An
important emerging sector of Indian economy, gem and jewelry is a leading
foreign exchange earner for the country. The country consumes around 800
tonnes of gold that account for 20 % of global gold consumption and nearly
600 tonnes of this goes into jewelry making. The Indian jewelery market,
which is estimated to be US$ 13.5 billion in fiscal 2006-07, accounts for
8.3 % of the global jewelery sales, according to a study by KPMG. The increase in purchasing parity of the middle class and surging income levels have resulted in consumption growth of gems and jewelery by about 11 % in the 5 year period preceding 2006-07. It also contributes over 15 % of the total exports of country and provides employment to 1.3 million people directly and indirectly. The two major segments of the gem and jewelry industry in India are gold jewelery and diamonds. The contribution of gold jewelry is about 80 % of the total jewelry market, with the balance comprising fabricated studded jewelry, which includes diamonds as well as gemstone studded jewelry.
Indian jewelry sector is well supported by Government policies and the banking sector, with around 50 banks providing about US$ 3 billion credit to the Indian diamond industry. In addition, the country is expected to have a diamond bourse soon.
History
Jewelery
has been an integral part of the Indian culture and civilization since
ancient history. They were in demand and fashion since ancient civilizations
as Harappa and Mohanjodaro. Made out of variety of materials, jewelry can be
adorned to highlight almost any part of body. Be it the traditional jewelry
or the latest ones that are continuously increasing in demand, i.e. The
costume and imitation jewelry. There is no dearth when it comes to
accentuating the beauty with wide-ranging imaginative & stunningly
designed jewelry pieces. Currently, India is the world’s largest diamond processing (cutting and polishing) country with around 1 million processors treating over 57 % of the world’s rough diamonds by worth. According to recent reports, 11 out of 12 diamond (stones) set in jewelry are cut and polished in India. Processing is done on rough diamonds in a complete range of sizes and qualities, including stones larger than 10 carats. In terms of carat, India's contribution in this sector is about 80 % of the global market. Employing over 90 % of the global diamond industry workforce, the country also accounts for about 90 % of the volume of diamonds processed in the world.
Industry Overview
The `India Shining' factor, is, possibly, best reflected in the surge in India's gold and jewelery exports, which have been making considerable contributions to the country's foreign exchange earnings. And driving this growth in gold and jewelery (GJ) exports is the Special Economic Zone in Mumbai that accounts for about 50 % of the country's gem and jewelry exports.
With negligible domestic production of gold and diamonds, the Indian jewelry industry has to depend entirely on on imported raw materials. The bulk of the domestic gem and jewelry industry is concentrated in the unorganized sector that employs an estimate of 2 million workers serving over 0.1 million gold jewelers and 8,000 diamond jewelers.
The hub of India's jewelry industry is Mumbai that receives majority of the country's gold and rough diamond imports. However, most of the diamond processing is undertaken in the neighboring state of Gujarat, primarily in Surat, Bhavnagar, Ahmadabad and Bhuj. But Mumbai does have a considerable number of modern semi-automatic factories and laser-cutting units, majority of which are located in the special economic zone.
Exports
Exports from the industry yield US$ 17.1 billion in 2006-07 against US$ 16.64 billion in 2005-06, reflecting a growth of 26 %. While the diamonds accounted for 64 % of the total exports, gold jewelery accounted for 30.47 %, colored gem stones and others accounted for 1.44 % and 1.04 % respectively last year. The export of cut and polished diamond segment US$ 10.90 billion, while the export of gold jewelery yielded US$ 5.21 billion last year. Colored gemstone exports fetched US$ 246.48 million last fiscal, against US$ 232.35 million in the previous year.
Future growth in the gem and jewelery business is likely to be driven by increased exports to the US and other markets, apart from a surge in domestic consumption.
Currently the major destinations for India's gem and jewelry exports are -
- United States (28 percent)
- Hong Kong (21 per cent)
- UAE (15 per cent)
- Singapore (9 per cent)
- Belgium (8 Per cent)
| Iteams | 2002-03 | 2003-04 | 2004-05 | 2005-06 | 2006-07 (P) |
2003-04 | 2004-05 | 2005-06 | 2006-07 (P) |
| Cut & Polished
Diamonds Coloured Gemstones |
7110.57 192.07 |
8627.46 178.46 |
11181.56 192.75 |
11856.77 233.53 |
10909.82 246.56 |
21.33 | 29.60 | 6.04 | -7.99 |
| -7.08 | 8.00 | 21.16 | 5.58 | ||||||
| Gold Jewellery | 1513.08 | 2680.92 | 3783.58 | 3863.23 | 5209.32 | 77.18 | 41.13 | 2.11 | 34.84 |
| Other | 112.90 | 132.82 | 161.94 | 187.97 | 190.33 | 17.64 | 21.93 | 16.07 | 1.26 |
| Total | 8928.62 | 11619.70 | 15319.83 | 16141.50 | 16556.03 | 30.14 | 31.84 | 5.36 | 2.57 |
| Rought Diamonds | 240.88 | 535.84 | 357.86 | 566.89 | 564.82 | 122.45 | -33.22 | 58.41 | -0.37 |
| Net Exports | 9169.50 | 12155.54 | 15677.69 | 16708.39 | 17120.85 | 32.56 | 28.98 | 6.57 | 2.47 |
India's Export of Gem & Jewelry (Destination-wise – 2005-06)
Future Forecast
The future growth of Indian jewelry industry lies in finding new markets and in adding value. Worldwide, jewelry is a big business, which is extremely lucrative as margins are high compared to diamonds, as branding can demand high premiums.
India was a late entrant to the global jewelry market and its industry took off after establishment of the export processing zones in 1990, especially the special economic zone in Mumbai that accounts for 40 % of India's exports. It has taken the country a few years to incorporate international designs, styles and finishes.
The outlook for the industry is bright, but how much of this amazing performance will actually translate into improved bottomlines will lie in the capability of individual businesses to harness the potential of new markets and products. With intense competition in market, the stock performance will depend on how efficiently, in terms of both cost and marketing, companies can cut and polish diamonds and also venture into the lucrative but difficult jewelery industry.