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ANALYSIS |
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Indian
Gems & Jewellery
Exports Rise 40pc
despite Recession
- Exim Bank Study
India's exports of gems and jewellery
showed a year-on-year growth of
40.7 percent in 2008-09 compared
to 23 percent witnessed in the previous
year, despite a global economic
slowdown, according to a study made
by the Export-Import Bank of India
(Exim Bank).
The Indian Gems and Jewellery industry
is one of the important sectors
of the Indian economy. The gems
and jewellery industry in India
comprises sourcing, processing,
manufacturing and selling of precious
metals, diamonds, pearls, precious
and semi-precious gemstones and
artificial jewellery. India is one
of the fastest growing jewellery
markets in the world and is the
largest consumer of gold in the
world. India is also one of the
largest diamond processors in the
world, with more than 90 percent
in terms of pieces, around 80 percent
in terms of carats and around 55
percent in terms of volume being
processed in India.
India is also the largest consumer
of gold in the world (over 700 tonnes
in 2008), accounting for around
24 percent of world gold consumption,
majority of them going into production
of jewellery. Over the years, India
is also emerging as largest trading
centre for gold. However, during
the second quarter of 2009, the
consumption of gold had shown a
decline mainly due to the rising
prices and global slowdown.
Source: World Gold Council
Despite global economic slowdown,
in the year 2008-09, the exports
of gems and jewellery from India
showed a y-o-y growth of 40.7 percent
as compared to a y-o-y growth of
23 percent witnessed during 2007-08
(Table 1).
Table: 1 Indian Exports of Gems
and Jewelery
Time Period
US
$ Million %
Change
2006-07
15,
966.25 ---
2007-08
19, 688.31
23.3
2008-09
27, 704.98
40.7
Source: DGCIS, Ministry of Commerce
Demand for gems and jewellery are
income elastic and is likely to
remain moderate in the near future.
The continuation of demand slowdown
in the US and Europe might slow
down the exports of gems and jewellery
as also the domestic retail market.
One of the major trends witnessed
in the gems and jewellery industry
due to the economic slowdown has
been the recycling of gold or in
other terms gold scrap. Key focus
has been the surge in the levels
of gold scrap coming back to the
market. With mine production on
a declining trend and the outlook
relatively benign, scrap levels
are likely to remain as the primary
supply of gold due to uncertainty
over the short to medium term. Selling
old gold jewellery has provided
consumers with access to the much-needed
funds during these very difficult
economic times. In the price sensitive
markets, the profit-taking motive
behind recycling activity has been
very strong, highlighting the intrinsic
value of jewellery and the strength
of the savings/investment aspect
of gold jewellery purchases. Increase
in recycling activity has been both
a western and non-western phenomenon,
although volumes in the non-western
markets have continued to dominate.
In western markets, the primary
motivation behind recycling of gold
has been distress selling, while
in the more traditional non-western
markets, the primary motive has
been profit-taking.
Research by World Gold Council suggests
that jewellery buyers across the
world recognize that gold jewellery
is both a store of value as well
as a means of adornment. Nevertheless,
the investment and adornment motives
tend to overlap most strongly in
traditional markets such as the
Middle East (including Turkey) and
India, largely due to the very strong
cultural values underpinning jewellery
ownership; bar and coin demand in
these regions comprise a relatively
modest proportion of total demand
for gold.
The prospects in growing economies
in India, Middle East, Hong Kong
and China are expected to help the
sector to regain its glitter. Changing
lifestyle and urbanization are also
expected to fuel the growth of the
industry, mainly in branded jewellery.
According to industry estimates,
the branded jewellery segment is
expected to grow over 40 percent
in the coming years. Consumers being
exposed to western lifestyles show
increased preferences to products
which are popular abroad, and this
in turn will help in maintaining
the demand and growth of the industry.
One of the major advantages of the
Indian gems and jewellery industry
is the low cost of labour involved
in the production of finished diamonds.
India has one of the best skilled
manpower to design and make high
volumes of exquisite jewellery at
relatively low labor cost.
It is reported that, the cost per
carat for cutting and polishing
diamond is US$ 10 in India as compared
to US$ 17 in China and US$ 150 in
Belgium. India also has the largest
resource hub in diamond cutting
and processing. The long-term outlook
for Indian gems and jewellery is
expected to be positive. India's
competitive advantage is likely
to be centered on its skilled labour
combined with a ready adoption of
leading technology.
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