RIMPY NARULA BM-A-01

PRATEEK GUPTA BM-A-02

ARCHIT MALHOTRA BM-A-03

RIDHIKA AGARWAL BM-A-17

 OVERVIEW

Diamonds, gems and Jewellery have been a part of the Indian civilization since its recorded

history, the significance of the gems and Jewellery industry in the Indian economic scenario is a

development of the last three or four decades. In 1966-67, the export turnover of the Gems &

Jewellery industry was just Rs 220 m representing a 3 per cent of total merchandise exports.

However, it has now grown to become one of the leading export oriented industries in India

recording an export turnover of around Rs 91617.53 Crore during 2008-09, making it a

significant foreign exchange earner for the country.

The gems and jewellery sector, which has seen a substantial fall in exports since 2007 due to the

withdrawal of a 6 per cent duty concession under the Generalized System of Preferences on

jewellery exports to the US, has been severely affected by the economic meltdown.

As a result, India’s share of gems and jewellery exports to the US has come down from 36 per

cent in 2006 to 20 per cent in 2009.

The UAE was the largest importer of gems and jewellery from India in 2008-09, with a share of

31 per cent. This was followed by Hong Kong with a 25 per cent and the US with 20 per cent.

The gems and jewellery sector accounted for 13 per cent of India’s total merchandise exports.

During April 2009, the total gems and jewellery exports of the country was $1,144 million, as

against $1,740 million during the same period last fiscal, a fall of about 34 per cent.

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INTRODUCTION

Gems & Jewellery Sector

Diamonds, gems and Jewellery have been a part of the Indian civilisation since its recorded

history, the significance of the gems and Jewellery industry in the Indian economic scenario is a

development of the last three or four decades. In 1966-67, the export turnover of the Gems &

Jewellery industry was just Rs 220 m representing a 3 per cent of total merchandise exports.

However, it has now grown to become one of the leading export oriented industries in India

recording an export turnover of around Rs 875 bn during 2006-07 and contributing 16 per cent of

total exports, making it a significant foreign exchange earner for the country.

Classification:
Gems & Jewellery Sector

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1. Polished Diamonds: India is one of the best markets in the world in the polished diamonds

for its world-class quality of diamonds as well as exquisite cutting skills. Over 83 per cent of

India's Gems & Jewellery cut and polished diamonds account for exports. Jaipur and Surat

are famous as world class polishing and designing centers.

2. Gem Stones: This category refers to the stones other than diamonds, these stones comes

under two basic categories that are precious stones and Semi precious stones. There is a huge

demand for these gemstones especially of Sapphire, Emerald and Ruby. India's exports of

gems have crossed 5000000 carats this year.

3. Gold and Jewellery: This category represents the gold and Jewellery, which is used in the

manufacturing of various ornaments. Indian is the country that is the largest consumer of

gold in the world, In the year 2007 gold consumption in India was 850 tons 33% up from the

last year.

4. Synthetic Stones: Synthetic diamond is diamond produced through chemical or physical

processes in a laboratory. Like naturally occurring diamond it is composed of a three-

dimensional carbon crystal. Synthetic diamonds are also called cultured diamonds. Synthetic

diamond is not the same as diamond imitation, which can be made of other material. This is

an upcoming market in India.

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 PRESENT STATE OF THE INDUSTRY:

The year 2007-08 has witnessed a growth in all the major segments of the Gem and Jewellery

industry and the total exports stood at Rs.67500 crore, a growth of 29.27% as compared to the

previous year. Exports of diamond have continued to rise and the Jewellery sector has turned in

another record-breaking performance. India’s share of the world's polished diamond market is 60

per cent in terms of value, 85 per cent in terms of volume and 92 per cent in terms of pieces.

Global gold Jewellery consumption increased 33% in the year 2005, the buoyant demand in

countries like India, the Gulf States, China and Turkey pulled up the overall figures. Since early

90's, the Jewellery has averaged a growth of over 30%, making India the fastest growing

Jewellery exporter in the world and also in the year 2004 the demand for gold Jewellery in India

increased by 29% in value to become the fastest growing Jewellery market in the world.

2004-05 2005-06 2006-07 2007-08

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Diamonds
India enjoys domination in the world cut and polished diamond market and smaller diamonds in

particular, which was amply reflected in the export growth of diamond industry with a total

export of US$ 11181.48 million (48000 crore) for the year ended 31st March, 2008 as compared

to US$ 8627.48 million (37000 crore) against the corresponding period in last year.

Jewellery
The year 2007-08 was a good year for the global Jewellery sales as well as to the Company.

Demand was fuelled by good economic growth and improved demand particularly from Asia and

the Middle East. Gold Jewellery sales in United States of America increased by 4% in 2007 to a

huge 73000 crore. The Jewellery sector recorded a massive growth of 49.23% for the year ended

31st March 2008. The demand for the diamond Jewellery will continue to grow stronger due to

continued marketing support by the industry especially in the U.S., India and China. The

Jewellery has an ever-increasing market abroad and the company with its manufacturing facility

comparable to international standards has been able to capture a reasonable portion of the same.

While opportunities are abundant, political uncertainty could affect this industry most.

FUTURE PROSPECTIVE:

With the world economy doing well and increase in the personal disposable income of the

general public demand for the gems and Jewellery has increased worldwide. This year Jewellery

sector grew by 49%. Exports contribute 70% of the total sales of the industry. With United States

contributing most (35%) in the export bill. With rupee value depreciating against the U.S. dollar

there may be a windfall increase in the profitability in the coming times for the industry. Many

companies are on the hunt for acquiring subsidiaries Indian companies will able to strengthen

their retail network. One of the areas of concern for the industry is the surge in the prices of

rough diamond pieces and India depends upon other countries but with the proposal of increase

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in the FDI limit on mining from 74% to 100%, dependence on the other countries will be

reduced. Overall with the economic fundamentals looking good, favorable government policies

and exploration of the newer markets industry looks all set for a good time ahead.

Government Policy:
⇒ Levy of two per cent excise duty on premium branded Jewellery.

⇒ 100 per cent Export Oriented Units (EOUs) and units in the Export Processing Zones

(EPZs)/Special Economic Zones (SEZs), enjoy a package of incentives and facilities, which

include duty free imports of all types of capital goods, raw material, and consumables in

addition to tax holidays against export.

⇒ Currently 74% FDI in Mining, 100% proposed.

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8
 COMPETITION AREA

India has been one of the most important countries for the production of Gems And Jewellery.

One of the highlights is the production of Studded Jewllery. Studded Jewellery trading in India is

age old as it is established by the fact that in 1650 A.D., sources report the employment of more

than 60,000 workers in the Eluru mines, where they dug and washed the precious stones. Today

though India has almost no raw Studded Jewllery left within her own soil still we produce 70%

of the World gems in terms of quantity and 45% in terms of value. India is the original country

which discovered gems and initiated gem craft. The gems produced here gave birth to a fabulous

industry and global trade.

Indian Gems and Jewellery Industry have achieved a premier position in the International

market. Today India has been recognized as a significant manufacturing exporting center apart

from its traditional strengths in handmade jewellery, the country has niche for itself in machine

made commercial jewellery arena. The export industry has come of age and is now entering a

new phase of development. Gearing up to achieve further growth, the industry has already

captured a 55% share of world market by the turn of this century.

India is a primary source of imports for the developed countries, mainly because of abundant

availability of skilled and cheap labor, but now this no longer remains the competitive edge for

India as heavy competition is faced by various countries like China, Thailand and Sri Lanka.

But at the same time, India has managed to keep its position healthy and have brighter prospects

ahead.

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GEMS & JEWELLERY SECTOR IN INDIA

Gems and jewellery play a significant role in Indian customs and traditions, making this sector

integral to the economy and one of the fastest growing industries in the country.

Worldwide, the gems and jewellery industry has been growing at a good pace and is currently

estimated at over US$ 130 billion. In India, it accounts for nearly 20 per cent of total Indian

exports. It provides employment to 1.3 million people directly and indirectly.

Apart form being the world’s largest diamond processing (cutting and polishing) country with an

80 per cent share in world market India’s favorable trade policies have made India the hub for

gems and jewellery.

Leading Branded jewellery is the new mantra in the market, having rapidly acquired a niche over

the past few years. Increasing purchasing power and disposable incomes of India’s middle class

has resulted in consumption growth of this industry by about 11 per cent in the five-year period

preceding 2006-07. Add to that the insatiable Indian craving for gems and jewellery, and the

demand will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according to

industry experts.

India’s gems and jewellery industry has been allowed 51 per cent foreign direct
investments by the government in single brand retail stores attracting both global and
domestic players to this sector. The burgeoning retail industry in India is instrumental
in innovatively marketing and branding diamonds and traditional jewellery, making
inroads in this sector and contributing to the nation’s economy. According to a report

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released by Technopak Advisors on Changing Retail Landscape in India, the jewellery and

watches market is pegged at about US$ 13.52 billion. It is expected to register a 12 per cent

growth by 2012, touching US$ 23.54 billion.

India’s economic boom in the country has translated into a large consumer market for jewellery

and other luxury products, offering a lucrative opportunity for major brands to make their foray

into the Indian market and establish their presence. Experts believe that by 2013, India will

become the biggest consumer of jewellery.

The history of the Indian gem and jewellery, a $30-billion industry, began and flourished in the

two leading States of Maharashtra and Gujarat. Exports from the industry fetched $17.1 billion

in 2006-07 against $16.64 billion in 2005-06, showing a growth of 26 per cent. But in past 1 year

we have seen some decline due to recession.

The journey of a diamond is said to begin with mining of roughs followed by sourcing them by

trading firms after which they trade it with the processors who then process the rough diamonds

to manufacture cut and polished diamonds which then end with the trade of the polished

diamonds.

Forecast
India and China together are predicted to emerge as a market equivalent to that of the US by

2015, according to the KPMG report on the global gems and jewellery industry – Vision 2015:

Transformation for Growth. The industry can see capital infusion of around $ 10 billion,

according to experts.

As per forecasts, by the year 2015, the industry will witness a good fragmentation in the

jewellery retail business while keeping the area of diamond mining, sourcing, processing within

the confines of either niche or mass players.

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Mining is at the heart of the gem and jewellery industry as the activity is the only
natural source of raw material for the industry. The Geological Survey of India has
stated that India has a great potential for diamond deposits. Based on this and
independent analyses, some of the diamond exploration companies are making efforts

to make India another target destination for diamond exploration. Maharashtra features on the

list of potential states for diamond exploration.

The Gem and Jewellery Export Promotion Council (GJEPC) is primarily involved in introducing

the Indian gem & jewellery products to the international market and promoting exports. To

achieve this, the Council provides market information to its members regarding foreign trade

inquiries, trade and tariff regulations, import duties, and information about jewellery fairs and

exhibitions. It also takes up relevant issues with government and agencies connected with

exports and submit documents for consideration and inclusion in the EXIM Policy. There are a

lot of opportunities from setting up factories to retailing through showrooms for a prospective

investor

SIZE

 Large market for Gems & Jewellery with domestic sales of over $10 billion

 4% of the global Gems and Jewellery market

 Exports of over US $15.5 billion; over 18% of India’s exports. According to recent statistics

of the Gems & Jewellery Export Promotion Council (GJEPC), India's exports of gems &

jewellery (GJ) aggregated Rs. 15787.09 Crores (US$3958.64million) during the month

April-May- 08.

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 India is the largest consumer of gold jewellery in the world

 Accounts for about 20% of world consumption

 India is the largest diamond cutting and polishing centre in the world, i.e., 60% value share,

85% volume share and 92% share of the world market by number of pieces

 The Indian domestic diamond jewellery market was estimated at around Rs. 76 billion during

2005.

 China ranks sixth in the world in terms of diamond jewellery retail value, ahead of India

which is in seventh place. India ranks third in terms of diamond value, while China holds the

seventh position.

 Indian diamond jewellery industry is the third largest consumer of polished diamonds after

USA and Japan

Structural Characteristics

 The Indian Gems & Jewellery industry is highly fragmented with a large number of

domestic private sector companies. The bulk of the GJ industry in India is concentrated in the

unorganised sector.

 The majority of India’s diamond workforce is employed by small units that process

diamonds on a job-lot basis. The number of gold jewellery manufacturing units is put at 0.1

million.

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  India is the largest diamond cutting & polishing centre in the world, followed by Israel

and employs an estimated 2 million workers serving over 0.45 million goldsmiths, and

around 0.1 million diamond processing units.

 India has several well recognised strengths which have made it a significant force in the

global Gems and Jewellery business, like i) highly skilled, yet low-cost labour, and ii)

established manufacturing excellence in jewellery and diamond polishing.

POLICY

 In 1990, the Gold (Control) Act was abolished, which had forbidden the holding of gold

in bar form.

 In 1993, the GOI also permitted non-resident Indians (NRIs) to bring 5 kg of gold into

the country twice yearly on the payment of import tax of Rs. 250 per 10 grams; this

allowance was raised to 10 kg per trip in January 1997. In 1997, the GOI also permitted

import and export of gold under Open General Licence.

 In the trade policy (2004-09) issued in April 2006, the GOI has allowed import of

precious metal scrap and used jewellery for melting, refining and re-export of jewellery for

higher utilisation of melting, refining and jewellery-making production capacity.

 Jewellery is permitted to be exported on a consignment basis, allowing exporters who

have had to deal with the problem of unsold jewellery in foreign markets to now re-import

the unsold pieces. steps taken include allowing exporters to re-import the rejected precious

metal jewellery subject to refund of duty exemption benefits on the inputs only and not the

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 duty on jewellery as was being done earlier; reduction in value addition norms for export of

gold & silver jewellery from 7% to 4.5%.

 100% FDI is permitted in the Gems & Jewellery sector through the automatic route

 SEZs and Gems and Jewellery Parks have been set up to promote investments in the

sector

 Cutting and polishing of gems and jewellery treated as manufacturing for the purposes of

exemption under Section 10A of the Income Tax Act

Outlook

 India is the fastest-growing jewellery market in the world

 Branded jewellery likely to be the fastest-growing segment in domestic sales

 The sector is expected to grow at 40% p.a. to $2.2 billion by 2010

 Exports expected to grow from $15.5 billion in 2005 to over $25 billion by 2010

 India is the most technologically advanced diamond cutting centre in the world and has

the opportunity to address one of the world’s largest and fastest-growing Gems and Jewellery

markets

 Indian industry has been gaining prominence as an international sourcing destination for

high quality designer jewellery

 Wal-Mart, JC Penney etc. are increasingly procuring jewellery from India

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 India's Exports of Gems & Jewellery (2000-03 to 2006-07)

ITEMS 2002-03 2003-04 2004-05 2005-06 2006-07

Cut & Polished

6187 5972 7111 8627 11182
Diamonds

Coloured Gemstones 203 183 192 178 193

Gold Jewellery 1150 1167 1513 268 3813

Pearls 3 3 4 4 3

Non-Gold Jewellery 56 64 85 99 129

Synthetic Stones 2 2 1 1 1

Costume/Fashion
10 10 10 10 -
Jewellery

sales to Foreign
12 13 13 18 -
Tourist

TOTAL 7622 7414 8929 11620 15320

Exports to Rough
157 142 241 536 358
Diamonds

Net Exports 7779 7556 9170 12156 15678

SOURCE: GJEPC, India

(In US$ million)

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MARKET PLAYERS IN GEMS & JEWELLERY INDUSTRY

In the recent years a large number of players have been attracted to the Indian gems and

jewellery retail sector:

⇒ Reliance Retail is planning an aggressive entry into the jewellery retail market through its

about 400 to 500 jewellery retail outlets across the country.

⇒ Damas India, part of one of the largest jewellery retail outlets in the world, is adding 16 new

stores to its present dozen stores in India.

⇒ Swarovski, the global crystal goods manufacturer and marketer plans to set up 30 stores by

2009, from the current 13.

⇒ The Gitanjali Group bought 'Nakshatra', the premium brand of jewellery promoted by

Diamond Trading Company (DTC)

⇒ Mumbai-based Vardhaman Developers plans to build four more jewellery malls in the city

and is already set to launch Jewel World-Mumbai’s first jewellery mall.

⇒ Dubai-based Joy Alukkas has recently opened its largest showroom in Chennai.

⇒ Viswa and Devji Diamonds a partnership between the Indian group and the top jewellery

retailer in UAE opened its first diamond retail outlet.

⇒ Gitanjal Gems Ltd opened its first luxury jewellery mall in Gurgaon, where a number of

international brands have started their retail business.

⇒ Gold Souk India has plans for bringing 100 Souks in 100 months

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 DATA PRESENTATION

SWOT ANALYSIS OF INDIAN GEMS & JEWELLERY INDUSTRY:

Strengths:
⇒ About one million craftsmen are associated with this industry. Their skills can be utilized for

designing and making modern Jewellery

⇒ Availability of abundance of cheap and skilled labor in India.

⇒ Presence of excellent marketing network spread across the world.

⇒ Supportive government industrial/ EXIM policy.

Weaknesses:
⇒ Small firms lacking technological/ export information expertise.

⇒ Low productivity compared to labor in china, Thailand and Sri Lanka.

⇒ As the major raw material requirements need to be imported, companies normally stock huge

quantities of inventory resulting high inventory carrying costs.

Opportunities:
⇒ New markets in Europe & Latin America

⇒ Growing demand in South Asian & Far East countries.

⇒ Rupee value depreciating resulting in a windfall increase in the profitability.

⇒ Industry moving from a phase of consolidation

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Threats:
⇒ China, Sri Lanka and Thailand's entry in small diamond segment

⇒ Infrastructure bottlenecks, absence of latest technology

⇒ Unusual increase in the prices of gold and rough diamond

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 CONCLUSION

Growth in global demand for jewelry may slow from the 5.2 percent Compounded Annual

Growth Rate (CAGR) it registered since 2000, to 4.6 percent by 2010 or 2015, unless

appropriate collective action is taken by players in the industry.

The projection is based on an assessment of the impact of eight key business trends that the two

bodies believe will affect the performance of the industry. These trends include: the local

beneficiation in the mining countries; fragmentation of supply sources and an increase in rough

supply; consolidation across the value chain; rise of new centers for jewelry manufacturing;

growth in the use of synthetics and non-precious metals in jewelry; a decline in demand for plain

gold jewelry; organization and consolidation in the emerging markets of India and China; and

intense competition from other luxury goods.

Based on the findings, the report estimates that worldwide jewelry sales will rise from $146

billion in 2005 to $185 billion in 2010 and $230 billion in 2015. However, it stresses that if the

industry as a whole focuses on “growing demand for jewelry as a category” and “strengthening

industry-level and enterprise-level capabilities” in the “next 12-18 months,” sales could reach

$280 billion in 2015, registering a CAGR of 6.7 percent.

Some of the statistical highlights include:

• Gold and diamond jewelry will continue to dominate the market, accounting for about 82

percent of overall market share

• Diamond jewellery will be the slowest growth segment at a Compounded Annual Growth

Rate of 3.3 percent

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• Synthetics will have sales of close to $2 billion at wholesale price by 2015, and will

impact sales of natural diamond jewelry to the extent of $6 billion at the retail level

• Palladium is expected to establish itself as an alternative metal for jewelry fabrication

• China (13 percent) and India (12 percent) together will emerge as a market equivalent to

that of the US share (26% percent)

• Middle East (9 percent) will be another large market

• China, Turkey and India will emerge as new centers for jewelry fabrication

• Value addition in diamond processing will increase from 29.3 percent to 34.1 percent

• India’s share in diamond processing will drop from about 57 percent by value to 49

percent

• China’s share in diamond processing will rise to 21.3 percent

• About 9 percent of world’s diamond will be processed locally by mining countries

• Centralized distribution of rough will drop from 55 percent in value to 40 percent

• Rough sold through traders will account for 45 percent

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 BIBLIOGRAPHY

 www.google.co.in

 www.eximpolicy.com

 www.gjepc.org

 Text book

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