Economic Analysis Of The Indian Jewellery Industry

Role in Indian Economy

The Gems and Jewellery ( G & A ; J ) market is composed of sourcing, processing, fabrication and merchandising of cherished metals and gemstones – Gold, Platinum, Silver, Diamond, Ruby, and Sapphire etc. The G & A ; J market is a important subscriber to the Indian economic system, based on the size of the domestic market and through its part to the state ‘s exports. The ingestion of gold in India bases at 1000 metric tons per twelvemonth ( around 20 per centum of planetary ingestion ) – largest consumer ; it is besides the procedures 90 % of the diamonds by pieces ( 55 per centum by value of the planetary market ) – largest consumer. The Gems and Jewellery Export Promotion Council ( GJEPC ) is responsible for prolonging the new enterprises in the sector ( Public enterprise ) .

The industry holds outstanding significance as it is a net exporter and provides employment to 1.3 million people straight and indirectly. India is besides emerging as the universe ‘s largest trading Centre for gold aiming US $ 16 billion by 2010. GJ market contributes 16 per cent of entire exports, doing it a important foreign exchange earner for the state.

Growth Potential

Jewellery Retail

Sourcing & A ; Mining of Metallic elements

The Industry ‘s value concatenation is indicated by the diagram above. India is non a major mineworker of cherished metals and rocks. The state ‘s cheap and skilled work force are one of the best in the universe for processing of diamonds though. The most interesting development in India ‘s diamond industry in the last five old ages has been the industry ‘s steady advancement up the value concatenation ; from the accomplishment to the ability to introduce and develop.

Presently, India ‘s G & A ; J industry is extremely unorganised and fragmented with 96 per centum of the entire participants being household owned concerns. The gold processing industry has about 15,000 participants, with merely 80 holding grosss over USD 5 million. India is besides place to around 450,000 goldworkers, 100,000 gold jewelry makers along with 6,000 diamond processing participants and 8,000 diamond jewelry makers.

Consumers have started switching towards branded jewelery, which offers higher quality and saves the consumers from unjust trade patterns in the industry. The outgrowth of jewellery retail ironss provide clients with convenience and confidence of quality. The organized treasures and jewelry sector is expected to come on with a good gait in close hereafter, and should hopefully account for about 8 % of the entire treasures and jewelry market by 2009-10. The Branded jewelry section is besides expected to hold a high growing rate.

The cardinal drivers for the industry growing are raising disposable income, witting selling attempts, lifting immature population with impulse to pass and jewelry being progressively regarded as manner accoutrement.

The entry of foreign participants is besides likely to increase competition and supply consumers with greater pick. As Indian treasure and jewellery exports have grown to $ 17 billion, the industry has witnessed an one-year mean growing rate of about 15-20 per centum.

Exports

The treasures and jewelry industry provides a reflecting illustration of accomplishing international fight. The majority of the Indian GJ exports comprises import of unsmooth diamonds, their film editing and smoothing in India, and re-export. CPDs ( Cut-Polished-Diamonds ) accounted for 71.1 % of India ‘s GJ exports during FY2006, followed by gold jewelry ( 23.2 % ) , unsmooth diamonds ( 3.4 % ) , coloured gemstones ( 1.4 % ) , and non-gold jewelry ( 0.9 % ) . Therefore, these two items-CPDs and gold jewellery- accountrd for around 96 % of India ‘s GJ exports.

Gems and jewelry exports from India have risen from Rs 2 crore in 1960-61 to Rs 22 crore in 1966-67, the twelvemonth in which the industry ‘s export publicity organic structure, The Gem & A ; Jewellery Export Promotion Council ( GJEPC ) , was set up to Rs. 45 crore in 1970-71.

India ‘s treasure and jewelry exports displayed a growing of 1.45 per cent during 2008-09 at $ 21.1 billion, chiefly driven by gilded jewelry exports, including medallions and decoration, over the exports of $ 20.8 billion of treasure and jewelry in 2007-08. The overall export for 2008-09 was $ 21.9 billion on the heels of a significant demand in the first half of the last financial and augmented gold jewelry exports to the United Arab Emirates ( UAE ) which has become the largest exporting finish accounting for 31 per cent of India ‘s exports. This was followed by Hong Kong with 25 per cent and the US with 20 per cent.

Beginning: ( GJEPC ) , Mumbai

The tendency for export based demand for the Indian GJ sector is 80-90 per centum as compared to the domestic demand between 10-20 per centum. Out of the entire demand for Indian GJ in 2008, 90.45 per cent was export driven and the staying 9.55 was from domestic consumers. GJ sector accounted for 13 per cent of India ‘s entire ware exports.

Top Export Finishs

United States, Hong Kong, UAE, Singapore, Belgium, Israel, Japan, Switzerland, Thailand, U.K

Market STRUCTURE

Emerging from comparatively low beginnings of a little and unorganised sector in the 1950s and 1960s, the Indian treasure & A ; jewelry industry has quickly emerged as one of the taking export oriented industries in India and a important foreign exchange earner for the state However, the demand for different types of G & A ; J is influenced by different factors including purchaser penchants, belongingss, assortments, unit values, application etc.

The GJ Sector may be farther classified into the following sub-sectors based on the features, treating techniques and costliness in footings of monetary value scope and marketability:

The two major sections in India are gilded and diamonds.

Gold

Gold is an built-in portion of the Indian tradition & A ; history. Gold jewelry is the preferable jewelry worn by adult females in India irrespective of their spiritual beliefs. India besides dominates the gold and Ag ingestion globally with ingestion of about 10000 tones p.a. ( largest consumers in the universe ) . Domestic Consumption of gold jewelery manufactured in India is besides really high.

Demand

India ‘s gold jewelry demand is seasonal with the highest ingestion during the festival and nuptials season. Demand for gold in India has an opposite relationship with monetary value volatility. With increased volatility in current months, the ingestion has declined. However, gold is besides considered a natural hedge against rising prices and is considered a safer option in times of economic uncertainness which leads to gilded demand in the signifier of retail investings and Exchange Traded financess ( ETF ) . The demand for gilded and gold-jewellery is related to international monetary values, currency fluctuations, agricultural production, and the figure of matrimonies. The consumer is hence really sensitive to monetary value. A rise in the monetary value can do rather a crisp autumn in the sum of new gold purchased. India has been the largest consumer of gold for jewelry in recent times.

The domestic demand for gilded jewelry is estimated at Rs. 390 billion in 2005, accounting for an estimated 80 % of the Indian jewelry market of Rs. 490 billion. Apart from its historical spiritual significance, gold circulates within the system and approximately 30 % of gilded jewelry fiction is from recycled pieces. India is the largest consumer of gold with a ingestion of 800 metric tons per twelvemonth.

Standardization and Hallmarking

The Gold jewellery trade in India is based on Confidence. In old times, a reputed goldworker had a fixed standing of local patronage in a specific country. The purchaser has inexplicit religion in his jewelry maker, and may non negociate excessively much.

Standardization of jewellery designs across the state is non executable due to the presence of local gustatory sensations. In the present system of selling gold jewelry, the pureness may or may non be as pronounced, and the purchaser can lose. The original labour constituent is besides a loss when gold is sold in the market. Cheating on caratage ( and pureness ) is widespread. Therefore, in 2000, the GoI introduced voluntary hallmarking of gold jewelry through the Bureau of Indian Standards ( BIS ) . The system of hallmarking is expected to increase the purchaser ‘s assurance in the jewelry pureness.

Diamond

Diamond is an ‘export-led ‘ and ‘value added ‘ industry. The industry depends wholly on imported natural stuff, viz. , unsmooth diamonds, by and large referred to as “ roughs ” in trade idiom. The diamond exporters have developed a planetary mentality, as theirs is an export-oriented and import-dependent industry.

In the diamond concern, Indian companies are largely present at the `Beneficiate ‘ degree of the value concatenation ; act as donees by importing unsmooth diamonds ( or `roughs ‘ ) from mining companies, cutting and smoothing roughs, and exporting them for farther ingestion in jewelry, etc.

Demand

Monetary values of diamonds are dictated by demand-supply spread with demand dominated in western states, particularly the US.A Because of increased disposable income and aggressive publicity schemes by the diamond industry, Indian diamond jewelry demand has increased significantly in recent years-from Rs. 19.7 billion in 1995 to around Rs. 80 billion in 2005. India dominates the diamond processing trade with 11 out of 12 diamonds being cut and polished in India.

Market size of Indian GJ is sector is driven by the demand for the domestic and international markets. The Indian GJ sector is traveling through unsmooth spots since 2008 with more than 100000 skilled and unskilled labour being laid off due to hapless demand or worsening export tendency from US which is staggering through economic lag, inflationary tendency and lifting natural stuff cost.

The diamond market is oligopolistic with De Beers being the dominating organic structure ( sometimes called the Wal-Mart of Diamonds ) .This laterality has led to the being of a market sharing trust. But in the recent old ages the different states get downing their ain production of diamonds and fabricating show that the tendency is switching to monopolistic market construction.

Major issues impacting the sector that need aid

Large Presence of Unorganized Sector

The majority of the Gem and Jewellery industry in India is concentrated in the unorganised sector and employs about 2 million workers functioning over 0.1 million gold jewelry makers and over 8,000 diamond jewelry makers. The bulk of India ‘s diamond work force is employed by little units that process diamonds on a job-lot footing.

The portion of the unorganised sector in the Indian GJ concern is worsening. Harmonizing to a study commissioned by GJEPC, the portion of the organized sector in diamond processing increased from 9 % in 1995 to 45 % in 1998. This was because of the displacement in treating towards higher rocks, execution of advanced cutting techniques, and penchant of purchasers towards fewer Sellerss.

Technological restraints

Technology is another country where the Indian industry faces a long-run menace from other states. Until now, a combination of manual accomplishment and semi-automatic machines has helped the Indian industry to keep a leading place. However, China with its modern and automatic mills is today in a similar place to fabricate jewelry at competitory monetary values. Increased competition will coerce the Indian industry to concentrate on higher-end merchandises, with the attendant demand of increased investing in modern engineering.

Significant dependance on Imported Raw Materials

With negligible production of gold and diamonds, the Indian GJ industry is about wholly dependent on imported natural stuffs. During FY2006, imports of pearls, cherished & amp ; semi-precious rocks aggregated Rs. 404.69 billion ( US $ 9.42 billion ) , accounting for 11.2 % of India ‘s non-bulk imports, and 6.4 % of entire imports. With the addition in exports in recent old ages, the GJ industry has besides accounted for an increased portion of gross bank recognition ( GBC ) of scheduled commercial Bankss ( SCBs ) . With GBC of Rs. 198.66 billion in March 2006, the industry accounted for 3.61 % of industry GBC of SCBs in March 2006, as compared with 2.7 % in March 2000.

Government Enterprises

The Indian authorities has provided an drift to the treasures and jewelry industry with its foreign trade policies:

100 per cent foreign direct investing ( FDI ) in treasure and jewelry allowed through the automatic path.

The authorities has lowered import responsibility on Pt and has exempted rough colored cherished treasures rocks from imposts responsibility. Rough, semi-precious rocks are besides exempt from import responsibility.

Duty-free import of consumables for metals other than gold and platinum up to 2 per cent of cargo on board value of exports.

Puting up of SEZs and treasures and jewelry Parkss to advance investing in the sector.

The export of coloured gemstones on a consignment footing has been allowed.

Social benefits in assorted sections

The Indian treasures and jewelry industry has proved its heart in international fight. Simultaneously, it has besides made important socio-economic parts.

Employment coevals with low investing:

The investing required for making employment in the diamond processing and jewellery-making units is rather low. Employment coevals in other industries calls for heavy investings.

Difficult currency foreign exchange net incomes:

The states to which India exports treasures and jewelry are among the difficult currency countries.

The industry contributes continuously to the state ‘s foreign exchange militias.

Pollution-free industry:

Diamond processing and jewelry industry do non foul the environment, neither air nor H2O.

Environmental friendly industry

Bing an import-based industry, it does non consume natural resources and leaves the vegetation and the vegetation in tact.

Aids in urban decongestion

Through decentralized location, the treasures and jewelry industry helps in the remotion of unemployment in the rural sector, bar of migration to metropoliss and the turning away of slums in the urban countries.

Low Power Consumption

The treasures and jewelry fabrication procedures do non worsen the state ‘s energy jobs.

No load on the state ‘s conveyance substructure

The natural stuffs as besides the finished merchandises are of high-value but of low weight. They do non set any load on the state ‘s route, rail, sea or air conveyance.