Gems and Jewellery Industry - Budget Beneficiary

As India makes rapid progress in the retail arena, the jewellery market is undergoing a gradual metamorphosis from a 'storehouse of value' to a fashion accessory bazaar. Plain gold has now given way to diamonds, platinum and coloured gemstones.

Growth in the diamond industry has been remarkable. Overall exports from this sector in 2004-05 at US$13.7 billion were up by an impressive 29.6 per cent from US$10.57 billion in 2003-04. In the current year up to August, 2005, exports were up 23.9 per cent from US$ 5.08 billion in the corresponding period of the previous year to US$ 6.29 billion, indicating a continuation of robust growth.

The Indian cut and polished diamond manufacturing industry is expecting a growth of 15 to 20 per cent growth in 2005. The US$ 11 billion diamond industry has accounted for 85 per cent of the total global business last year. The global business is worth almost US$ 12.5 billion.

A large part of this growth was fuelled by the branded segment, which hurtled northwards at an amazing growth rate of 40 per cent. According to a study by consulting firm McKinsey, the branded jewellery market in India would touch US$ 2.28 billion mark by 2010.

This trend reveals a shift in the jewellery buying pattern in India. Traditionally, Indians bought jewellery only from a 'family jeweller' based on a relationship cultivated over, sometimes, generations. Now, the 'family jeweller' is gradually being replaced by branded jewellery makers.

Of late, some of the world's biggest names in the jewellery and luxury items such as watches and cuff-links are making inquiries to set up shop in India. Multi-national jewellery brands such as Tiffany, Cartier, Zales and Harry Winston are all said to be interested in coming here following the government's decision to allow foreign direct investment of up to 51 per cent in single brand retail stores. Most of these stores have been sourcing cut and polished diamond and gold items from Indian firms. Now they are making inquiries for a possible tie-up for India operations.

The sustained buoyancy in the gems and jewellery sector reflects the effects of continuing policy initiatives:

• Import of gold of 8 carat and above allowed under the replenishment scheme subject to the import being accompanied by an Assay Certificate specifying the purity, weight and alloy content
• Duty free import entitlement of consumables for metals other than gold and platinum at 2 per cent of the FOB value of exports during the previous financial year
• Duty free import entitlement of commercial samples at Rs 3 lakh (US$ 6,762).
• Duty free re-import entitlement for rejected jewellery at 2 per cent of the FOB value of exports
• Cutting and polishing of gems and jewellery treated as manufacturing for the purposes of exemption under Section 10A of the Income Tax Act

In addition, the Government of India and the Gem and Jewellery Export Promotion Council (GJEPC), a representative body of the trade, have taken several steps to improve exports of gems and jewellery and enhance competitiveness:

• A medium-term export strategy for various sectors, including gems and jewellery, prepared by Ministry of Commerce and Industry.
• GJEPC and Government constantly exploring the possibility of direct procurement of rough diamonds from mining countries.
• Promotion of the image of Indian diamonds and jewellery by GJEPC abroad through advertisements, publicity and participation in international fairs, buyer-seller meets, and direct approach to market retailers.
• Market study by GJEPC through experts in the field to identify new markets.
• Deployment by GJEPC of Indian designers to various international trade fairs and exhibitions to study the latest trend in designs.
• Promotion of export of 'hallmark' jewellery from India to assure foreign customers of quality and purity of jewellery made in India.
• Provision of infrastructure facilities for training to enhance the quality, design and global competitiveness of Indian jewellery. A training institute of international level - Indian Institute of Gem and Jewellery-has been set up.