The Rs 20, 000 crore gems and jewellery industry stands to gain Rs 20 crore as savings on interest costs following the 100 basis points reduction in export credit rate by the Reserve Bank of India.
The 1 per cent drop in the export credit rate is effective from September 26 up till March 31, 2002.
The total banking credit to the gems and jewellery export sector is Rs 4,000 crore. The US accounts for over 75 per cent of the exports and the reduction in interest rate for exporters will help adjust the rate cut announced by the US Federal Bank last week.
However, exports have been hit considerably since the terrorist attacks in the US on September 11. "Had the rupee not depreciated by almost 2 per cent, the industry would have been hit harder," said a gold jewellery exporter. The trade had anticipated a reduction in the export credit rate or a bank rate cut as exports became more expensive, following the cut in the Fed rate. Said bullion expert Bhargava Vaidya: "The reduction in the rates for export credit was anticipated by the trade. However, the central bank ought to extend the reduction for post-shipment credit beyond 90 days as well." Many US buyers are facing problems in terms of payments and this has affected the Indian exporting community.
The Indian gems and jewellery trade does not expect demand to pick up come Christmas. Said a leading exporter of diamond studded jewellery: "Christmas may not be celebrated this year in the US, and the diamond industry will be hit hard. In the first six months of the year, trade fails to pick up. This year, there has been a setback of more than 10 per cent, considering that lot of stock has been transferred to other offices to be re-exported from there."
