Economic slowdown in the developed world has hit India’s exports of cut and polished diamonds, as consumers shift to plain gold and silver jewellery from diamond-studded precious metal ornaments.
Data compiled by the apex trade body, the Gems & Jewellery Export Promotion Council (GJEPC), showed exports of cut and polished diamonds fell 28.92 per cent to Rs 42,740.15 crore in the first half (H1) of the current financial year, from Rs 60,133.84 crore in the corresponding period last year. Overall exports of cut and polished diamonds plunged in volume terms to 164.80 lakh carats in H1 2013 from 302.92 lakh carat in the same period last year.
During the same period, however, shipment of gold jewellery jumped 129 per cent to Rs 44,748.59 crore from Rs 19,547.14 crore, while silver jewellery exports rose 42 per cent to 2,157.32 crore in the first half of the current fiscal from Rs 1,516.53 crore in the same period previous year. The shift assumes significance as diamond is considered a luxury item, while gold and silver are bought as safe haven investments in the form of protection during times of financial crises.
| RIGHT OPTION Jewellery exports during April-September (Rs crore) | |||
| 2011 | 2012 | Change (%) | |
| Cut & polished diamonds | 60,134 | 42,740 | -28.92 |
| Gold jewellery | 19,547 | 44,749 | 128.93 |
| Silver jewellery | 1,517 | 2,157 | 42.25 |
| Coloured gemstones | 761 | 915 | 20.36 |
| Source : Gems & Jewellery Export Promotion Council | |||
“Precious metals continued to remain as preferred investment options against financial uncertainty while diamond is preferred as a luxury item (which is bought) with excess investible funds. Hence, consumers in the developed world went slow on diamond purchases in the last few months, which is visible in export figures,” said Sanjay Kothari, an industry veteran. The last six months were particularly bad for India’s diamond industry, when demand fell to even lower levels than during the economic crisis of 2008. But, orders have revived now, as Christmas, New Year and Mother’s Day approach. “We are hopeful this season will be better than last year,” said Kothari.
Meanwhile, the Middle East has emerged as one of India’s hottest jewellery export destinations where consumers prefer primarily gold ornaments. Although, diamond jewellery is also gradually gaining popularity in the Middle East, yet a substantial portion of the petro dollar income in the region is invested in gold.
“The major advantage of exporting gold jewellery to Dubai is the easy access to the entire Middle East market up to Turkey, and from there ornaments find their way to the European and then American markets. Exports to Dubai are duty-free, from where ornaments can be exported to any other region with a marginal tax. Hence, apart from cost saving in exports through the Dubai route, it is the consumers’ preference which plays a dynamic role,” said Pankaj Parekh, vice chairman of GJEPC.
Vipul Shah, chairman of GJEPC, however, is hopeful of a turnaround in the current trend. Compared to other sectors, consumers prefer gold and silver as investment avenues to safeguard against financial crises. The jewellery business is currently skewed towards gold and silver. But, with the US announcing the third round of quantitative easing (QE3), a shift from gold and silver jewellery to diamond jewellery is already visible, he added. The gradual release of this money would raise individual investible surplus resulting in a recovery in demand for diamond jewellery, going forward, Shah said.
