Diamonds are forever

OUTLOOK: MACRO VIEW

The jewellery industry must move up the value chain.

The last five years have seen India emerging as a significant player in gems and jewellery, including the diamond processing market of the world. With exports of $17.1 billion in 2006-07, with cut and polished diamond accounting for $11 billion of this total and roughs adding another $0.5 billion, India has touched a new high with an overall 2.4% growth. However, the diamond sector saw a drop in exports of about 7%. This has an import content of $11.9 billion in the same year, also recording a negative growth of 8%, over the last year.

The net value addition is estimated at $4 billion plus by GJEPC. Driving overall performance this year was gold jewellery exports, which grew at 34%, while coloured precious stones grew at 6%. The domestic market is growing much faster at 25% plus. Overall, the sector is generating a livelihood for over 1 million families, with its main centres being Surat, Ahmedabad and Mumbai. 

NET EXPORTS OF GEMS AND JEWELLERY
	April-March-'06		April-March-'06		% change over previous year
	Rs Crs	$ Mill	Rs Crs	$ Mill	Rs	$
Cut & Pol Diamonds	49206.22	10903.22	52121.83	11829.74	-13.42
Gold Jewellery- D. T. A.	13486.54	2988.38	10592.32	2405.43	27.32	24.23
SEZ / EPZ	10029.29	2222.31	6471.01	1467.32	54.99	51.45
Coloured Gemstones	1112.38	246.48	1023.73	232.35	8.66	6.08
Others	803.96	178.14	660.39	149.88	21.74	18.85
Exports of Roughs	2541.88	563.24	2473.16	561.32	2.78	0.34
Total Exports	77180.3	17101.8	73342.4	16646	5.23	2.74

Due to the recently changed arrangement for procurement of roughs from multiple sources and the current shortage in the global market, their steady availability is needed to ensure growth of business and employment for people involved in the trade. It is of critical value to ensure that India develops both a better direct relationship with the important rough exporting countries of Botswana, Angola, Canada, South Africa, Congo and others, and also gets an effective international diamond trading centre ('Bharat Diamond Bourse') in the country, like that of Antwerp, as fast as possible, well before this year runs out. Though having been seized of this issue, the government of India has only just abolished customs duty on cut and polished diamonds. Its earlier rate of 3% was inadequate for supporting a successful trading hub. Octroi in Mumbai and Gujarat's cities as well as VAT of 1% on metals and stones continue to be a deterrent to free trade.

The second challenge for this industry is to continue to go up the value chain, both in terms of handling bigger carat stones as well as setting these in gold and silver, to realize better value and profits. Money and financing is not an issue, given the very low non-performing assets of this sector.

The third challenge is to enter the lucrative markets of the US (global market share), EU and Japan, Hong Kong and the Middle East, much more aggressively with innovation in design and in diamond cuts, which requires high-end human resource development with knowledge of international preferences and contemporary styles. A focused drive to market Indian product ranges in these important markets is a task being taken up aggressively by their dynamic association.

The author is advisor, Zydus Group, Crisil, Suzlon Energy Ltd, and his views are personal