articles of jewellery and parts thereof; of prcs mtl/of mtl cld wth precious metal
The next major obstacle is the heavy dependency on other countries for raw materials. For instance, India imports rough diamonds & raw pearls from Belgium, UK, Israel and UAE. Gold jewellery is imported from Switzerland, South Africa, UAE and Australia. Measures such as the Union Government’s decision to hike import duties in the latest budget from 10% to 12.5% will have an adverse impact on demand for gold jewellery as the raw material will be costlier and buyer will face the brunt of it. Countries such as China & US have emerged as the leading gems & jewellery producers owing to their superior technology, efficient labour and industry-friendly policies.
Injecting liquidity in the banking system would give the much-needed boost to this sector by addressing the problem of cash crunch and enabling it to indulge in capacity expansion. Another viable proposal is to allow duty-free sales of gems and jewellery from SEZs/EOUs to DTAs, as suggested by Baba Kalyani Committee.
Technological interventions like establishing jewellery parks in manufacturing zones (e.g. Mumbai & Kolkata), having mega common facility centers & support by local government/institutions will go a long way in bolstering trade. We also need to focus on skill development of our labour and strengthening the approach to marketing of our products. The overdependence on few markets like UAE and US can be reduced by actively exploring new potential markets and adapting the product offering to meet their specific demands.
