EXPORT-IMPORT BANK OF INDIA

OCCASIONAL PAPER NO. 138

INDIAN GEMS AND JEWELLERY:A SECTOR STUDY

EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings ofresearch studies carried out in the Bank. The results of research studies can interestexporters, policy makers, industrialists, export promotion agencies as well asresearchers. However, views expressed do not necessarily reflect those of the Bank.While reasonable care has been taken to ensure authenticity of information and data,EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of suchitems.

© Export-Import Bank of IndiaPublished by Quest Publications

February 2010

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CONTENTS

Page No.

List of Tables 5

List of Exhibits 7

List of Boxes 9

Executive Summary 11

1. Introduction 30

2. Raw Material Base: Global scenario 32

3. International Trade in Precious Metals, Gems and Jewellery 41

4. Profile of Select Countries 47

5. Status of Precious Metals, Gems and Jewellery Industry in India 61

6. Market Analysis 84

7. Challenges and Strategies 93

Annexure

1. World Gold Demand 108

2. Production of Diamond in the World and in India 109

3. World Exports and Imports (2007) of Select Precious Metals, 110Gems and Jewellery

4. India’s Major Export Destinations and Import Source Countries 113of Precious Metals, Gems and Jewellery (2008-09)

5. Members of Kimberley Process 116

Project Team:

Mr. S. Prahalathan, General Manager, Research & Planning Group

Ms. Renuka Vijay, Manager, Research & Planning Group

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List of Tables

Table Title Pg. No.No.

1. Consumer Demand for Gold in the World 31

2. Major Producers of Gold in the World 33

3. Major Producers of Silver in the World 39

4. Major Producers of Gemstones in the World 39

5. Major Producers of Platinum in the World 40

6. Brazil’s Exports of Precious Metals, Gems and Jewellery 48

7. Brazil’s Major Export Destinations and Import Sources of 49Precious Metals, Gems and Jewellery

8. China’s Exports of Precious Metals, Gems and Jewellery 50

9. China’s Major Export Destinations and Import Sources of 52Precious Metals, Gems and Jewellery

10. Exports and Imports of Diamonds by Israel 54

11. Israel’s Exports of Precious Metal, Gems and Jewellery 54

12. Israel’s Major Export Destinations and Import Sources of 55Precious Metals, Gems and Jewellery

13. Italy’s Exports of Precious Metals, Gems and Jewellery 56

14. Italy’s Major Export Destinations and Import Sources of 57Precious Metals, Gems and Jewellery

15. Malaysia’s Exports of Precious Metals, Gems and Jewellery 58

16. Malaysia’s Major Export Destinations and Import Sources 59of Precious Metals, Gems and Jewellery

17. Reserves of Gold in India 64

18. Reserves of Gold in India - State-wise 64

19. Trends in Foreign Exchange Reserves of India 66

20. Export and Import of Gold Jewellery by India 68

21. Exports of Gold Jewellery by SEZ/EPZ 69

22. Reserves of Diamond in India 70

23. India’s Exports and Imports of Diamonds 73

24. Reserves and Resources of Select Precious Stones in India 74

25. India’s Exports and Imports of Precious Stones 75

26. India’s Exports and Imports of Platinum 77

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27. India’s Exports and Imports of Pearls 78

28. India’s Exports and Imports of Silver 79

29. Market Analysis of Articles of Jewellery (HS 7113) 85

30. Market Analysis of Articles of Jewellery (HS 711311) 85

31. Market Analysis of Articles of Jewellery (HS 711319) 86

32. Market Analysis of Articles of Jewellery (HS 711320) 87

33. Market Analysis of Articles of Natural and Cultured Pearls, 88Precious or Semi-precious Stones (HS 7116)

34. Market Analysis of Articles of Natural and Cultured Pearls, 89Precious or Semi-precious Stones (HS 711610)

35. Market Analysis of Articles of Natural and Cultured Pearls, 90Precious or Semi-precious Stones (HS 711620)

36. Market Analysis of Imitation Jewellery (HS 7117) 91

37. Market Analysis of Imitation Jewellery (HS 711711) 91

38. Export Performance of Indian Gems and Jewellery Industry 94

39. Analysis of Major Export Destinations of India for 95Gems and Jewellery

40. Financial Performance of Companies (April-September 2009-10) 96

41. Production Cost/Net Sales Ratio Across Manufacturing Sector 97

Table Title Pg. No.No.

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List of Exhibits

No. Title Pg. No.

1. Price Trends of Gold in Select Currencies 34

2. Company-wise World Diamond Production, 2007 35(in terms of value and volume)

3. World’s Largest Producers of Diamonds, 2007 36(In Terms of Volume and Value)

4. Diamond Pipeline 37

5. Value Chain of the Gems and Jewellery Industry 61

6. Value Chain of Diamonds and Precious Stones 62

7. Production of Gold in India 63

8. India’s Share in World Consumption of Gold Jewellery 65

9. India’s Gold Consumption 66

10. Trends in Prices of Gold (January 2005- December 2009) 67

11. Diamond Production in India 70

12. India’s Major Export Destinations and Source Countries 72for Diamonds (2008-09)

13. Prices of Gold and Silver (December 2008-December 2009) 96in India

14. Prices of Platinum (Jan 2008-Dec 2009) 103

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List of Boxes

No. Title Pg. No.

1. World Diamond Council 38

2. Responsible Jewellery Council 44

3. Kimberley Process 45

4. Diamond Dollar Account Scheme 82

5. Exim Bank’s Role in Supporting Indian Gems and 83Jewellery Industry

6. BIS Certification Scheme for Hallmarking of Gold Jewellery 101

7. Benefits of Becoming a Member of Hallmarking Convention 102

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INTRODUCTION

Gems and jewellery are being usedby the Indians since ages, for bothaesthetic, as well as investmentpurposes. India has the distinctionof being one of the first countriesto introduce diamonds to the world.The country was also one of thefirst countries to mine, cut & polish,and trade in diamonds. The twomajor segments of the gems andjewellery business in India are goldand diamond jewellery. While apredominant portion of goldjewellery manufactured in India isfor domestic consumption, apredominant portion of rough, uncutdiamonds processed in India areexported either in the form ofpolished diamonds or in the formof finished diamond jewellery. Thegems and jewellery industry has animportant role in the Indianeconomy. With an estimatedconsumption of 713 tonnes of goldduring the year 2008 (includingjewellery consumption of 501tonnes), India is one of the largestconsumers of gold in the world.

RAW MATERIAL BASE:GLOBAL SCENARIO

Production

Gold

The major producer of gold in theworld in the year 2008 was Chinawith a production of 295 metrictonnes (growth rate of 7.3% overthe previous year); China held ashare of 18.9% of the total worldproduction of gold during 2008,followed by South Africa (12.7%),USA (10.7%), Australia (9.9%) andPeru (9.7%). Compared to 2007,during 2008, countries such asIndonesia (-23.7%), Australia(-8.5%), USA (-3.4%), Canada(-1%) and South Africa (-0.8%)witnessed a decline in production,and countries such as China(7.3%), Russia (5.1%) and Peru(2.9%), witnessed an increase inproduction of gold.

During the third quarter of 2009,the demand for gold has shown adecline in almost all the segments.This may be partially owing to globaleconomic slowdown and increase in

EXECUTIVE SUMMARY

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prices, reducing the disposableincome with the consumers.

Diamond

During 2007, Botswana was thelargest diamond producing country,in terms of value, estimated at US $2.96 billion, recording a decline ingrowth of 7.7% over the year 2006.Botswana constituted a share of25% in the world production ofdiamonds. Botswana was followedby Russian Federation (21.7%),Canada (13.7%), South Africa(11.7%) and Angola (10.5%), as theworld’s largest producers ofdiamond. Lesotho (growth of96.4%), Canada (17.5%) and SierraLeone (13%) were countries, whichshowed impressive growth rates intheir production of diamonds during2007.

Russia was the largest diamondproducer by volume with a productionof 38.3 million (23% of world’sdiamond production) carats in 2007,followed by Botswana (20%), Congo(17%), Australia (11%) and Canada(10%). In terms of growth in volumeof production, Guinea recorded115% growth in 2007 (over 2006),followed by Canada (28%) andAngola (5.7%).

Silver, Gemstones and Platinum

Major producers of silver in theworld in the year 2008 include Peru

(19%), Mexico (15.8%), China(13.7%), Chile (10.5%), andAustralia (9.5%). There has beenan increase in the productioncompared to the previous year inalmost all the major countries,except USA and Australia, whichwitnessed a decline of (–) 11.1%and (–) 4.3%, respectively.

In the case of gemstones (otherthan diamond), major producers ofthe world include: Botswana (26.5%),Russia (24.7%), Canada (19.1%),Angola (10.6%) and South Africa(6.5%). Though most of the countrieshaven’t shown an increase in itsproduction in 2008, over 2007, somecountries such as Sierra Leone(66.7%), Guinea (35%), CentralAfrican Republic (27%), and Angola(14.9%) have shown tremendousincrease in production in the year2008, over the previous year. Brazil(-33.3%) and Australia (-0.4%) werethe few major countries, whichshowed a decline in production, overthe previous year.

The largest producer of platinumin the world was South Africa, holdinga share of 76.6% of the total worldproduction, followed by Russia(12.5%), Canada (3.6%), Zimbabwe(2.8%) and USA (1.9%). However,major producers such as SouthAfrica (–7.8%), Russia (– 7.4%) andUSA (– 4.1%) have shown a declinein their production in 2008, over theprevious year.

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INTERNATIONAL TRADE INPRECIOUS METALS, GEMSAND JEWELLERY

Exports and Imports ofPrecious Metals and Stones

Gold

The largest exporter of gold in theworld in the year 2007 was USAwith a share of 19.9% in total worldexports, followed by Australia(15.9%), Canada (9.3%), HongKong (7.3%) and Peru (7.1%). Theworld’s largest importers of goldinclude Switzerland (25.7%), UK(19.6%), USA (8.4%), India (7.5%),and South Africa (4.4%).

Diamond

Israel (with a share of 19.7%),Belgium (19.6%), India (14.3%),USA (12.8%), and UK (9.1%) werethe largest exporters of diamond inthe world, in the year 2007. Thelargest importers of diamondsinclude: USA (17.7%), Belgium(16.2%), India (13.1%), Israel(13%), and Hong Kong (12.9%).India was an exporter as well asan importer of diamonds, with arespective share of 14.3% and13.1% in the world. This may bebecause, India imports roughdiamonds, for value addition, andexports as cut and polisheddiamonds.

Precious Stones

Hong Kong, USA, Switzerland,Thailand and India were among the

leading exporters, as well asimporters of precious stones (otherthan diamond) in the world in theyear 2007. Hong Kong was thelargest exporter of precious stones(other than diamonds) with a shareof around 17.1% of the total worldexports, and was followed by USA(13.2%), Switzerland (12.7%),Thailand (12.2%), and India (9%).In the case of imports, the leadingimporters include: USA (26.5%),Hong Kong (14.4%), Switzerland(9.2%), Thailand (7.2%) and India(6.3%).

Pearls

In the case of Pearls, Hong Kongwas the largest exporter, with theexports valued US $ 482.92 millionconstituting a share of 30.2%, inthe world exports of pearls in theyear 2007. Japan, China, Australia,and French Polynesia were theother major exporters of pearls.Hong Kong was the largestimporter with a share of around33.2%, followed by Japan (18.3%),USA (15.8%), Germany (4.4%), andAustralia (4%).

Platinum

South Africa, constituting a shareof 32.5% was the largest exporterof platinum in the world in the year2007. UK, USA and Germany werethe other major exporters. USA wasalso a major importer of platinumconstituting a share of 24.4% in theworld, followed by Japan (19.2%),Germany (12.7%) and UK (8.6%).

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Silver

Major exporters of silver in the year2007 include: China, with a shareof 15.9% in the world, followed byMexico (11.2%), Hong Kong (8.7%)and Germany (8.1%). USA, HongKong, UK, Germany and India werethe major importers of silver in theworld.

Exports and Imports ofJewellery

Articles of Jewellery

World exports of jewellery articlesmade of precious metals wasvalued at US $ 42.5 billion in 2007;major exporters include: Italy(14.2%), India (11.9%), USA(10.5%), and Hong Kong (9.9%).Major importers of jewellery include:USA (23.7%), UAE (13.7%), HongKong (9.1%), and Switzerland(6.7%).

Articles of Natural / CulturedPearls, Precious Stones

World exports of articles of naturaland cultured pearls, or made ofprecious stones was valued at US $1945.99 million in 2007. Majorexporters include USA (76.4%),Hong Kong (6.4%), China (5.4%),Switzerland (2%), and Japan(1.3%); major importers under thiscategory include: Hong Kong(15.7%), Switzerland (14.9%), UK(9%), Netherlands Antilles (9%),and Japan (8.6%).

Articles of Imitation Jewellery

World exports of articles of imitationjewellery were valued atUS $ 4967.03 million in 2007. Majorexporters of imitation jewelleryinclude Hong Kong (21.9%), China(17.2%), Austria (8%), France(6.4%), and Italy (5.7%); majorimporters under this categoryinclude USA (19.6%), Germany(7.3%), France (7.3%), UK (6.4%),and Italy (6.2%).

Profile of Select Countries

Brazil

Brazil is known for its diversity andvolume of precious stones depositsin its soil such as tourmaline,aquamarine, agate, amethyst,citrine, topaz and quartz; Brazil isthe only major source of imperialtopaz and paraiba tourmaline in theworld.

During 2007, Brazil’s exports,under the HS Code 71 catetory,consisted mainly of gold (valuedUS $ 790.88 million), followed byprecious stones (with a value of US $111.57 million), and articles ofjewellery and parts (with a value ofUS $ 72.9 million). Major exportdestinations of gems and jewelleryinclude: USA, Germany, UK, HongKong and Mexico, and the majorimport sources include Peru, SouthAfrica, Germany, Belgium and UK.Gold was largely exported to USA(around 95% of the total exports of

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gold by Brazil). India was a majorsource country for import ofdiamonds, imitation jewellery andarticles of natural and culturedpearls.

China

China is one of the largestconsumers of gold, with goldjewellery being the major item ofdemand. In the year 2008, the totaldemand for gold in China was392.7 tonnes, a growth of 19.8%,over the previous year. During thethird quarter of 2009, the golddemand in China was 120.2tonnes, a growth rate of 12% overthe corresponding quarter of 2008.After diamond was found in thethree provinces of Liaoning,Shandong and Hunan, the diamondindustry in China has been growing,since 1980s. The annual productionof diamonds in 2008 was US $ 1.3million (69.4 thousand carats), anincrease of 18% in value (13% incarat) since 2006. China is one ofthe largest producers of silver in theworld. In the year 2008, Chinaproduced silver worth 2600 tonnes,an increase of 1.6% over theprevious year; China, in the year2008, held a share of 13.7% in theworld production of silver.

China’s exports of gems andjewellery have grown by 21% perannum since 2005; from US $ 5.5billion to US $ 8.1 billion in 2007. The

sub-item which was largely exported(according to value) from China,under the HS Code 71 category, wasarticles of jewellery and parts ofprecious metals with a share of30.9% in the total exports of gemsand jewellery in the year 2007.However, silver (42%), and articlesof natural or cultured pearls andprecious and semi precious stones(30.8%) were the items whichshowed highest CAGR during theperiod 2005 – 2007. Exports ofprecious stones showed a decline (-26.4%) over the years, from US $29.1 million in 2004 to US $ 15.8million in 2007. Major destinations forChina’s gems and jewellery exportsinclude: Hong Kong, USA, Belgium,Switzerland and UK.

Israel

Diamond jewellery is the main subsegment of Israel’s gems andjewellery industry, followed by gold,silver and imitation jewellery. Theartists in Israel make use of mostof their skills, innovativetechnologies and techniques, whichenable them to offer their productsat very reasonable prices.

Exports of diamonds, accordingto the Central Bureau of Statistics,Government of Israel, showed adecline following the economicrecession. During January -September 2009 there was a drasticdecline in exports ranging above

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40%. The economic slowdown wascited as the main reason for thisdecline in exports. During 2007, theexport of precious metals, gems andjewellery by Israel touched US $ 19.1billion, achieving a CAGR of 7.5%,during 2005-2007; and the importsof Israel were US $ 12.6 billion in2007. Israel was a major exporter ofdiamonds, which constituted around97% of the total gems and jewelleryexports, and around 2% wasaccounted by articles of jewellery.Major export destinations ofdiamonds from Israel include: USA,constituting a share of 48.5%,followed by Belgium (16.7%), HongKong (15%), India (4.8%) andSwitzerland (4.7%). Major sourcecountries for imports of diamonds byIsrael include: USA (40%), Belgium(24.8%), India (8.5%), Hong Kong(8.2%), and UK (8.1%).

Italy

Italy has a large gems and jewelleryindustry, mainly located in theregions, namely, Veneto, Toscana,Lombardia, Lazio and Piedmont.These regions have captured morethan half of the Italian market ofgems and jewellery. There are twomajor clusters in Italy for gems andjewellery which are located inVicenza and Arezzo.

Constituting a share of 69.5%,articles of jewellery and parts was themajor jewellery export item, underthe HS Code 71 category, in Italy.

However all the categories ofprecious metals, gems and jewelleryhave witnessed an increase inexports from Italy, with platinum anddiamonds witnessing the highestCAGR of 69.8% and 52%,respectively, during 2005 to 2007.The exports of platinum increasedfrom US $ 222.71 million to US $642.17 million, and that of diamondsincreased from US $ 56.83 million toUS $ 131.45 million during thisperiod. The total exports of preciousmetals, gems, and jewellery (HSCode 71) witnessed a CAGR of17.4%, since 2005, showing anincrease from US $ 6.3 billion to US$ 8.7 billion, in value terms. Majorexport destinations of Italy’s preciousmetals, gems and jewellery industryinclude: USA, Switzerland, France,UAE and UK, and the major sourcecountries for import of preciousmetals, gems and jewellery include:USA, Switzerland, France, Belgiumand Hong Kong. Major exportdestinations of articles of jewelleryand parts include: USA (15.4%), UAE(13.6%), Switzerland (10.2%),France (6%) and UK (4.9%), and themajor source countries for articles ofjewellery and parts include:Switzerland (29.6%), Hong Kong(13.9%), France (8.8%), Poland(7.9%), and Turkey (7.7%).

Malaysia

Malaysia is another major producerand exporter of gems and jewellery,

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with the industry havingconcentration in Penang. Accordingto industry sources, approximately75-80 percent of the gold andjewellery in Malaysia aremanufactured or fabricated inPenang, followed by Johor Bahruand Kuala Lumpur, with activitiesranging from manufacturing toimport, export, retail and wholesale.

During 2007, exports of preciousmetals, gems and jewellery fromMalaysia were valued at US $ 2.1billion, of which 64% constitutedarticles of jewellery and parts,followed by gold with 19% share.Other export segments of gems andjewellery, namely, diamonds,precious stones, pearls, and silverconstituted marginal share in thetotal gems and jewellery exports fromMalaysia.

Major export destinations forgold include: Thailand (27.9%),Australia (13.9%), Hong Kong(13.2%), China (8.9%), and Taiwan(8.2%), whereas the major sourcecountries for gold include: Japan(71.3%), Singapore (19.2%),Indonesia (3.2%), USA (2.9%), andHong Kong (1%). In the case ofarticles of jewellery and parts, majorexport destinations include: UAE(71.2%), Singapore (21.3%), USA(2.6%), China (1.7%), and HongKong (1%); and the major sourcecountries include: Singapore(60.1%), China (14%), Hong Kong(7%), USA (4.8%), and Switzerland(4.1%).

STATUS OF PRECIOUSMETALS, GEMS ANDJEWELLER Y INDUSTRY ININDIA

Gold

The total resources of gold in thecountry, as on April 2005, wereestimated at 390.28 million tonnes.Out of these, 19.25 million tonneswere under the reserve category,and the balance 371.03 milliontonnes were under the resourcescategory. Besides, the totalresources of gold ore of placer typein the country were estimated at26.12 million tonnes. Karnataka hasthe largest known reserves of goldin India followed by Rajasthan andKerala. Although there have beensignificant ore resources, India’sgold production has shown adecline over the years.

India has been the largestconsumer of gold jewellery in recenttimes, and in the year 2008, the goldconsumption in India was estimatedto be 501 tonnes, accounting for 23%of world demand. In the third quarterof 2009, the consumption of goldjewellery in India has declined bynearly 37% and the totalconsumption of gold has declined byaround 45% over the same period inthe previous year.

During the year 2008-09, theexport of gold (or jewellery) haswitnessed a growth rate of 51.1%over the previous year, from US $4.3 billion to US $ 6.5 billion, and the

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imports had grown by 24.4%, fromUS $ 17.1 billion to US $21.2 billion.Major source countries for import ofraw gold by India includeSwitzerland, constituting 44.6% ofthe total imports of raw gold in theyear 2008-09, followed by Australia(19.7%), UAE (19.6%) and SouthAfrica (10.4%). Main exportdestinations of gold jewellery includeUAE, Singapore and Hong Kong.

Diamond

According to USGS data, diamondproduction (gem and industrial) inIndia in the year 2007 was 55thousand carats and has remainedmore or less stagnant over theyears. As per United NationsFramework Classification (UNFC)system, as on 1.4.2005, India hadtotal resources of around 4.5 millioncarats, of which 1.2 million caratswas reserves. By grades, about17% of resources are of gemvariety, 18% are of industrial variety,while bulk of the resources (65%)is placed under unclassifiedcategory. Andhra Pradesh accountsfor 40% of diamond resources,followed by Madhya Pradesh(32%), and Chhattisgarh (28%).

India imports rough diamondsand process them for value additionand exports. As a result, India is anet exporter under this category invalue terms. India exporteddiamonds valued US $ 14.2 billionduring 2007-08, an increase of 34%

over the previous year. During theyear 2008-09, the exports ofdiamonds showed an increase of10.6%, touching US $ 15.7 billion.Export of crushed industrialdiamonds showed a tremendousincrease during this period. Indiaimported diamonds valuedUS $ 7.7 billion in 2007-08; duringthe year 2008-09, the importsincreased by 110% from US $ 7.7billion to US $ 16.3 billion. In the caseof diamond exports, majordestinations were: Hong Kong(30.1%), UAE (22.5%), USA(17.6%), Belgium (11.4%), and Israel(5.0%). As regards diamond imports,Hong Kong (27.6%), Belgium(24.4%), UAE (25.6%), UK (6.4%),and USA (4.8%) were the majorsource countries for India.

Precious stones

Although traditional Indiangemologists have identified around84 precious and semi-preciousstones, nine stones, namely: Ruby,Emerald, Pearl, Diamond, Redcoral, Zircon, Blue sapphire, Yellowsapphire, and Cat’s Eye, form the‘Navratnas’ or nine gems. India wasmore an exporter of preciousstones than an importer of thesame, and the difference betweenthese two being minimal. During2007-08, the exports of preciousstones were US $ 280.8 million, anincrease of 6.5% over the previousyear, and in the year 2008-09,exports of precious stones

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witnessed a marginal decline of0.1%, over the previous year.Import of precious stones hasgrown marginally in the year 2008-09, by only 4.6% over the previousyear.

Major export destinations forprecious stones (other thandiamonds, which were not worked orgraded) include: USA (30.5%), HongKong (22.7%) and Thailand (13.9%).The source countries for the sameinclude: Thailand (23.3%), HongKong (19.1%), and Zambia (13.9%).In the case of articles of preciousstones other than diamonds (natural/synthetic), the major exportdestinations were USA (38.8%),Germany (23.9%), and Switzerland(9%), and the source countries forthe same include: Hong Kong(27.8%), Sri Lanka (22.2%), andGermany (16.7%).

Platinum

The total resources of platinumgroup of metals in India, as on April2005, was only 14.2 tonnes; theentire known resources are locatedin Niligiri, Boula-Nuasahi andSukinda areas in Orissa. Theexports of platinum which hadwitnessed an increase of 175% invalue terms, during 2007-08, overthe previous year, showed atremendous increase of 1804%during the year 2008-09, over theprevious year. Imports also showeda high increase during the year

2008-09, of around 6542% over theprevious year. During 2007-08, theimports had grown by 55% over theprevious year. UAE was the majorexport destination for India’s exportof raw platinum, constituting 49%of total exports; major sourcecountries for raw platinum importsby India include: UAE (78.7%),South Africa (15.3%), Switzerland(2.7%). UAE and Australia were themajor export destinations ofplatinum jewellery constituting acombined share of 43.8% and themajor source countries for importsby India were Thailand and Belgiumwith 69% and 13% share,respectively.

Pearls

During 2007-08, the exports ofpearls had witnessed an impressiveperformance, with the export ofcultured pearls showing a growthof 125%. During the year 2008-09,the imports of pearls declined by7.8% over the previous year. Majorexport destinations of pearlsinclude: USA (38.6%), UAE(14.1%), Austria (12.0%), Japan(7.5%), and Hong Kong (10.8%).The source countries for import ofpearls by India include Japan(34.5%), China (31.9%) and HongKong (21.1%).

Silver

During 2007-08, exports of silver(unwrought and semi-manufacturedform) witnessed a negative growth

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of 35.5%, and silver jewellerywitnessed a growth of 19.5%.However, during the year 2008-09,exports of silver (unwrought andsemi-manufactured form) grew by27.4%, and export of silverjewellery witnessed a growth of87%. During the year 2008-09,India imported unwrought silvervalued around US $ 2 billion, agrowth of 79% over the previousyear. Import of silver jewellerywitnessed a growth of 80.6%. Majorexport destinations of silver include:USA (21.3%), Switzerland (29.7%),UK (13.8%), Iran (11.5%), andJapan (9.3%), and that of silverjewellery include: USA (38.1%),China (12.6%), UAE (10.4%), HongKong (7.1%), and UK (5.8%). Thesource countries for import of silverby India include: UK (38%), China(15.4%), Russia (11.8%),Switzerland (11.6%) and HongKong (3.8%); and that of silverjewellery include: USA (35.2%),Italy (17.6%), Hong Kong (12.3%),UAE (12.4%), and Thailand (6.1%).

ROLE OF EXIM BANK INSUPPORTING INDIAN GEMSAND JEWELLERY INDUSTRY

Exim Bank of India seeks to createan enabling environment topromote two-way transfer oftechnology, trade and investmentsand operates a wide range oflending, service and supportprogrammes. The Bank has avariety of loan products to cater to

the financing requirements ofvarious enterprises. The creditfacilities are available for financingat all stages of export cycle ofIndian firms. The Bank’s Lines ofCredit (LOC), extended tocommercial banks, financialinstitutions, regional developmentbanks, and entities overseas, serveas a market entry mechanism toIndian exporters, and provide asafe mode of non recoursefinancing option to Indian exporters.Apart from LOC, the Bank offersbuyer’s credit and supplier’s creditfor exports on deferred paymentterms. These facilities helpcompanies, especially the SMEs, tooffer competitive credit terms to thebuyers and to explore newgeographical markets.

Exim Bank has extendedsupplier’s credit, pre shipment credit,post shipment credit, and foreigncurrency packing credit (FCPC), tothe firms engaged in the gems andjewellery sector, among others. EximBank has signed an MOU with theIndian Diamond Institute, whichenvisages development of humanresources through professionaltraining, and thereby support theexport efforts of the industry. EximBank has provided grant to IDI forupgrading LRS (Laser RamanSpectroscopic Machine) equipmentin order for the Institute to providetraining to carry out in-depth studyof all types of gems. The MOU willalso enable the institutions to

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exchange literature, data,information and research output onthe gems and jewellery industry, andalso help in exchange of foreignexperts between the two institutions,in organizing their respective trainingprogrammes.

MARKET ANALYSIS

The product-country analysis showsthat USA, EU, Japan and HongKong are the leading importers ofmajor gems and jewellery products.These countries have beensourcing their jewellery importrequirements mainly from countriessuch as Hong Kong, China, Italy,USA, Germany and UK, of whichUSA, UK and Germany areimporters as well as exporters.Hong Kong appears to be more ofa trading hub in the Asian continent.India served as one of the majorsource countries for diamonds, asalso for articles of jewellery forselect countries. In the case ofdiamonds, India is one of the majorimporters of rough diamonds, andone of the major exporters of cut/polished diamonds. India’s exportsof cut and polished diamonds havebeen to all major markets in theworld. India is also a major exporterof articles of jewellery and parts,and the exports have been to allthe major importers in the world.However, some of the markets arenot well-explored by Indian gemsand jewellery exporters. Forexample, India may endeavour to

concentrate on markets like: UKand Switzerland for articles ofjewellery of gold and platinumgroup of minerals (HS code711319); USA, Germany, UK andSwitzerland for articles of jewellerymade of silver (HS code 711311);USA, Japan, Switzerland and UAEfor articles of natural and culturedpearls (HS code 711610);Switzerland, UK and Japan forarticles of semi-precious stones(HS code 711620); and USA,Germany, France, UK and Italy forarticles of imitation jewellery (HScode 7117).

India may leverage its traditionalcraft-skills, low-cost labour, andfabrication techniques in some of thejewellery products (such asprocessing of small-sizeddiamonds), and replicate suchadvantages in the production of otherproducts, and thereby become aglobal player across the gems andjewellery segments.

CHALLENGES ANDSTRATEGIES

Challenges

Unorganised Sector

Being an unorganized sectorhampers the ability of Indian gemsand jewellery Industry to emerge asa world-class supplier. According toa FICCI study, the gold processingindustry has around 15,000 players,with only around 80 units having

22

revenues over US $ 5 million. Indiais also home to around 4,50,000goldsmiths, over 100,000 goldjewellers, along with about 6,000diamond-processing players and8,000 diamond jewellers.

Impact of Recession

There had been a loss of marketfor gems and jewellery exports dueto recession and global economicslowdown. During 2007-08, therewas growth in export of gems andjewellery by 23%, over the previousyear. The growth trend continuedeven in 2008-09 during which theexports showed a growth of 44%over the previous year.

However, during the period April-September 2009-10, due toeconomic slowdown, the demand forgems and jewellery shrank, whichresulted in export slowdown for India.Following the economic slowdown,asset price devaluations, job lossesand decrease in disposable incomehave happened, along withescalation in gold prices, which havechanged the consumption pattern ofgems and jewellery. Further, theeconomic slowdown has alsoaffected the consumer buyingpattern, with growing demand forsingle-line jewellery, low-caratjewellery, and gems-studdedjewellery.

Rise in Prices

As mentioned earlier, the prices ofprecious metals, especially goldand silver, has been witnessing

steep increase, since the last fewyears, which has been changingthe buying pattern of consumers.During the period December 2008 -December 2009, the price of goldper ten grams, has increased fromRs 13,445 to Rs 16,870, showingan increase of 26%. Even thoughthe price of silver had witnessed adecline after February 2009, itagain started rising after April 2009.From Rs 17,847 per kg inDecember 2008, the silver priceincreased to Rs 27,430 per kg inDecember 2009.

Possible Threats from Chinaand from Other CountriesProducing Diamonds

Although India currently enjoysdominance in the world’s cut andpolished diamond market, Chinamay emerge as a rival in the long-term, mainly because of theavailability of cheap labour, growingdomestic demand, and also theimprovement in the quality ofworkmanship in the country. It maybe added that increasing numberof diamond processors are settingup their facilities in China due tothese reasons. Also, there hasbeen growing pressure in majordiamond producing countries inAfrica, like Botswana, Namibia andSouth Africa, to gain furthereconomic benefits from diamondvalue chain, seeking investments incutting and polishing industry. Suchdevelopments may affect theprospects of India.

23

Low Level of TechnologyAbsorption

Utilization of hi-tech, speedy andefficient machinery and softwarehas led to the gradual replacementof traditional / manual methods ofpolishing, manufacturing anddesigning of gems and jewellery.Proactive players in the Indiangems and jewellery industry arealways on the lookout for bettertechnology for their units. However,such technology absorption isrelatively low in Indian gems andjewellery industry, due to the smallsize, and unorganized nature ofmajority of the players in thisindustry. Also, mere absorption oftechnology may not be helpful,without a proper blend of manuallabour with machinery, to provideethnicity to the end-products.Usage of semi-skilled and unskilledworkforce in operation of such high-end machines may result insignificant under-utilization of themachinery / technology, and may,at times, cause losses inoperations. Skill development istherefore very essential for properreclassification of the workmen inthis industry.

R&D and Product Development

Another major challenge faced bythe industry is the low level of R&Dintensity, and facilities forundertaking R&D and productdevelopment. Proper R&D solutionswould help in improving product

quality, reducing wastage,introducing new designs andconcepts, and innovation in supplychain management and marketing.The gap between hi-end machinesand unskilled labour can also bereduced with innovative R&Dsolutions.

Strategies

Branding of Jewellery

Branding of jewellery plays a veryimportant role in the jewellerymarket as it assures consumersthat the products are of certainquality, durability, and conform toseveral social, environmental anddurability standards. Brandpromotion is therefore one of thebest modes of market penetration.Though in its nascent stage,branded jewellery in India has beenshowing encouraging signs, despitetough competition. According to anestimate by the Indian Brand EquityFoundation (IBEF), the market forbranded jewellery is expected toreach US $ 2.2 billion by 2010.Some of the jewellery brands inIndia are DeBeers, D’damas,Tanishq, Oyzterbay, and Gili. Inorder to gain market share,branded jewellers may have tocome up with designs thatcustomers want, and win the trustand confidence of consumers byhallmarking and demonstrating thepurity of the gold used by them. Tocompete with traditional players,

24

branded players may also findsome ways to differentiatethemselves from others. While thesuccess of a particular brand maydepend on differentiation andaffordability, quality will be a keyelement in sustaining a brand. Inaddition, branded players requirefocused advertising and astutesalesmanship to compete withtraditional jewellers.

Hallmarking of jewellery

Hallmarking is the accuratedetermination and official recordingof the proportionate content ofprecious metal in jewellery.Government of India has beenprotecting the interests ofconsumers from adulteration, andirregular metal quality, andlaunched the Hallmarking Schemethrough Bureau of IndianStandards. The principal objectivesof the Hallmarking Scheme are toprotect the consumers against thefraud of adulteration and to obligethe manufacturers to maintain legalstandards of fineness. However, itis difficult to make Hallmarking ofgold jewellery mandatory across thecountry due to insufficient numberof certification centres. At present,there are over 100 BIS-recognisedassaying and hallmarking centres inIndia, which are centred aroundTier – 1 and Tier – 2 cities. It isproposed that India may considerexpanding the network ofhallmarking infrastructure acrossthe country, and help penetrate

quality products even in rural areas.India may also consider becominga member of InternationalHallmarking Convention, and derivethe benefits of such Convention.

Increasing Market Presence ofPlatinum Jewellery

With the gold prices increasing atrecord levels, consumers havestarted showing interest inornaments made from other metals,like platinum and palladium. The fallin prices of platinum has alsotriggered the demand for platinumjewellery across the world, includingIndia. During the past one year theprices of platinum have witnesseddecline, which is one of the mainreasons for the consumers to optfor platinum jewellery. During March2008, the price of platinum stoodat US $ 2005 per troy ounce (31.1gms), and during November 2008,the price fell down to as low as US$ 844 per troy ounce. As ofDecember 2009, the price ofplatinum stood at US $ 1448 pertroy ounce. As the demand forplatinum jewellery is increasing andespecially when the consumerpreferences are shifting to platinumjewellery, due to rise in price ofgold, Indian jewellers need todiversify their product range andconcentrate more in themanufacture of platinum-basedjewellery. Leading retail jewellersshould also add exclusive space forplatinum jewellery in their stores.According to industry observers, at

25

present, facilities for orebeneficiation and extraction ofplatinum group metals do not existin the country. Technology also hasto be imported for extraction ofplatinum group of metals, whichshould be promoted in India

Change in Product Portfolio

As the recession is reducing thedemand for jewellery productsworldwide, it is necessary todiversify the export productportfolio, and concentrate more onlesser-priced jewellery, such asimitation, fashion or costumejewellery. Indian gems and jewelleryindustry may also diversify theexport product portfolios on thelines of the change in perceptionof the consumers. It may bementioned that the new-ageconsumer perceives jewellery as apersonal accessory that manifeststhe wearer’s attitude, personalityand lifestyle. Significantopportunities may be available tothe players in the Indian jewelleryindustry, if they leverage andpackage the products with theblending of tradition and culture indesigns that are universal andcontemporary in their aestheticappeal. While the products withsuch blend would stand out withresemblance of cultural andregional identity, they may notsignificantly look as ethnic products.In other words, the products shouldbe a new-look piece, but withtraditional inspiration. Branding and

packaging are very important inmarketing such products. Focusingon such product lines would enablethe players in establishing an edgeover their competitors. Playersshould also have desire for productinnovation to catch-up with thechange in consumer trends.

Continuous Skill Development

Human resource is one of thecritical factors for the gems andjewellery industry, as the industryis labour-centric. Non-availability ofskilled workers is often cited as oneof the major reasons for the inabilityof the players in this industry toscale up their operations. Thus, theplayers need to constantly upgradethe skills of the workmen, throughtraining and retraining strategies, toenhance their productivity. Some ofthe focus areas for imparting skill-upgradation include: technologyinterface of design and productdevelopment, innovation inmanufacturing process andreduction of wastage,standardization and quality control,and international networking andmarketing. In addition to firm levelstrategies, the industry also needsto address the challenge of skilldevelopment collectively. Supply ofcraftsmen / artisans that comethrough generations need to becomplemented by fresh talents,trained in a professional manner, tohave access to wider talent pool.The industry may establish closelinkages with the existing learning

26

centres, and help them in impartingskills / training that are needs ofthe hour. At present, there are fewinstitutes which provide training injewellery design, viz., IndianInstitute of Gems and Jewellery,Indian Diamond Institute, andNational Institute of Design. Also,the National Skill DevelopmentCorporation (NSDC), initiated by theGovernment of India, is expectedto give thrust on skill developmentof various sectors, including gemsand jewellery. It is also importantfor the players to accomplishgreater degree of professionalismand establish appropriateorganization structure that wouldattract and retain best talent in theindustry.

Technology Upgradation

Players in this industry need toadopt latest technology, includingthe ICT interface in all aspects,starting from mining, cutting andpolishing, to fabrication andmarketing. Technological solutionsare available for several of thechallenges faced by the gems andjewellery industry; these solutionsinclude: innovations in designs(through CAD/CAM machinery),quality and finish of products(through infrared, photo-typing,etching, wax-casting), cost controlin process and reduction ofwastage (laser cutting, hollow-tubeprocessing). Imparting oftechnological solutions may reducecost and time, which may not be

feasible under conventionalmethods. Technology also helps thefabricators to churn-out the new-design products in a much speedyway.

Establishing Diamond Bourses

At present, one diamond bourse,Bharat Diamond Bourse, has beenestablished in Mumbai.Nevertheless, the traders have tovisit Antwerp, Israel, Hong Kongand other locations to buy and sellrough and polished diamonds.Establishment of more diamondbourses will give a major fillip toIndia to emerge as an internationaldiamond trading hub, and also tomake trading in diamonds easierfor the players in India. It will beeasier to get the rough diamondsthrough these trading centres andalso for getting buyers for the cutand polished diamonds.Government of India has alreadyannounced the plan for establishingmore diamond bourses to make thecountry an international trading hubto boost the gems and jewelleryexports. These diamond boursesare expected to provide a singleplatform for traders and it wouldhelp in making India a tradingcentre for diamonds.

Increase in ExplorationActivities

As per United Nations FrameworkClassification, total resources(reserves and remaining resources)

27

of gold ore (primary) in India as onApril 1, 2005, were estimated at390.28 million tonnes, of which only19.25 million tonnes are placedunder reserve category, and therest, 371.03 million tonnes, underresources category. Besides, it hasbeen estimated that the totalresources of gold of placer type inthe country would be around 26million tonnes. However, resourceaugmentation and gold productionhave not been significant in India.This may require increase inexploration activities withimprovements in technology andknow-how. According to a report bythe Planning Commission,Government of India, the miningsector also requires improvedmethod of narrow-vein-mining forachieving full economic benefits.Introduction of small-scale miningculture in the gold industry is alsoanother requirement with adoptionof modern gold extractiontechnology. Cluster mining of smallgold deposits may also deserveconsideration and should beencouraged. The metallurgicaltechnique for extraction of platinumgroup of elements from low gradeore is also required to be sourcedfrom developed countries, in orderfor India to become a producer ofplatinum. Efforts should be madeto increase the production of roughdiamonds from India to partly meetthe requirement of Indian diamondcutting and polishing industry.Exploration activity in different

states is required to be boosted fordiscovering new economicallyviable kimberlite / lamporite rocksfor indigenous production ofdiamonds.

Enhancing Visibility throughContinuous Participation inInternational Exhibitions

Continuous participation ininternational trade shows andjewellery exhibitions is veryimportant for the Indian gems andjewellery industry; such strategywould help in projecting the industryas a player in entire jewellery valuechain, from cutting, polishing,fabricating of wide variety of plainand stone-studded jewellery.Participation in internationalexhibitions would also helpestablish new business links for theIndian gems and jewellery industry,and would also pave the way forthe industry to develop furtherbusiness links to enhance the levelof their innovations in designs andtechnology. This platform wouldalso help in attracting andmobilizing the major buyers ofgems and jewellery internationally,and also provide exhibitors withlearning opportunities and exposureto new markets and trends. Therecent foreign trade policy hasincreased the personal jewellerycarriage limit to US $ 5 million, fromUS $ 2 million, and the limit in caseof personal carriage, as samples,for export promotion tours, has also

28

been increased from US $ 0.1million to US $ 1 million. This wouldalso help the industry promoteexports, as the industry will be ableto showcase more jewellery inexhibitions abroad.

CONCLUSION

World gems and jewellery industryis on the verge of transformationdue to both supply-side anddemand-side factors. Some of therecent trends in the global gemsand jewellery industry include:fragmentation of rough diamondsupply positions; emergence of newmining areas; beneficiationmovement in mining countries, andever-growing raw material prices. Atfabrication level, fashion and styleshave been changing significantly;the ratio of cost of raw materialsto sales has been coming down,squeezing the profit margin of thefabricators. There has beenvolatility in raw material prices; theglobal slowdown led to low capacityutilization in this industry bringingdown the margins in the jewellerymanufacturing. In some countries,including India, some of theprocessing units have been partiallyshut down due to slackeningdemand. As a result, the valuechain in the gems and jewelleryindustry may witness consolidation;only select major players are likelyto cope with the trends and sustainthe competitive pressures.

It is expected that the spike ingold and silver prices might changethe consumer preferences, as alsoimpact their demand pattern. Thegrowing consumer sophistication,decline in investment-driven(jewellery) demand, and competitionfrom other luxury goods are alsolikely to impact the demand patternof gems and jewellery. Further, theconsumer awareness andconsciousness, generated throughthe vigilant measures adopted byvarious national Governments, areexpected to drive the demand forbranded and hallmarked jewellery. Atnational level, India has beenadopting various strategies to copewith the global trends in gems andjewellery business. World GoldCouncil and the Indian gems andjewellery industry have jointlyintroduced international jewellerydesigning competitions among theIndian artisans to generateawareness about the skills of Indianartisans in the global market, as alsoto expose Indian artisans to newdesign developments emergingaround the world. There have beeninitiatives taken by many designingcenters to train Indian jewellers ininternational manufacturing anddesigning skills. This is expected toenhance demand as well as sales forthe Indian gems and jewelleryindustry.

Indian gems and jewelleryindustry is increasingly building itsability to produce full range of sizes

29

and qualities of stones, utilizing notonly the low-cost and abundantworkforce, but also advancedtechnologies. The industry has beenseeking further growth throughprocessing of larger size stones andmanufacture of diamond jewellery.Both the Government and the gemsand jewellery industry haverecognized the use of IT in diamondclusters in order to enable seamlessflow of information between thefunctional areas, right from jobcontractors to small / mid-sized firms,to large, integrated units. The IT

interface would also provide thenecessary platform for firms to scaleup their operations. While severalsuch measures have been taken, atfirm-level, industry-level, andGovernment-level, there exists still aneed to strengthen the position ofIndia in the global market placethrough a concerted strategy,addressing the challenges of raw-material sourcing, technologicalinfusion at processing stage,adoption of dynamism in design andproduct development, andsustainable market entry approach.

30

Gems and jewellery are beingused by the Indians since ages forboth its aesthetic as well asinvestment purposes. India has thedistinction of being one of the firstcountries to introduce diamonds tothe world. The country was alsoone of the first countries to mine,cut & polish, and trade in diamonds.

The gems and jewellery sectormay be categorized broadly into:

� Gemstones: Diamonds,coloured stones - precious,semi precious and syntheticstones;

� Jewellery – plain gold,studded, silver, costumejewelleries; and

� Pearls.

The two major segments of thegems and jewellery business in Indiaare gold and diamond jewellery.While a predominant portion of goldjewellery manufactured in India is for

domestic consumption, apredominant portion of rough, uncutdiamonds processed in India isexported either in the form ofpolished diamonds or in the form offinished diamond jewellery.

The gems and jewellery industryhas an important role in the Indianeconomy. With an estimatedconsumption of 713 tonnes of goldduring the year 2008 (includingjewellery consumption of 501tonnes), India is the largestconsumer in the world. (Table 1).

Apart from its historical religioussignificance, gold is valued as animportant savings and investmentvehicle. Even in present times, goldremains the bride’s wealth and is thepreferred jewellery worn by womenin India irrespective of their religiousbelief. Buying of gold and jewelleryis an important part in every stage ofthe life-cycle of an Indian citizen.

1. INTRODUCTION

31

Table 1:CONSUMER DEMAND FOR GOLD IN THE WORLD

(in tonnes)

Countries 2007 2008 % Change

Jewellery Net Total Jewellery Net Total Jewellery Net Totalretail retail retail

investment investment investment

India 551.7 217.5 769.2 501.6 211.4 713.0 -9.1 -2.8 -7.3

China 302.2 25.6 327.8 326.7 65.9 392.6 8.1 157.4 19.8

USA 257.9 16.6 274.5 188.1 78.9 267.0 -27.1 375.3 -2.7

Europe — 9.6 9.6 — 242.7 242.7 — 2428.1 2428.1excludingCIS

Turkey 188.1 61.1 249.2 153.2 57.1 210.3 -18.6 -6.5 -15.6

Saudi Arabia 117.9 9.0 126.9 108.9 13.5 122.4 -7.6 50.0 -3.5

Vietnam 21.4 56.1 77.5 19.6 96.2 115.8 -8.4 71.5 49.4

UAE 99.8 7.5 107.3 100.0 9.5 109.5 0.2 26.7 2.1

Russia 85.7 — 85.7 91.4 — 91.4 6.7 0.0 6.7

Egypt 67.8 0.7 68.5 74.3 2.5 76.8 9.6 257.1 12.1

Indonesia 55.2 0.3 55.5 55.9 2.9 58.8 1.3 866.7 5.9

Italy 59.1 — 59.1 50.3 — 50.3 -14.9 — -14.9

Other Gulf 40.0 2.9 42.9 34.8 2.9 37.7 -13.0 — -12.1

UK 50.1 — 50.1 37.2 — 37.2 -25.7 — -25.7

Taiwan 14.7 7.4 22.1 12.2 8.7 20.9 -17.0 17.6 -5.4

Hong Kong 14.2 1.0 15.2 17.0 1.0 18.0 19.7 0.0 18.4

Japan 30.6 -56.3 -25.7 28.2 -39.4 -11.2 -7.8 -30.0 -56.4

Total Above 1956.4 359.0 2315.4 1799.4 753.8 2553.2 -8.0 110.0 10.3

Others 444.3 51.3 495.6 386.4 64.8 410.3 -13.0 26.3 -17.2

World Total 2400.7 410.3 2811.0 2185.8 818.6 2963.5 -8.9 99.5 5.4

SOURCE: World Gold Council

32

PRODUCTION

GoldGold is produced from mines inevery part of the world, exceptAntarctica, where mining is notpermitted. From a level of 25701

metric tonnes in 2001, world goldmine production has declined to2327 metric tonnes in 2008, mainlybecause of decline in production inthe major gold producing countries,like South Africa, USA andIndonesia.

The major producer of gold in theworld during 2008 was China with aproduction of 295 metric tonnes(growth rate of 7.3% over theprevious year); China held a shareof 18.9% of the total world productionof gold during 2008, followed bySouth Africa (12.7%), USA (10.7%),Australia (9.9%) and Peru (9.7%).Compared to 2007, during 2008,countries such as Indonesia(-23.7%), Australia (-8.5%), USA(-3.4%), Canada (-1%) and SouthAfrica (-0.8%), witnessed a declinein production, and only countriessuch as China (7.3%), Russia (5.1%)and Peru (2.9%) witnessed anincrease in production of gold.

Growth in production of gold isexpected to remain flat in 2009, asincreased production in China,Canada and Peru may not be ableto offset decline in production inSouth Africa, USA, Indonesia andAustralia.

World gold demand primarilycomprises of jewellery fabrication,retail investments, industrial anddental uses and exchange tradedfunds. In the year 2008, world golddemand in volume terms declined forjewellery consumption and industrialand dental purposes; however, golddemand for investment purposesshowed an increase over theprevious year (Annexure: 1).However, in value terms (USD), thedemand for gold has shownconsiderable growth in 2008,indicating the significant priceincrease during this year.

During the third quarter of 2009,the demand for gold has shown adecline in almost all the segments.This may be partially owing to globaleconomic slowdown and increase inprices, reducing the disposableincome with the consumers.

2. RAW MATERIAL BASE:GLOBAL SCENARIO

1 SOURCE: USGS (U.S. Geological Survey)

33

Gold exchange traded fundshave gained popularity with investorsacross the world and these werefloated in the market in 2003. Thesefunds and additional similar funds arenow listed in the exchanges acrossthe countries. Holdings of ETFs(Exchange Traded Funds) wereestimated to be US $ 8.8 billion in2008, and US $ 1.3 billion in the thirdquarter of 2009. Investing in gold inthe traditional manner is notaccessible and carries higher costsowing to insurance, storage andhigher markups. The claimedadvantage of the ETF is that the

investor can purchase gold ETFshares through a stockbroker withoutbeing concerned about suchproblems.

World gold prices have shownan upward trend over the years. Goldprices, which stood at US $ 274.5per ounce on December 31, 2001,increased to US $ 869.8 per ounceon December 31, 2008 showing aCAGR of 15.5%.The price hasincreased further to US $ 1,192 perounce on December 1, 2009. Exhibit1 shows the gold prices in selectcurrencies. Almost all the currencies

Table 2:MAJOR PRODUCERS OF GOLD IN THE WORLD

(In metric tonnes)

Countries 2007 2008 % Change %Share in 2008

China 275 295 7.3 12.7

South Africa 252 250 -0.8 10.7

USA 238 230 -3.4 9.9

Australia 246 225 -8.5 9.7

Peru 170 175 2.9 7.5

Russia 157 165 5.1 7.1

Canada 101 100 -1.0 4.3

Indonesia 118 90 -23.7 3.9

Uzbekistan 85 85 0.0 3.7

Ghana 84 84 0.0 3.6

Papua New Guinea 65 65 0.0 2.8

Chile 42 42 0.0 1.8

Mexico 39 41 5.1 1.8

Brazil 40 40 0.0 1.7

Other countries 471 440 -6.6 18.9

World total 2383 2327 -2.3 100.0

SOURCE: USGS

34

have shown an upward trend sincethe year 2000. In Indian rupees, theprice of gold, which stood atRs. 12,803 per ounce on December31, 2000, increased to Rs. 42,374per ounce on December 31, 2008.The price has increased further toRs. 55,228 per ounce on December1, 2009. The main reason for theincrease in prices of gold was thestrong consumer demand, especiallywith the change in investor behaviourand consideration of gold as safeinvestment, post financial crisis.

Diamond

During 2007, Botswana was thelargest diamond producing country

in terms of value, estimated at US$ 2.96 billion, recording a declinein growth of 7.7% over the year2006. Botswana constituted a shareof 25% in the world’s production ofdiamonds. Botswana was followedby Russian Federation (21.7%),Canada (13.7%), South Africa(11.7%) and Angola (10.5%) asother world’s largest producers ofdiamond. Lesotho (growth of96.4%), Canada (17.5%) and SierraLeone (13%) were countries, whichwitnessed impressive growth ratesin their production of diamondsduring 2007.

Russia was the largest diamondproducer by volume, with a

Exhibit 1:PRICE TRENDS OF GOLD IN SELECT CURRENCIES

SOURCE: World Gold Council (based on London pm fix)

35

production of 38.3 million (23% ofworld’s diamond production) caratsin 2007, followed by Botswana(20%), Congo (17%), Australia (11%)and Canada (10%). In terms ofgrowth in volume of production,Guinea recorded 115% growth in2007 (over 2006), followed byCanada (28%) and Angola (5.7%)(Annexure: 2).

Including its mines in SouthAfrica, Namibia and Canada, DeBeers is the world’s largest diamondmining company, constituting 42% ofthe total production by value and29% of the total production byvolume (Exhibit 2). Other majorproducers include Rio Tinto, Alrosaand BHP Billiton.

The Diamond Pipeline

The trade in gem-grade roughdiamonds is primarily controlled by

the De Beers, Trans Hex, Rio Tinto,BHP Billiton and a hand-full of othercompanies which use their cartelpower to control the supply ofdiamonds on the wholesale market(diamond pipeline), therebycontrolling and stabilizing prices.The process under the diamondpipeline is given in Exhibit-42:

Silver, Gemstones andPlatinum

Major producers of silver in theworld in the year 2008 include:Peru (19%), Mexico (15.8%), China(13.7%), Chile (10.5%) andAustralia (9.5%). There has beenan increase in the productioncompared to the previous year inalmost all the major countries,except USA and Australia, whichwitnessed a decline of (–) 11.1%and (–) 4.3%, respectively.

Exhibit 2:COMPANY-WISE WORLD DIAMOND PRODUCTION, 2007

SOURCE: Indian Gems and Jewellery Sector, ICRA Sector Analysis

2 SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html

36

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37

Exhibit 4:DIAMOND PIPELINE

SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html

1. Rough diamonds are sent directly from De Beers mining operations in Africa(#1), or secondary mining producers in Canada and Russia, to De Beers’ DiamondTrading Company (DTC) in London, Gaborone, Kimberley and Windhoek, forsorting and resale. The rough stones are separated into 16,000 categories basedon size, color and quality, then divided by human or automated sorters intoindividual lots called “boxes.”

2. The DTC is part of the De Beers Group supply-chain known as the Central SellingOrganization (CSO), which combines (“aggregating”) supplies of rough diamondsfrom multiple sources into one wholesale market (#2).

3. The DTC holds a sale called a “site” or “sight”, ten times per year, in Londonand Johannesburg, where De Beers sells the “boxes” to its select group (“supplierof choice”) of 125 “sightholders” (#3) or diamond manufacturers, cutters, andretailers. De Beers (DTC) sets the price of each box in advance, determining thequantity and quality that each site-holder will receive. A ‘sight’ can have a valueof between US $ 500,000 to US $ 2,000,000.

4. The sightholder then transports the box of rough diamonds back to diamantairefirms (cutting and polishing factories) located around the world (#4). India cutsthe vast majority of small stones (0.20 carats or less) in Mumbai and Surat,while large stones are primarily cut in Antwerp, Tel Aviv, Ramat Gan, and NewYork. Other major cutting centers are located in Johannesburg, China, andThailand.

5. The diamonds are then re-sold from the cutting and polishing (manufacturing)centers to wholesalers (Diamond Bourses), or to jewellery manufacturers (#5)around the world. Both traders and manufacturers may sell diamonds “upstream”and “downstream” through the diamond pipeline, to take advantage of marketfluctuations. Once the diamonds are set into jewellery, they are sold to retailersor directly to the customers.

38

Box 1:WORLD DIAMOND COUNCIL

Amid growing concern over human rights violations and atrocities committedagainst innocent victims in diamond producing countries, the World Federation ofDiamond Bourses, and the International Diamond Manufacturers Associationpassed resolution creating the World Diamond Council (WDC). The resolutioncalled for the newly formed WDC to include representation from the diamondindustry itself, and also from among countries where diamonds play a majoreconomic role, and from the international banking sector. The mandate for theWorld Diamond Council is the development, implementation and oversight of atracking system for the export and import of rough diamonds to prevent theexploitation of diamonds for illicit purposes, such as war and inhumane acts. Humanrights activists refer to diamonds exploited in this way as “blood” or “conflict”diamonds.

As a result of the commitment and resolve of WDC leaders and members,significant strides have been made towards resolving and reconciling the issuesthreatening the diamond industry because of “conflict” diamonds. Variouscommittees, under the aegis of WDC, were formed for efficient functioning tocover areas such as legal, technical, legislative, steering, finance, banking,information and research.

The world diamond industry does not condone the exploitation of diamondsfor illicit or immoral purposes. Nor, will it acquiesce to outside efforts to disrupt theimportance that diamonds are to the established and emerging economies aroundthe world. Rather it is the goal of the diamond industry, working through the WorldDiamond Council, to work openly and in partnership with the people of the worldwhenever and wherever such challenges occur.

SOURCE: World Diamond Council

In the case of gemstones (otherthan diamond), the major producersin the world include: Botswana(26.5%), Russia (24.7%), Canada(19.1%), Angola (10.6%), and SouthAfrica (6.5%). Though most of thecountries haven’t shown an increasein its production in 2008, over 2007,some countries such as Sierra Leone(66.7%), Guinea (35%), CentralAfrican Republic (27%) and Angola(14.9%) have shown tremendousincrease in its production in 2008over the previous year. Brazil(– 33.3%) and Australia (– 0.4%) were

the only countries, which showed adecline in production compared tothe previous year (Table 4).

The largest producer of platinumin the world was South Africa holdinga share of 76.6% of the total worldproduction, followed by Russia(12.5%), Canada (3.6%), Zimbabwe(2.8%) and USA (1.9%). However,the major producers such asSouth Africa (–7.8%), Russia(– 7.4%) and USA (– 4.1%) haveshown a decline in their productionin 2008 over the previous year.

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Table 3:MAJOR PRODUCERS OF SILVER IN THE WORLD

Countries 2007 2008 % Change %Share in 2008

Peru 3500 3600 2.9 19.0Mexico 3000 3000 0.0 15.8China 2560 2600 1.6 13.7Chile 1900 2000 5.3 10.5Australia 1880 1800 -4.3 9.5Poland 1200 1300 8.3 6.9USA 1260 1120 -11.1 5.9Canada 800 800 0.0 4.2South Africa 70 70 0.0 0.4Other countries 4630 4600 -0.6 24.2

World Total 20800 20890 100.0

SOURCE: USGS

Table 4:MAJOR PRODUCERS OF GEMSTONES IN THE WORLD

Countries 2007 2008 % Change %Share in 2008

Botswana 25000 25000 0.0 26.5Russia 23300 23300 0.0 24.7Canada 18000 18000 0.0 19.1Angola 8700 10000 14.9 10.6South Africa 6100 6100 0.0 6.5Congo 5400 5400 0.0 5.7Namibia 2200 2200 0.0 2.3Guinea 815 1100 35.0 1.2Ghana 720 720 0.0 0.8Sierra Leone 360 600 66.7 0.6Central African Republic 370 470 27.0 0.5Guyana 350 350 0 0.4Australia 231 230 -0.4 0.2Tanzania 230 230 0 0.2Cote d’lvoire 210 210 0 0.2Brazil 300 200 -33.3 0.2China 100 100 0 0.1Other countries 210 210 0 0.2

World total 92596 94420 2.0 100.0

SOURCE: USGS

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Table 5:MAJOR PRODUCERS OF PLATINUM IN THE WORLD

Countries 2007 2008 % Change %Share in 2008

South Africa 166000 153000 -7.8 76.6

Russia 27000 25000 -7.4 12.5

Canada 6200 7200 16.1 3.6

Zimbabwe 5300 5600 5.7 2.8

USA 3860 3700 -4.1 1.9

Columbia 1400 1700 21.4 0.9

Other countries 3490 3500 0.3 1.8

World total 213250 199700 -6.4 100.0

SOURCE: USGS

41

EXPORTS AND IMPORTS OFPRECIOUS METALS ANDSTONES

Gold

The largest exporter of gold in theworld, in the year 2007, was USAwith a share of 19.9% in the totalworld exports, followed by Australia(15.9%), Canada (9.3%), HongKong (7.3%) and Peru (7.1%). Theworld’s largest importers of goldinclude: Switzerland (25.7%), UK(19.6%), USA (8.4%), India (7.5%)and South Africa (4.4%).(Annexure: 3).

Diamond

Israel (with a share of 19.7%),Belgium (19.6%), India (14.3%),USA (12.8%), and UK (9.1%) werethe largest exporters of diamond inthe world, in the year 2007. Thelargest importers of diamondsinclude: USA (17.7%), Belgium(16.2%), India (13.1%), Israel (13%)and Hong Kong (12.9%). India wasan exporter as well as an importerof diamonds with a respectiveshare of 14.3% and 13.1%, in theworld. This may be because, Indiaimports rough diamonds, for value

addition, and for exports, as cutand polished diamonds.

Precious Stones

Hong Kong, USA, Switzerland,Thailand and India were among thelargest exporters, as well asimporters of precious stones (otherthan diamond) in the world in 2007.Hong Kong was the largestexporter of precious stones (otherthan diamonds), with a share ofaround 17.1% of the total worldexports, and was followed by USA(13.2%), Switzerland (12.7%),Thailand (12.2%), and India (9%).In the case of imports, the leadingimporters include: USA (26.5%),Hong Kong (14.4%), Switzerland(9.2%), Thailand (7.2%), and India(6.3%).

Pearls

In the case of Pearls, Hong Kongwas the largest exporter, with theexports valued US $ 482.92 million,constituting a share of 30.2% in theworld exports of pearls in the year2007. Japan, China, Australia, andFrench Polynesia were the othermajor exporters of pearls.

3. INTERNATIONAL TRADE INPRECIOUS METALS, GEMS ANDJEWELLERY

42

Hong Kong was the largest importerwith a share of around 33.2%,followed by Japan (18.3%), USA(15.8%), Germany (4.4%), andAustralia (4%).

Platinum

South Africa, constituting a shareof 32.5% was the largest exporterof platinum in the world in the year2007. UK, USA and Germany werethe other major exporters. USA wasalso a major importer of platinumconstituting a share of 24.4% in theworld, followed by Japan (19.2%),Germany (12.7%), and UK (8.6%).

Silver

Major exporter of silver was China,with a share of 15.9% in the world,in the year 2007, followed byMexico (11.2%), Hong Kong (8.7%),and Germany (8.1%). USA, HongKong, UK, Germany and India werethe major importers of silver in theworld.

EXPORTS AND IMPORTS OFJEWELLERY

Articles of Jewellery

World exports of jewellery articlesmade of precious metals wasvalued at US $ 42.5 billion in 2007;major exporters include: Italy(14.2%), India (11.9%), USA(10.5%), and Hong Kong (9.9%).Major importers of jewellery include:USA (23.7%), UAE (13.7%),Hong Kong (9.1%), and Switzerland(6.7%).

Articles of Natural / CulturedPearls, Precious Stones

World exports of articles of naturaland cultured pearls, or made ofprecious stones was valued atUS $ 1945.99 million in 2007. Majorexporters include USA (76.4%),Hong Kong (6.4%), China (5.4%),Switzerland (2%) and Japan(1.3%); major importers under thiscategory include: Hong Kong(15.7%), Switzerland (14.9%), UK(9%), Netherlands Antilles (9%),and Japan (8.6%).

Articles of Imitation Jewellery

World exports of articles of imitationjewellery were valued at US $4967.03 million in 2007. Majorexporters of imitation jewelleryinclude Hong Kong (21.9%), China(17.2%), Austria (8%), France(6.4%), and Italy (5.7%); majorimporters under this categoryinclude USA (19.6%), Germany(7.3%), France (7.3%), UK (6.4%),and Italy (6.2%).

SELECT GLOBAL TRENDS

One of the recent major trendswitnessed by the gems andjewellery industry, due to theeconomic slowdown, has been theincrease in recycling of gold orusage of gold scrap. Key focus hasbeen the surge in the levels of goldscrap coming back to the market.With mine production on a decliningtrend and the outlook relativelybenign, scrap levels are likely toremain as the primary supply of

43

gold. Selling of gold jewellery hasprovided the consumers withaccess to the much-needed fundsduring the economic crisis. In theprice sensitive markets, the profit-taking motive behind recyclingactivity has been very strong,highlighting the intrinsic value ofjewellery and the strength of thesavings/investment aspect of goldjewellery purchases. Cash flowchallenges have forced consumersto sell some of their assets,including their jewellery, to raise themuch-needed cash. Increase inrecycling activity has been both awestern and non-westernphenomenon, although volumes inthe non-western markets havecontinued to dominate. In westernmarkets, the primary motivationbehind recycling of gold has beendistress selling, while in the moretraditional non-western markets, theprimary motive has been profit-taking.

Research by World Gold Councilsuggests that jewellery buyersacross the world recognize that goldjewellery is both a store of value, aswell as a means of adornment.Nevertheless, the investment andadornment motives tend to overlapstrongly in traditional markets, suchas the Middle East (including Turkey)and India, largely due to the verystrong cultural values underpinningjewellery ownership; bar and coindemand in these regions account fora relatively modest proportion of totaldemand for gold.

New technologies, oftenadapted from other industries, arefinding their way into jewellerymanufacturing. The use of ComputerAided Design (CAD) is fast growing,and is increasingly being coupledwith Rapid Prototyping, whichenables new designs to reach themarket more quickly, therebyincreasing competitiveness. Lasertechnology is also being increasinglyutilised, not only for repair ofdefective castings and brokenjewellery (it enables gem setjewellery to be repaired without theneed for removing the gemstones),but also for decoration (laserengraving), cutting and hallmarking.Examples of technologies beingadapted from other industries includecables (in place of conventionalchains), knitted wires and powdermetallurgy processing.

According to World GoldCouncil, in the first quarter of 2009,total demand for gold increased by38% to reach a level of 1016 tonnes,valued US $ 29.7 billion. The overalldemand for gold has fallen in the thirdquarter of 2009, by 34% over thecorresponding period of previousyear, along with investment demandwhich witnessed a decline of 46%over the corresponding period ofprevious year. The impact of highgold prices, at a time of globaleconomic crisis, led to a widespreaddecline in consumer demand for goldjewellery, by 30%, compared to thesame period in 2008. In India,despite economic pressures and

44

sustained increase in gold prices,second quarter gold demandrecovered from the exceptionallyweak levels witnessed in theprevious quarter, but remained wellbelow the levels of a year before.Total gold off-take in India was downby 48% during the first threequarters, with jewellery, the largestcomponent of demand, fallingby 36%.

Following the global financialcrisis, the growth environment for theglobal gems and jewellery industryremains uncertain. The world

diamond industry, which is large sub-segment of global gems andjewellery industry faced demandslump following the global economiccrisis. Diamond prices in the world,like many other commodities,bottomed out, forcing the diamondmajors (such as De Beers, ZaoAlrosa) to cut down production andsupply of rough diamonds to boostup the prices. Mining was halted atmany mines, which were put onmaintenance during this period. Themost prominent example was themove by Debswana, jointly owned byDe Beers and the Government of

Box 2:RESPONSIBLE JEWELLERY COUNCIL

The Responsible Jewellery Council (RJC) is an international, not-for-profitorganization established to reinforce consumer confidence in the jewellery industryby advancing responsible business practices throughout the diamond and goldjewellery supply chain. The Council aims to build ‘a community of confidence’across every step of the diamond and gold jewellery supply chain in all geographies,and among businesses, both large and small. It seeks to work with a wide rangeof stakeholders in defining and implementing responsible jewellery practicesthrough the RJC’s certification system. The certification process starts with theCouncil accrediting conformity assessment bodies and auditors who verify RJCmember organizations for conformance with RJC Code of Practices. Membershipopportunity is open to all businesses and associations participating in the diamondand gold jewellery supply chain and / or engaged in activities that have a potentialimpact on consumer confidence in diamond or gold jewellery.

In 2005, a group of 14 organisations from a cross section of the diamond andgold jewellery business came together to form the Council for Responsible JewelleryPractices. These founding organisations were ABN AMRO, BHP Billiton Diamonds,Cartier (part of Richemont), World Jewellery Confederation, Diamond TradingCompany (part of De Beers), Diarough, Jewelers of America, National Associationof Goldsmiths (UK), Newmont Mining, Rio Tinto, Rosy Blue, Signet Group, Tiffany& Co., and Zale Corporation.

SOURCE: Responsible Jewellery Council

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Box 3:KIMBERLEY PROCESS

The Kimberley Process (KP) is a joint initiative of governments, industry and civilsociety to stem the flow of conflict diamonds – rough diamonds used by rebel movementsto finance wars against legitimate governments. The trade in these illicit stones has fuelleddecades of devastating conflicts in countries such as Angola, Cote d’Ivoire, the DemocraticRepublic of the Congo, and Sierra Leone.

The Kimberley Process (KP) is open to all countries that are willing and able toimplement its requirements. As of November 2008, the KP has 49 members (Annexure:5) representing 75 countries, with the European Community and its member states countingas an individual participant. KP members account for approximately 99.8% of the globalproduction of rough diamonds. In addition, the World Diamond Council representing theinternational diamond industry, and civil society organizations – Global Witness, Partnership– Africa Canada – are participating in the KP, and have played a major role since itsoutset.

The Kimberley Process Certification Scheme (KPCS) imposes extensive requirementson its members to enable them to certify shipments of rough diamonds as ‘conflict-free’and prevent conflict diamonds from entering the legitimate trade. Under the terms of theKPCS, participating states must meet ‘minimum requirements’ and must put in placenational legislation and institutions; export, import and internal controls; and also committo transparency and the exchange of statistical data. Participants can only legally tradewith other participants, who have also met the minimum requirements of the scheme, andinternational shipments of rough diamonds must be accompanied by a KP certificateguaranteeing that they are conflict-free.

The Kimberley Process is chaired, on a rotating basis, by participating countries. Sofar, South Africa, Canada, Russia, Botswana, the European Community, and India (wasthe Chair in 2008) have chaired the KP. KP participating countries, industry and civil societyobservers gather twice a year at intersessional and plenary meetings, as well as in workinggroups and committees that meet on a regular basis. Implementation is monitored through‘review visits’ and annual reports as well as by regular exchange and analysis of statisticaldata.

The joint efforts of governments, industry leaders and civil society representativeshave enabled the KP to curb successfully the flow of conflict diamonds in a very shortperiod of time. Diamond experts estimate that conflict diamonds now represent a fractionof one percent of the international trade in diamonds, compared to estimates of up to 15%in the 1990s. That has been the KP’s most remarkable contribution to a peaceful world,which should be measured not in terms of carats, but by the effects on people’s lives. KPhas done more than just stem the flow of conflict diamonds; it has also helped stabilisefragile countries and supported their development. KP has brought large volumes ofdiamonds into the legal market that would not otherwise have made it there and this hasincreased the revenues of poor governments, and helped them to address theirdevelopment challenges. For instance, some US $ 125 million worth of diamonds werelegally exported from Sierra Leone in 2006, compared to almost none at the end of the1990s.

SOURCE: Kimberley Process

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Botswana, which decided to closemining operations in three of its fourmines for several months. De Beers(which account for over 40% ofglobal rough diamond production)cut its production drastically acrossthe world, which resulted in a 90%fall in the supply during the first

quarter of 2009, as compared to thecorresponding period of the previousyear. It was also reported that thesales by the Diamond TradingCorporation has declined by over50% in the first half of 2009, due toreduced purchases by sight-holders3.

3 The Diamond Trading Company, which is the world´s largest single sourceof rough diamonds, sells its rough diamonds exclusively through itsSightholders, who work within the strategic framework of “Supplier of Choice”.

47

Brazil

The development of gems andjewellery industry in Brazil wasfollowed by the discovery of goldand diamonds at the end of the17th century. Brazil is known for itsdiversity and volume of preciousstones deposits in its soil, such astourmaline, aquamarine, agate,amethyst, citrine, topaz and quartz;Brazil is the only source of imperialtopaz and paraiba tourmaline in theworld. The jewellery sector in Brazilis basically characterized by theproduction of small volume of high-valued items; the industry developsits own style by incorporatingsymbols of their culture in piecesmade of a variety of raw-materials.While the extraction of preciousstones and gold are carried out bythousands of individual miners andsmall number of mining companies,the cutting and manufacturing ofstone artifacts is carried out bysmall home based firms withgrowing volume of outsourcing inthe last few years.

During 2007, Brazil’s exports,under the HS Code 71 category,consisted mainly of gold (valuedUS $ 790.88 million), followed by

precious stones (with a value ofUS $ 111.57 million), and articles ofjewellery and parts (with a value ofUS $ 72.9 million).

Major export destinations ofgems and jewellery include: USA,Germany, UK, Korea DPR (North),and Belgium, and the major importsources include: Germany, Peru,USA, Chile, and Italy. Gold waslargely exported to USA (around 94%of the total exports of gold by Brazil).India was a source country for importof diamonds, imitation jewellery,articles of jewellery and preciousstones.

China

Gems and jewellery industry inChina, since the onset of reformsover 25 years ago, has beengrowing to emerge as an industrywith dynamism and highdevelopment prospects. China isone of the largest consumers ofgold, with gold jewellery being themajor item of demand. During2008, the total demand for gold inChina was 392.7 tonnes, a growthrate of 19.8%, over the year 2007.During the third quarter of 2009, thedemand was 120.2 tonnes, a

4. PROFILE OF SELECT COUNTRIES

48

Table 6:BRAZIL’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY

(US $ Million)

HS Code Items 2005 2006 2007 % share CAGR (%) in total

71 Total Precious Metals, 787.41 1080.12 1242.93 100.0 25.6Gems and Jewellery

7108 Gold 458.88 658.6 790.88 63.6 31.3

7103 Precious stones 94.59 109.15 111.57 9.0 8.6(other than diamonds)

7113 Articles of jewellery 62.97 73.50 72.90 5.9 7.6and parts

7106 Silver 20.40 35.84 30.36 2.4 22.0

7117 Imitation jewellery 18.07 19.26 20.72 1.7 7.1

7102 Diamonds 20.42 5.15 18.88 1.5 -3.8

7116 Articles of natural or 15.73 15.28 14.73 1.2 -3.2cultured pearls andprecious andsemi precious stones

7110 Platinum 8.53 34.62 0.39 0.0 -78.6

SOURCE: UN COMTRADE

growth rate of 12% over thecorresponding quarter of 20084.Gold has been a traditional item ofinterest for the Chinese consumers.Shenzen and Payu are the majorprocessing centres of gold in China.The Shenzhen special economiczone is the largest jewellerymanufacturing and wholesalecenter supplying to the domesticmarket in China; it is also a majormanufacturing centre for gem-setgold jewellery for the domesticmarket; major centre for platinumjewellery production; and a majorcentre for gemstone polishing.During 2008, China was the largest

producer of gold in the world with295 metric tonnes5 with a growthrate of 7.3% over the previous year.During 2008, China’s share in worldgold production was 18.9%.

Demand for diamond in China isincreasing, and the Chinese diamondindustry is growing fast. Previously,diamond was used only for industrialuse, and rarely for jewellery. Afterdiamond was found in the threeprovinces of Liaoning, Shandongand Hunan, the diamond industrystarted growing since the 1980s. Theannual production of diamonds in2008 was valued at US $ 1.3 million6

4 World Gold Council5 USGS6 World Diamond Council

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Table 7:BRAZIL’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF

PRECIOUS METALS, GEMS AND JEWELLERY

HS Items Export destinations Import sources

Code Countries US $ Million Countries US $ Million(% share) (% share)

71 Total Precious USA 862.44 (69.4) Germany 178.23 (40.1)Metals, Gems Germany 120.88 (9.7) Peru 117.94 (26.5)and Jewellery UK 53.57 (4.3) USA 49.97 (11.2)

World 1242.93 (100.0) World 444.40 (100.0)

7108 Gold USA 740.62 (93.6) France 0.66 (64.7)UK 50.20 (6.3) Korea Republic (S) 0.25 (24.5)Peru 0.05 (0.01) Germany 0.05 (4.9)World 790.88 (100.0) World 1.02 (100.0)

7103 Precious USA 33.78 (30.3) USA 0.87 (21.5)stones Hong Kong 17.91 (16.1) Madagascar 0.64 (15.8)

India 9.29 (8.3) Thailand 0.57 (14.1)World 111.57 (100.0) World 4.04 (100.0)

7113 Articles of USA 32.25 (44.2) Italy 9.80 (46.5)jewellery Germany 4.99 (6.8) USA 5.80 (27.5)and parts Israel 4.49 (6.2) Germany 1.82 (8.6)

World 72.9 (100.0) World 21.09 (100.0)

7106 Silver USA 21.93 (72.2) Peru 117.92 (74.4)Germany 5.61 (18.5) Chile 33.85 (21.3)Belgium 1.32 (4.3) Germany 2.11 (1.3)World 30.36 (100.0) World 158.58 (100.0)

7117 Imitation USA 6.59 (31.8) China 8.48 (42.8)jewellery Argentina 1.53 (7.4) Hong Kong 4.81 (24.3)

Colombia 1.33 (6.4) Korea Republic (S) 1.94 (9.8)World 20.72 (100.0) World 19.81 (100.0)

7102 Diamonds Israel 7.33 (38.8) Israel 5.43 (68.1)USA 6.02 (31.9) USA 0.93 (11.7)Belgium 4.33 (22.9) Belgium 0.84 (10.5)World 18.88 (100.0) World 7.97 (100.0)

7116 Articles of USA 4.68 (31.8) USA 1.4 (95.2)natural or Germany 3.08 (20.9) Switzerland 0.07 (4.8)cultured pearls France 0.61 (4.1) Hong Kong 0.01 (0.7)and precious World 14.73 (100.0) World 1.47 (100.0)and semiprecious stones

7110 Platinum Argentina 0.25 (64.1) Germany 173.19 (82.0)USA 0.08 (20.5) USA 35.31 (16.7)Canada 0.04 (10.3) Belgium 2.12 (1.0)World 0.39 (100.0) World 211.15 (100.0)

SOURCE: UN COMTRADE

50

(69.4 thousand carats), an increaseof 18% in value (13% in carat) since2006. In order to promote thedevelopment of China’s diamondindustry, authorized by the statecouncil, the Shanghai DiamondExchange was established. Thisnon-profit organization broughttogether most of the diamondprocessing and trading companies inChina, and in addition attractedalliances from several foreigndiamond companies.

China is a one of largestproducers of silver in the world.During 2008, China produced silverworth 26007 tonnes, an increase of1.6% over the previous year; China,in the year 2008, held a share of

13.7% in the world production ofsilver. There have been changes inconsumption pattern in China.People no longer want to buyjewellery as a store of value, and usethem more for aesthetic use. Thishas created increased demand forsilver jewellery in China. Platinumjewellery has been emerging as afast growing sector, competing thegold jewellery sector.

China’s exports of gems andjewellery have grown by 21%(CAGR) since 2005; from US $ 5.5billion to US $ 8.1 billion in 2007. Theitem which was largely exported(according to value) from China,under the HS Code 71 category. wasarticles of jewellery and parts with a

7 USGS

Table 8:CHINA’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY

(US $ Million)

HS Code Items 2005 2006 2007 % share CAGR (%) in total

71 Total Precious Metals, 5532.84 6893.92 8122.75 100.0 21.2Gems and Jewellery

7113 Articles of jewellery 2004.58 2102.48 2507.37 30.9 11.8and parts

7106 Silver 1000.91 1642.18 2017.17 24.8 42.0

7102 Diamonds 1443.66 1752.02 1904.23 23.4 14.8

7117 Imitation jewellery 611.53 721.58 855.00 10.5 18.2

7101 Pearls 146.50 143.97 208.37 2.6 19.3

7116 Articles of natural or 61.74 93.16 105.55 1.3 30.8cultured pearls andprecious andsemi precious stones

7103 Precious stones 29.13 18.17 15.77 0.2 -26.4

7110 Platinum 4.19 6.73 6.14 0.1 21.1

SOURCE: UN COMTRADE

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share of 30.9% in the total exportsof gems and jewellery during 2007.However, silver (42%), and articlesof natural or cultured pearls andprecious and semi precious stones(30.8%) were the items whichshowed highest CAGR during theperiod 2005-2007. The exports ofprecious stones showed a negativeCAGR of (-26.4%) over the years,from US $ 29.1 million in 2004 toUS $ 15.8 million in 2007.

Major export destinations forChina are given in Table 9; HongKong, USA, Belgium, Switzerlandand UK were the major exportdestinations for China’s gems andjewellery exports. However some ofthe other major destinations include:India for pearls and silver; Japan forpearls, precious stones, platinumand articles of natural and culturedpearls; and Korea Republic forprecious stones and articles ofjewellery and parts. In the case ofimports, major source countries wereHong Kong, Belgium, Switzerland,USA and UK.

Israel

Israel is one of the world’s largestcentres for diamond cutting. Thecountry’s integrated culture, withimmigrants from over 70 countries,offers diversity in artistic ideas,styles, techniques and know-how.The Israeli jewellery industry hasdeveloped unique technologies thatadd to the strength, design, beautyand quality of its products.

Israel is one of the world’s largestsources of polished diamonds. Thepartnership between the diamondand jewellery industries has nomiddlemen, in order to keep theprices competitive.

Diamond jewellery is the mainsub segment of Israel’s gems andjewellery industry, followed by gold,silver and imitation jewellery. Theartists in Israel make use of most oftheir skills, innovative technologiesand techniques, which enable themto offer their products at veryreasonable prices. It may bementioned that Israel’s jewellery isallowed duty free in USA, Europe,Jordan, Canada, Mexico and Egypt.

The exports of diamonds,according to the Central Bureau ofStatistics, Government of Israel,witnessed a decline in 2008 (Table10). During January - September2009 there was a drastic decline inexports ranging around 60%. Theeconomic slowdown was cited as themain reason for this level of declinein exports.

Israel was largely an exporter ofprecious metals, gems and jewellery,than an importer of the same. During2007, the export of precious metals,gems and jewellery by Israel touchedUS $ 19.1 billion, achieving a CAGRof 7.5%, during 2005-2007; and theimports of Israel were US $ 12.6billion in 2007. Israel was a majorexporter of diamonds, whichconstituted around 97% of the total

52

Table 9:CHINA’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF

PRECIOUS METALS, GEMS AND JEWELLERY

HS Items Export destinations Import sources

Code Countries US $ Million Countries US $ Million(% share) (% share)

71 Total Precious Hong Kong 4512.02 (55.5) Hong Kong 2422.07 (37.8)Metals, Gems USA 1296.30 (16.0) Belgium 851.32 (13.3)and Jewellery Belgium 664.58 (8.2) Switzerland 555.85 (8.7)

World 8122.75 (100.0) World 6407.63 (100.0)

7113 Articles of Hong Kong 1303.35 (52.0) Italy 150.99 (34.7)jewellery and USA 823.84 (32.9) Hong Kong 113.51 (26.1)parts Korea Republic (S) 79.46 (3.2) France 43.66 (10.0)

World 2507.37 (100.0) World 435.33 (100.0)

7106 Silver Hong Kong 1641.91 (81.4) Hong Kong 198.61 (55.7)Thailand 135.32 (6.7) Japan 69.04 (19.4)India 107.38 (5.3) Korea Republic (S) 30.38 (8.5)World 2017.17 (100.0) World 356.53 (100.0)

7102 Diamonds Hong Kong 932.94 (49.0) Hong Kong 847.75 (43.3)Belgium 653.12 (34.3) Belgium 843.24 (43.1)Switzerland 165.37 (8.7) Israel 171.08 (8.7)World 1904.23 (100.0) World 1957.14 (100.0)

7117 Imitation USA 334.94 (39.2) Hong Kong 45.47 (56.6)jewellery Hong Kong 135.76 (15.9) Korea Republic (S) 20.06 (25.0)

UK 54.42 (6.4) Switzerland 2.9 (3.6)World 855.00 (100.0) World 80.36 (100.0)

7101 Pearls Hong Kong 178.10 (85.5) Hong Kong 16.38 (80.3)India 19.64 (9.4) Japan 2.59 (2.7)Japan 3.81 (1.8) UK 0.53 (2.6)World 208.37 (100.0) World 20.39 (100.0)

7116 Articles of Hong Kong 60.73 (57.5) USA 6.12 (41.3)natural or USA 17.62 (16.7) Taiwan 5.03 (33.9)cultured pearls Switzerland 5.40 (5.1) Hong Kong 2.22 (15.0)and precious World 105.55 (100.0) World 14.82 (100.0)and semiprecious stones

7103 Precious stones Hong Kong 10.03 (63.6) Hong Kong 80.75 (78.7)USA 1.80 (11.4) Brazil 7.67 (7.5)Thailand 0.93 (5.9) Uruguay 5.40 (5.3)World 15.77(100.0) World 102.63 (100.0)

7110 Platinum USA 4.59 (74.8) Switzerland 525.47 (28.5)Japan 1.01 (16.4) UK 477.57 (25.9)Hong Kong 0.39 (6.4) Germany 287.74 (15.6)World 6.14 (100.0) World 1844.92 (100.0)

SOURCE: UN COMTRADE

53

gems and jewellery exports, andaround 2% was accounted by articlesof jewellery. Major exportdestinations of diamonds from Israelinclude: USA, constituting a share of48.5%, followed by Belgium (16.7%),Hong Kong (15%), India (4.8%) andSwitzerland (4.7%). Major sourcecountries for imports of diamonds byIsrael include: USA (40%), Belgium(24.8%), India (8.5%), Hong Kong(8.2%), and UK (8.1%).

Italy

Italy has a large gems and jewelleryindustry, mainly located in theregions, namely, Veneto, Toscana,Lombardia, Lazio and Piedmont.These regions have captured morethan half of the Italian market forgems and jewellery. There are twomajor clusters in Italy for gems andjewellery which are located inVicenza and Arezzo. Italianjewellery industry has beenenjoying spiraling growth in exports.This scenario may change due toslump in demand in the mostimportant markets, due to globaleconomic crisis. It is reported thatthe producers in the Vicenza areamay face relatively less challenges,because of the level of automationand the possibility of reduction incost of operations, and thereby theprice at the hands of end-consumers. Also the gems andjewellery industry in Valenza has anedge over others due to highquality design skills for diamondand other precious stones. The

gems and jewellery industry inArezzo is likely to face challengesmainly due to overseas competition.In addition, a greater share ofArezzo’s jewellery exports goes toLatin America and the USA,markets which have been havingweak demand of late.

Exports of gems and jewelleryfrom Italy are given in Table - 13.Constituting a share of 69.5%,articles of jewellery and parts was themajor export item, under the HSCode 71 category, in Italy. However,all the categories of precious metals,gems and jewellery have witnessedan increase in exports from Italy, withplatinum and diamonds witnessingthe highest CAGR of 69.8% and52%, respectively, during 2005 to2007. Exports of platinum increasedfrom US $ 222.71 million to US $642.17 million, and that of diamondsincreased from US $ 56.83 million toUS $ 131.45 million during thisperiod. The total exports of preciousmetals, gems and jewellery (HSCode 71) witnessed a CAGR of17.4%, since 2005, an increase fromUS $ 6.3 billion to US $ 8.7 billion, invalue terms.

Major export destinations ofItaly’s precious metals, gems andjewellery industry include: USA,Switzerland, France, UAE and UK,and the major source countries forimport of precious metals, gems andjewellery include USA, Switzerland,France, Belgium and Hong Kong(Table 14). Major export destinations

54

Table 10:EXPORTS AND IMPORTS OF DIAMONDS BY ISRAEL

(US $ Million)

Items 2007 2008 % change Jan-Sep Jan-Sep % change2008 2009

Exports

Diamonds

Polished 7116.9 6299.2 -11.5 5503.7 2609.5 -52.6

Rough 3373.2 3318.2 -1.6 2176.4 1278.9 -41.2

Total 10490.1 9617.4 -8.3 5963.4 2396.1 -59.8

Imports

Rough and 9642.5 8836.4 -8.4 7447.4 3125.7 -58.0polisheddiamonds (net)

SOURCE: Monthly Bulletin of Statistics, October 2009, Central Bureau ofStatistics, Government of Israel

Table 11:ISRAEL’S EXPORTS OF PRECIOUS METAL, GEMS AND JEWELLERY

(US $ Million)

HS Code Items 2005 2006 2007 % share CAGR (%) in total

71 Total Precious Metals, 16484.13 16659.59 19060.29 100.0 7.5Gems and Jewellery

7102 Diamonds 16017.00 16127.49 18416.94 96.6 7.2

7113 Articles of jewellery 345.62 338.30 356.30 1.9 1.5and parts

7103 Precious stones 52.85 64.19 67.38 0.4 12.9(other than diamonds)

7108 Gold 7.01 21.44 65.55 0.3 205.8

7117 Imitation jewellery 34.66 48.51 51.89 0.3 22.4

7106 Silver 0.08 0.08 6.46 0.0 798.6

7110 Platinum 0.02 0.68 0.44 0.0 369.0

7101 Pearls 0.22 0.05 0.05 0.0 -52.3

7116 Articles of natural or 0.08 0.08 0.01 0.0 -64.6cultured pearls andprecious and semiprecious stones

SOURCE: UN COMTRADE

55

Table 12:ISRAEL’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF

PRECIOUS METALS, GEMS AND JEWELLERY

HS Items Export destinations Import sources

Code Countries US $ Million Countries US $ Million(% share) (% share)

71 Total Precious USA 9246.77 (48.5) USA 4931.49 (39.1)Metals, Gems Belgium 3083.87 (16.2) Belgium 3036.84 (24.1)and Jewellery Hong Kong 2789.76 (14.6) India 1047.94 (8.3)

World 19060.29 (100.0) World 12611.42 (100.0)

7102 Diamonds USA 8938.86 (48.5) USA 4867.90 (40.0)Belgium 3074.27 (16.7) Belgium 3021.66 (24.8)Hong Kong 2762.04 (15.0) India 1037.26 (8.5)World 18416.94 (100.0) World 12178.19 (100.0)

7113 Articles of USA 201.19 (56.5) Italy 85.77 (30.8)jewellery UK 30.27 (8.5) Thailand 46.17 (16.6)and parts Switzerland 16.06 (4.5) Turkey 41.40 (14.9)

World 356.30 (100.0) World 278.12 (100.0)

7103 Precious stones USA 33.34 (49.5) USA 19.69 (52.9)Hong Kong 11.58 (17.2) Italy 5.81 (15.6)Switzerland 9.18 (13.6) Switzerland 3.21 (8.6)World 67.38 (100.0) World 37.24 (100.0)

7108 Gold Jordan 63.44 (96.8) Singapore 4.10 (36.8)Canada 0.80 (1.2) Italy 3.74 (33.6)Italy 0.55 (0.8) Germany 1.32 (11.8)World 65.55 (100.0) World 11.14 (100.0)

7117 Imitation USA 32.78 (63.2) China 2.72 (25.9)jewellery UK 2.70 (5.2) USA 1.72 (16.4)

Japan 2.54 (4.9) Italy 1.59 (15.1)World 51.89 (100.0) World 10.50 (100.0)

7106 Silver USA 6.46 (100.0) Belgium 13.12 (44.1)World 6.46 (100.0) Italy 11.87 (39.9)

Germany 4.32 (14.5)World 29.78 (100.0)

7110 Platinum Italy 0.30 (68.2) USA 7.29 (65.9)UK 0.12 (27.3) Switzerland 2.78 (25.1)World 0.44(100.0) Germany 0.77 (7.0)

World 11.06 (100.0)

7101 Pearls UK 0.03 (60.0) Japan 0.49 (50.0)Panama 0.01 (20.0) Hong Kong 0.19 (19.4)World 0.05 (100.0) Switzerland 0.12 (12.2)

World 0.98 (100.0)

7116 Articles of World 0.01 (100.0) USA 0.80 (81.6)natural or Hong Kong 0.07 (7.1)cultured pearls China 0.05 (5.1)and precious World 0.98 (100.0)and semiprecious stones

SOURCE: UN COMTRADE

56

of articles of jewellery and partsinclude: USA (15.4%), UAE (13.6%),Switzerland (10.2%), France (6%)and UK (4.9%), and the major sourcecountries for articles of jewellery andparts include: Switzerland (29.6%),Hong Kong (13.9%), France (8.8%),Poland (7.9%), and Turkey (7.7%).

Malaysia

Malaysia is another major producerand exporter of gems and jewellery,with the industry havingconcentration in Penang. Accordingto industry sources, approximately,75-80 percent of the gold andjewellery in Malaysia aremanufactured or fabricated inPenang, followed by Johor Bahruand Kuala Lumpur, with activities

ranging from manufacturing toimport, export, retail and wholesale.There are about 300 registeredcompanies engaged in the gold andjewellery industry in Penang,including major gold and jewellerymanufacturers such as OE Design,Zenmax, Yikon and Zhulian.Penang is one of the major exportregions of gold and jewellery inSouth East Asia. More than70 percent of the gold and jewellerymanufactured in Penang is meantfor the export market.

The primary suppliers of rawmaterials for gems and jewellerytrade in Penang are bullion banks(such as UOB (United OverseasBank), RHB and Maybank) andinternational private bullion houses.

Table 13:ITALY’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY

(US $ Million)

HS Code Items 2005 2006 2007 % share CAGR (%) in total

71 Total Precious Metals, 6304.66 7418.79 8694.05 100.0 17.4Gems and Jewellery

7113 Articles of jewellery 4758.31 5211.16 6044.74 69.5 12.7and parts

7108 Gold 632.08 859.73 969.47 11.2 23.8

7110 Platinum 222.71 486.47 642.17 7.4 69.8

7117 Imitation jewellery 195.64 236.30 280.74 3.2 19.8

7106 Silver 87.80 126.36 161.37 1.9 35.6

7102 Diamonds 56.83 117.76 131.45 1.5 52.1

7103 Precious stones 28.15 41.38 58.42 0.7 44.1

7101 Pearls 19.17 20.86 27.19 0.3 19.1

7116 Articles of natural and 10.00 11.85 15.76 0.2 25.5cultured pearls andprecious andsemi precious stones

SOURCE: UN COMTRADE

57

Table 14:ITALY’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF

PRECIOUS METALS, GEMS AND JEWELLERY

HS Items Export destinations Import sources

Code Countries US $ Million Countries US $ Million(% share) (% share)

71 Total Precious USA 1180.00 (13.6) USA 1169.04 (26.7)Metals, Gems Switzerland 1123.63 (12.9) Switzerland 660.42 (15.1)and Jewellery France 955.96 (11.0) France 447.71 (10.2)

World 8694.05 (100.0) World 4374.06 (100.0)

7113 Articles of USA 932.65 (15.4) Switzerland 290.90 (29.6)jewellery and UAE 823.71 (13.6) Hong Kong 136.86 (13.9)parts Switzerland 614.34 (10.2) France 86.25 (8.8)

World 6044.74 (100.0) World 983.18 (100.0)

7108 Gold Switzerland 350.82 (36.2) France 249.93 (58.9)France 304.35 (31.4) Switzerland 67.29 (15.9)Croatia 63.31 (6.5) Kazakhstan 31.02 (7.3)World 969.47 (100.0) World 424.46 (100.0)

7110 Platinum France 134.36 (20.9) USA 849.29 (68.2)USA 116.58 (18.2) Switzerland 140.93 (11.3)Switzerland 101.39 (15.8) UK 107.79 (8.7)World 642.17 (100.0) World 1245.51 (100.0)

7117 Imitation France 53.46 (19.0) Hong Kong 122.23 (39.5)jewellery Spain 29.73 (10.6) Austria 50.76 (16.4)

USA 28.17 (10.0) France 43.85 (14.2)World 280.74 (100.00) World 309.79 (100.0)

7106 Silver Spain 31.30 (19.4) Germany 35.77 (48.2)France 26.62 (16.5) Argentina 8.76 (11.8)UK 16.41 (10.2) France 8.02 (10.8)World 161.37 (100.0) World 74.14 (100.0)

7102 Diamonds France 23.66 (18.0) Belgium 371.99 (66.1)Hong Kong 23.30 (17.7) Israel 81.39 (14.5)Israel 19.53 (14.9) India 38.09 (6.8)World 131.45 (100.0) World 563.05 (100.0)

7103 Precious stones France 13.55 (23.2) Switzerland 26.18 (28.8)Switzerland 11.32 (19.4) Hong Kong 14.49 (15.9)Hong Kong 6.77 (11.6) India 13.70 (15.1)World 58.82 (100.0) World 91.00 (100.0)

7101 Pearls Switzerland 7.35 (27.0) Hong Kong 16.31 (41.0)Hong Kong 5.23 (19.2) Switzerland 8.23 (20.7)Japan 5.15 (18.9) Japan 6.52 (16.4)World 27.19 (100.0) World 39.76 (100.0)

7116 Articles of France 3.60 (22.8) USA 16.79 (48.3)natural or Spain 2.56 (16.2) Hong Kong 11.63 (33.4)cultured pearls Germany 2.44 (15.5) Switzerland 2.73 (7.9)and precious World 15.76 (100.0) World 34.77 (100.0)and semiprecious stones

SOURCE: UN COMTRADE

58

A dominant international privatebullion house is MKS Precious MetalSwitzerland, and its Malaysian officeis a key local supplier for many ofthe jewellery fabricators andmanufacturers. The Chinese havebeen the major players in the goldand jewellery industry in Penang foryears with their experienceencompassing manufacturing andtrading of gold articles (bangles,necklace, bracelet, earrings, etc.),and gem setting (diamond &precious stones). Apart from theChinese, smaller groups of Indianjewellers are also involved, mainly ingem setting, focusing on retail,wholesale, and a small portion of

import and export. Most of the Indianplayers provide the design andspecifications based on theircustomer’s requirements to theChinese goldsmiths andmanufacturers for production.

During 2007, exports of preciousmetals, gems and jewellery fromMalaysia were valued at US $ 2.1billion, of which 64% constitutedarticles of jewellery and parts,followed by gold, with 19% share.Other export segments of gems andjewellery, namely, diamonds,precious stones, pearls, and silverconstituted marginal share in thetotal gems and jewellery exports fromMalaysia.

Table 15:MALAYSIA’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY

(US $ Million)

HS Code Items 2005 2006 2007 % share CAGR (%) in total

71 Total Precious Metals, 1435.15 1736.33 2154.87 100.0 22.5Gems and Jewellery

7113 Articles of jewellery 934.88 991.98 1381.53 64.1 21.6and parts

7108 Gold 367.89 506.27 421.71 19.6 7.1

7102 Diamonds 19.21 12.98 11.91 0.6 -21.3

7117 Imitation jewellery 1.77 4.43 4.10 0.2 52.2

7103 Precious Stones 1.24 0.19 1.13 0.1 -4.5

7116 Articles of natural or 0.55 0.36 0.38 0.0 -16.9cultured pearls andprecious and semiprecious stones

7101 Pearls 0.43 1.56 0.16 0.0 -39.0

7106 Silver 0.10 0.05 0.04 0.0 -36.8

7110 Platinum 0.32 0.01 0.02 0.0 -75.0

SOURCE: UN COMTRADE

59

Table 16:MALAYSIA’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES

OF PRECIOUS METALS, GEMS AND JEWELLERY

HS Items Export destinations Import sources

Code Countries US $ Million Countries US $ Million(% share) (% share)

71 Total Precious UAE 1004.58 (46.6) Japan 768.06 (51.5)Metals, Gems Singapore 342.87 (15.9) Singapore 348.76 (23.4)and Jewellery Switzerland 137.59 (6.4) Taiwan 107.88 (7.2)

World 2154.87 (100.0) World 1490.11 (100.0)

7113 Articles of UAE 984.15 (71.2) Singapore 64.16 (60.1)jewellery and Singapore 294.92 (21.3) China 14.95 (14.0)parts USA 35.26 (2.6) Hong Kong 7.47 (7.0)

World 1381.53 (100.0) World 106.71 (100.0)

7108 Gold Thailand 117.80 (27.9) Japan 636.84 (71.3)Australia 58.77 (13.9) Singapore 171.46 (19.2)Hong Kong 55.64 (13.2) Indonesia 28.87 (3.2)World 421.71 (100.0) World 893.31 (100.0)

7102 Diamonds Hong Kong 6.62 (55.6) Singapore 71.99 (49.9)Singapore 3.51 (29.5) Hong Kong 33.17 (23.0)Thailand 0.55 (4.6) India 19.37 (13.4)World 11.91 (100.0) World 144.23 (100.0)

7117 Imitation Indonesia 2.99 (72.9) Singapore 4.61 (33.6)jewellery Saudi Arabia 0.32 (7.8) China 3.11 (22.7)

Thailand 0.16 (3.9) Hong Kong 1.88 (13.7)World 4.10 (100.0) World 13.72 (100.0)

7101 Pearls Hong Kong 0.09 (56.3) Singapore 1.76 (48.2)Singapore 0.07(43.8) Japan 1.02 (27.9)World 0.16 (100.0) Germany 0.64 (17.5)

World 3.65 (100.0)

7116 Articles of Singapore 0.29 (76.3) USA 1.04 (54.2)natural or Germany 0.08 (21.1) Hong Kong 0.35 (18.2)cultured pearls World 0.38 ( 100.0) China 0.27 (14.1)and precious World 1.92 (100.0)and semiprecious stones

7103 Precious stones Singapore 0.38 (33.6) India 1.18 (22.6)USA 0.27 (23.9) Singapore 1.16 (22.2)Hong Kong 0.22 (19.5) Thailand 1.11 (21.3)World 1.13 (100.0) World 5.22 (100.0)

7106 Silver USA 0.03 (75.0) Japan 49.07 (48.8)World 0.04 (100.0) Singapore 24.42 (24.3)

Australia 15.38 (15.3)World 100.65 (100.0)

7110 Platinum World 0.02 (100.0) Japan 14.57 (40.0)USA 12.45 (34.2)Taiwan (Taipei) 8.87 (24.4)World 36.38 (100.0)

SOURCE: UN COMTRADE

60

Major export destinations forgold include: Thailand (27.9%),Australia (13.9%), Hong Kong(13.2%), China (8.9%), and Taiwan(8.2%), whereas the major sourcecountries for gold include: Japan(71.3%), Singapore (19.2%),Indonesia (3.2%), USA (2.9%), andHong Kong (1%). In the case of

articles of jewellery and parts majorexport destinations include: UAE(71.2%), Singapore (21.3%), USA(2.6%), China (1.7%), and HongKong (1%); and the major sourcecountries include: Singapore(60.1%), China (14%), Hong Kong(7%), USA (4.8%), and Switzerland(4.1%).

61

The gems and jewellery industryplays a very important role in theIndian economy. The primaryjewellery demand in India is for gold;from historic times, gold andjewellery have played a pivotal rolein the Indian social scenario. Goldjewellery is the most preferredjewellery worn by women in Indiairrespective of their religious beliefsand is the most preferred gifts inIndian weddings.

The basic value chain of thegems and jewellery industry is givenin Exhibit 5.

The gems and jewellery industryin India comprises of sourcing,

processing, manufacturing andselling of precious metals, diamonds,pearls, precious and semi-preciousgemstones, and artificial jewellery.India is one of the fastest growingjewellery markets in the world and isthe largest consumer of gold in theworld. Indian gems and jewelleryindustry is also one of the largestdiamond processors in the world;more than 90% in terms of pieces,around 80% in terms of carats, andaround 55% in terms of volume areprocessed in India. This means thatIndia processes 9 out of 10 diamondsprocessed in the world.

India is also the largest consumerof gold in the world (over 700 tonnes

5. STATUS OF PRECIOUS METALS,GEMS AND JEWELLERYINDUSTRY IN INDIA

Exhibit 5:VALUE CHAIN OF GEMS AND JEWELLERY INDUSTRY

62

in 2008), accounting for around 24%of world gold consumption, majorityof them goes into production ofjewellery. India is also emerging asthe largest trading centre for gold.The demand for gold jewellery inIndia has been traditionally linked tosocial and religious significance, asgold is valued as an importantsavings and investment vehicle inIndia, and is the second mostpreferred investment after bankdeposits. This is mainly because goldand jewellery is highly portable andholds its value in times of need. It isconsidered to provide a hedgeagainst economic, social, politicaland personal risks. Hence, jewelleryis a preferred, handy investment, asit can be worn and enjoyed inordinary times and sold in times offinancial distress.

In the case of diamonds andprecious stones, the value chain isas given in Exhibit 6.

India sources rough diamondsmainly from De Beers; the countryhas a large cutting and polishingindustry, which processes thediamonds, after which the design andfabrication of studded jewellery takesplace. India mainly concentrates onsmall stones in the case ofdiamonds.

Major segment of the Indiangems and jewellery industry isunorganized and fragmented withmost of the players running family-owned business. It is estimated thatthere are nearly 500,000 goldsmiths,over 100,000 jewellers, over 6,000diamond processors, and about8,000 diamond jewellers in thecountry. The country is dependent onimporting precious metals,gemstones as also diamonds.Further, the Indian gems andjewellery industry thrive on theavailability of skilled workforce andlarge market size.

Exhibit 6:VALUE CHAIN OF DIAMONDS AND PRECIOUS STONES

63

Gold

The production of gold in Indiaduring 2007 was 3000 kilogramswitnessing an increase of 25% overthe production in the previous year.However, the production of goldhas shown a declining trend overthe years. The total resources ofgold in the country, as on April2005, were estimated at 390.28million tonnes. Out of these, only19.25 million tonnes were under the

reserves category, and the balanceof 371.03 million tonnes were underthe resources category (Table 17).Besides, the total resources of goldore of placer type in the countrywere estimated at 26.12 milliontonnes. Karnataka has the largestknown reserves of gold in India,followed by Rajasthan and Kerala(Table 18). Although there havebeen significant ore resources,India’s gold production has showna decline over the years.8

8 Placer: a deposit of sand or gravel that contains particles of gold, gemstones,or other heavy minerals of value.Reserves: an estimate within specified accuracy limits of the valuable metalor mineral content of known deposits that may be produced under currenteconomic conditions and with present technology; that part of the reservebase that could be economically extracted or produced at the time ofdetermination.Resources: a concentration of naturally occurring solid, liquid, or gaseousmaterial in or on the Earth’s crust in such form and amount that economicextraction of a commodity from the concentration is currently or potentiallyfeasible.

SOURCE: USGS Minerals Yearbook 2006 & 2007

Exhibit 7:PRODUCTION OF GOLD IN INDIA

64

India has been the largestconsumer of gold jewellery in recenttimes, and during 2008, theconsumption was estimated to be501 tonnes accounting for 23% ofworld demand (Exhibit 8). The main

reason for demand for gold has beenthe traditions and cultures in India,which gives a lot of importance togold as a gift in marriages or otherfunctions and also the need for gold,as an investment. For the purpose

Table 17:RESERVES OF GOLD (As on 1.4.2005) IN INDIA

Mineral Reserves Remaining Totalresources

Gold (Tonnes)

� Ore (Primary) 19,253,951 371,035,286 390,289,237

� Metal (Primary) 85 406.12 491.12

� Ore (Placer) 0 26,121,000 26,121,000

� Metal (Placer) 0 5.86 5.86

SOURCE: Indian Minerals Yearbook, 2006

Table 18:RESERVES OF GOLD IN INDIA - STATE WISE (As on 1.4.2005)

(In tonnes)

States Ore Metal

Andhra Pradesh 12,098,347 31.58

Bihar 22,884,860 37.60

Chhattisgarh 900,000 2.70

Jharkhand 346,850 3.12

Karnataka 66,172,387 153.41

Kerala

� Primary 558,460 0.20

� Placer 26,121,000 5.86

Madhya Pradesh 7,322,000 7.81

Maharashtra 1,517,000 3.55

Rajasthan 65,589,000 125.84

Tamil Nadu 67,000 1.00

West Bengal 12,833,333 124.00

Note: All reserves are primary unless specified otherwise

SOURCE: Indian Minerals Yearbook, 2006

65

of purchase of gold ornaments, fromreputed jewellers and/or gold coins,many financiers have introducedfinancing schemes. The customercan purchase ornaments or goldcoins under these financing schemesand pay back in installments.

Inspite of an increase in goldprices, the demand for gold jewelleryhas been increasing, barring fewyears. The continuous rise in pricesof gold however dampened thejewellery demand after 2005, and inthe year 2008, the demand showeda decline of 9% over the previousyear. During the first three quartersof 2009, the consumption for goldjewellery in India has declined bynearly 36%, and the totalconsumption of gold has declined byaround 49%, over the same periodin the previous year.

Trends in foreign exchangereserves show that the share of goldin the total foreign exchangereserves has been declining over theyears. During 1993-94, goldaccounted a share of 21%, whereasduring the period 2008-09, the sharehad fallen to 3.8%.

The upward movement of goldprice has contributed to the partialgrowth in value of gold under thecountry’s foreign exchange reserves.It may be noted that despiteeconomic recession around theworld and crash in commodity prices,gold price has been increasing.Between December 2008 -December 2009, the price hasincreased from Rs. 13,445 per tengrams to Rs. 16,870 per ten grams,an increase of 25 %. (Exhibit 10)

Exhibit 8:INDIA’S SHARE IN WORLD CONSUMPTION OF GOLD JEWELLERY

SOURCE: World Gold Council

66

Exhibit 9:INDIA’S GOLD CONSUMPTION

SOURCE: World Gold Council, Note: *First three quarters of 2009

Table 19:TRENDS IN FOREIGN EXCHANGE RESERVES OF INDIA

(US $ Million)

Year SDR Gold Foreign Reserve Total % share ofEnd of Currency tranche Foreign gold inMonth Assets position Exchange totalMarch Reserves foreign

(1+2+3+4) exchangereserves

1 2 3 4 5 6

1994 108 4078 15068 299 19553 20.91995 7 4370 20809 331 25517 17.11996 82 4561 17044 310 21997 20.71997 2 4054 22367 291 26714 15.21998 1 3391 25975 283 29650 11.41999 8 2960 29522 663 33153 8.92000 4 2974 35058 658 38694 7.72001 2 2725 39554 616 42897 6.42002 10 3047 51049 610 54716 5.62003 4 3534 71890 672 76100 4.62004 2 4198 107448 1311 112959 3.72005 5 4500 135571 1438 141514 3.22006 3 5755 145108 756 151622 3.82007 2 6784 191924 469 199179 3.42008 18 10039 299230 436 309723 3.22009 1 9577 241426 981 251985 3.8

SOURCE: RBI

67

Exhibit 10:TRENDS IN PRICES OF GOLD (JAN 2005-DECEMBER 2009) IN INDIA

SOURCE: MCX

India imports gold largely forprocessing into jewellery, both fordomestic consumption and exports.During 2007-08, India imported gold(largely in the form of raw gold)valued US $ 17 billion, witnessing anincrease of 15.6% over the previousyear. In the same year, Indiaexported gold mainly in the form ofjewellery, valued US $ 4.32 billion(majority of them are studded withdiamonds), which witnessed anincrease of 2.2% over the previousyear. This signifies the importance ofdomestic demand for jewellery andthe reliance of imported gold forjewellery manufacturing.

During the year 2008-09, theexport of gold (or jewellery) has

witnessed a growth rate of 51.1%over the previous year. All thecategories of gold jewellery haswitnessed tremendous increase inexports during this period, exceptgold jewellery set with diamonds,which witnessed a marginal growthof 1% in exports.

Major source countries for importof raw gold by India includeSwitzerland, constituting 44.6% ofthe total imports of raw gold during2008-09, followed by Australia(19.7%) and UAE (19.6%). In thecase of export of gold jewelleryduring the year 2008-09, main exportdestinations include UAE, USA, UK,Singapore and Hong Kong.(Annexure 4)

68

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hang

e%

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nge

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69

Exports of gold jewellery by SEZ/EPZ had witnessed a tremendousincrease during the year 2008-09,over the year 2007-08, a growth ofalmost 80%. However, during theperiod April-November 2009-10, goldjewellery exports from SEZ/EPZwitnessed a decline of 11% over theprevious year. One of the reasonsfor this negative trend is the globaleconomic slowdown, which engulfedthe demand for jewellery worldwide.

Diamond

Traditionally, India has alwaysexcelled in the field of diamondcutting, gem cutting, polishing andprocessing. India’s diamondtradition goes back thousands ofyears and is one of the oldest inthe world. In fact, it was reportedthat diamonds were discovered byIndia and were the only source ofdiamonds until 1730s. At present,India is one of the the world’sleading diamond cutting andpolishing centers in the world.

According to USGS data,diamond production (gem andindustrial) in India in the year 2007was 55 thousand carats and hasremained more or less stagnant overthe years. As per United NationsFramework Classification (UNFC)system, as on 1.4.2005, India hadtotal resources of around 4.5 millioncarats, of which 1.2 million caratswas reserves. By grades, about 17%of resources are of gem variety, 18%are of industrial variety, while bulk ofthe resources (65%) is placed underunclassified category. AndhraPradesh accounts for 40% ofdiamond resources, followed byMadhya Pradesh (32%), andChhattisgarh (28%) (Table 22).

Gujarat is one of the major statesin India promoting gems andjewellery sector as one of the thrustareas for development. Gujarat,having the largest human resourcepool in the country in diamond cuttingand polishing, accounts for 80% ofthe total diamonds processed in

Table 21:EXPORTS OF GOLD JEWELLERY BY SEZ/EPZ IN INDIA

(US $ Million)

Year Exports % change to previous period

2007-08 2653.7279.7

2008-09 4767.93

April-Nov 2008-09 4677.88-11.0

April-Nov 2009-10 4161.33

SOURCE: Gems and Jewellery Export Promotion Council (GJEPC)

70

Exhibit 11:DIAMOND PRODUCTION IN INDIA

Table 22:RESERVES OF DIAMOND IN INDIA

(As on 1.4.2005)(in carats)

Mineral Reserves Remaining resources Total

Diamond 1,205,577 3,376,336 4,581,913

By gradesGem – 756,765 756,765

Industrial – 840,823 840,823

Unclassified 1,205,577 1,778,748 2,984,325

By StatesAndhra Pradesh – 1,822,955 1,822,955

Madhya Pradesh 1205,577 249,381 1,454,958

Chhattisgarh – 1,304,000 1,304,000

SOURCE: Indian Minerals Yearbook, 2006

SOURCE: USGS Minerals Yearbook 2006 & 2007

India. The state intends to furtherenhance its dominance in the sectorand has introduced variousschemes, including:

� Financial support for modernjewellery enterprises;

� Assistance for setting upHallmark certification centres

71

for jewellery and testingcentres for gems;

� Scheme for support to safetymeasures and protection fromoccupational hazards;

� Scheme for setting up traininginstitute for the development ofgems and jewellery sector;

� Support for development ofjewellery parks.

India imports rough diamondsand process them for value additionand exports. As a result, India is anet exporter under this category invalue terms. India exporteddiamonds valued US $ 14.2 billionduring 2007-08, an increase of 34%over the previous year. During theyear 2008-09, the exports ofdiamonds witnessed an increase of10.6%, touching US $ 15.7 billion.Export of crushed industrialdiamonds showed a tremendousincrease during this period. (Table23).

India imported diamonds valuedUS $ 7.7 billion in 2007-08; duringthe year 2008-09, the importsincreased by 110% from US $ 7.7billion to US $ 16.3 billion.

In the case of diamond exports,major destinations include: HongKong (30.1%), UAE (22.5%), USA(17.6%), Belgium (11.4%) and Israel(5.0%). As regards diamond imports,Hong Kong (27.6%), UAE (25.6%),UK (6.4%), and USA (4.8%) were the

major source countries for India.(Annexure 4).

Precious Stones

Gems or precious stones havefascinated mankind since ancienttimes. Precious stones are not onlyadorned as the items associatedwith royalty, they are considered asvaluable gifts along with gold. Therole played by precious and semi-precious stones in Indian mythologyand society is well-known. In India,people, for astrological reasons,have used gems, as they areconsidered to be influencing variousplanetary positions, which in turnare believed to be influencinghuman life cycle and humandestiny. Gems are also used inpreparation of some Ayurvedicmedicines. Although traditionalIndian gemologists have identifiedaround 84 precious and semi-precious stones, amongst them 9stones namely: Ruby, Emerald,Pearl, Diamond, Red coral, Zircon,Blue sapphire, Yellow sapphire, andCat’s Eye, form the ‘Navratnas’ ornine gems.

Table 24 gives the total reservesand resources of select preciousstones.

India was more an exporter ofprecious stones than an importer ofthe same, and the differencebetween these two being minimal.During 2007-08, the exports ofprecious stones were US $ 280.8

72

Exh

ibit

12:

IND

IA'S

MA

JOR

EX

PO

RT

DE

ST

INA

TIO

NS

AN

D S

OU

RC

E C

OU

NT

RIE

S F

OR

DIA

MO

ND

S (

2008

-09)

SO

UR

CE

: D

GC

IS

73

Tab

le 2

3:IN

DIA

’S E

XP

OR

TS

AN

D I

MP

OR

TS

OF

DIA

MO

ND

S (

US

$ M

illio

n)

Co

de

Co

mm

od

ity

Nam

e20

05-0

620

06-0

720

07-0

820

08-0

9%

Cha

nge

% C

hang

e%

cha

nge

2006

-07

2007

-08

2008

-09

vsvs

vs20

05-0

620

06-0

720

07-0

8

Exp

ort

s

7102

Dia

mo

nd

s, w

het

her

or

no

t w

ork

ed,

1161

0.33

10,5

86.4

514

,211

.75

1572

5.30

-8.8

34.2

10.6

bu

t n

ot

mo

un

ted

or

set

7102

1000

Uns

orte

d di

amon

ds w

/n w

orke

d,no

t m

ount

ed0.

490.

520.

541.

236.

13.

812

7.8

7102

21U

nwor

ked

or s

impl

y sa

wn,

cle

aved

or

brut

ed:

0.34

0.54

2.25

7.98

58.8

316.

725

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29O

ther

:1.

420.

640.

2917

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9-5

4.7

6048

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3100

Non

-indu

stria

l di

amon

ds u

nwor

ked/

sim

ply

438.

2349

5.56

523.

3262

1.22

13.1

5.6

18.7

saw

n cl

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d or

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ted

7102

39O

ther

s :

1116

9.85

10,0

89.1

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1507

7.03

-9.7

35.6

10.2

Imp

ort

s

7102

Dia

mo

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s, w

het

her

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no

t w

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ed,

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7,30

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4.88

1630

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46.

210

9.9

bu

t n

ot

mo

un

ted

or

set

7102

1000

Uns

orte

d di

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ds w

/n w

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d,no

t m

ount

ed0.

813.

241.

000.

2830

0.0

-69.

1-7

2.0

7102

21U

nwor

ked

or s

impl

y sa

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cle

aved

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brut

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–0.

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022.

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010

600.

0

7102

29O

ther

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52.

3015

.51

0.01

360.

057

4.3

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9

7102

3100

Non

-indu

stria

l di

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ds u

nwor

ked/

sim

ply

saw

n cl

eave

d or

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ted

6259

.31

5,76

2.00

5,89

5.75

6512

.72

-7.9

2.3

10.5

7102

39O

ther

s :

2692

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1,54

0.61

1,85

2.61

9785

.28

-42.

820

.342

8.2

SO

UR

CE

: D

GC

IS

74

million, an increase of 6.5% over theprevious year, and in the year 2008-09, exports of precious stoneswitnessed a marginal decline of(-)0.1%, over the previous year.Import of precious stones has grownmarginally; during the year 2008-09,imports grew by 4.6% over theprevious year.

Major export destinations forprecious stones (other thandiamonds, which were not worked orgraded) include: USA (30.5%), HongKong (22.7%) and Thailand (13.9%).The source countries for the sameinclude Thailand (23.3%), HongKong (19.1%), and Zambia (13.9%).In the case of articles of preciousstones other than diamonds (natural/synthetic), the major exportdestinations include: USA (38.8%),Germany (23.9%), and Switzerland(9%), and the source countries forthe same include: Hong Kong(27.8%), Sri Lanka (22.2%), andGermany (16.7%). (Annexure 4).

Platinum

Platinum is a naturally occurringrare metal which is scantier thangold. One of the main advantagesof platinum in jewellery fabrication isits strength and resistance totarnish. It can be repeatedly heatedand cooled without hardening andoxidation effects; even the mostslender sections of platinum,permanently retain their shape,providing a secure setting fordiamonds, and giving jewellerydesigners a freedom of invention,not always possible with othermetals. The total resources ofplatinum group of metals in India,as on April 2005, was only 14.2tonnes; the entire known resourcesare located in Niligiri, Boula-Nuasahi and Sukinda areas inOrissa.

The exports of platinum whichhad witnessed an increase of 175%in value terms during 2007-08, overthe previous year, witnessed a

Table 24:RESERVES AND RESOURCES OF SELECT PRECIOUS STONES IN INDIA

(As on 1.4.2005)

Mineral Unit Reserves Remaining TotalResources Resources

Diamond Carats 1,205,577 3,376,336 4,581,913

Ruby Kilogram 1,925 3,346 5,271

Sapphire Kilogram 0 450 450

Garnet Carats 20,975,605 36,680,028 57,655,633

SOURCE: Indian Mineral Yearbook, 2006

75

Tab

le 2

5:IN

DIA

’S E

XP

OR

TS

AN

D I

MP

OR

TS

OF

PR

EC

IOU

S S

TON

ES

(U

S $

Mill

ion)

Co

de

Co

mm

od

ity

Nam

e20

05-0

620

06-0

720

07-0

820

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9%

Cha

nge

% C

hang

e%

cha

nge

2006

-07

2007

-08

2008

-09

vsvs

vs20

05-0

620

06-0

720

07-0

8

Exp

ort

s

7103

Pre

ciou

s st

ones

(ot

her

than

dia

mon

ds)

and

268.

2326

3.30

280.

4628

0.04

-1.8

6.5

-0.1

sem

ipre

ciou

s st

ones

, w

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er o

r no

t w

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d or

grad

ed b

ut n

ot s

trun

g, m

ount

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t

7103

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nwor

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impl

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wn

or r

ough

ly s

hape

d:4.

67.

2214

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8.08

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91R

uby,

sap

phire

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eral

ds94

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ther

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9.21

174.

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8.58

168.

293.

12.

3-5

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7116

2000

Art

icle

s of

pre

ciou

s or

sem

i pr

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tone

s3.

060.

410.

350.

67-8

6.6

-14.

691

.4(n

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al s

ynth

etic

/rec

onst

ruct

ed)

Tota

l27

1.29

263.

7128

0.81

280.

71-2

.86.

5-0

.04

Imp

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s

7103

Pre

ciou

s st

ones

(ot

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than

dia

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and

166.

8916

1.97

190.

1819

8.9

-2.9

17.4

4.6

sem

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, w

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91R

uby,

sap

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325

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46.0

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0.0

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79.6

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ther

:20

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21.7

130

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38.8

45.

342

.425

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7116

2000

Art

icle

s of

pre

ciou

s or

sem

i pr

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us s

tone

s0.

070.

150.

140.

1811

4.3

-6.7

28.6

(na

tura

l sy

nthe

tic/r

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cted

)

Tota

l16

6.96

162.

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0.32

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.917

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6

SO

UR

CE

: D

GC

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76

tremendous increase of 1804%during the year 2008-09, over theprevious year. Imports also showedan increase during 2008-09, ofaround 6542% over the previousyear. During 2007-08, the importshad grown by 55% over the previousyear.

UAE was the major exportdestination for India’s export of rawplatinum, constituting 49.1% of totalexports; major source countries forraw platinum imports by Indiainclude: UAE (78.7%), South Africa(15.3%), Switzerland (2.7%), and UK(1.9%). UAE and Australia were themajor export destinations of platinumjewellery constituting a combinedshare of 43.8%, and the majorsource countries for imports by Indiawere Thailand and Belgium with 69%and 13% share, respectively(Annexure 4).

Pearls

During 2007-08, the exports ofpearls had witnessed an impressiveperformance, with the sub-segment- cultured pearls - witnessing agrowth of 125%. During 2008-09,the exports of pearls grew by17.6%, driven by the tremendousgrowth of 778% in the export ofcultured pearls (unworked) category(Table 27).

During 2008-09, the imports ofpearls declined by 7.8% over theprevious year (Table 27). Majorexport destinations of pearls include:

USA (38.6%), UAE (14.1%), Austria(12.0%), and Hong Kong (10.8%).The source countries for import ofpearls by India include: Japan(34.5%), China (31.9%), and HongKong (21.1%). (Annexure 4).

Silver

During 2007-08, exports of silver(unwrought and semi-manufacturedform) witnessed a negative growthof 35.5%, and silver jewellerywitnessed a growth of 19.5%.However, during 2008-09, theexports of silver (unwrought andsemi-manufactured form) grew by27.4%, and silver jewellerywitnessed a growth of 87.7% inexports (Table 28).

During 2008-09, India importedunwrought silver valued around US$ 2 billion, a growth of 79% over theprevious year. Import of silverjewellery witnessed a growth of80.6%. (Table 28). Major exportdestinations of silver include:Switzerland (29.7%), USA (21.3%),UK (13.8%), Iran (11.5%) and Japan(9.3%), and that of silver jewelleryinclude: USA (38.1%), China (12.6%),UAE (10.4%), Hong Kong (7.1%)and UK (5.8%). The source countriesfor import of silver by India include:UK (37.8%), China (15.4%), Russia(11.8%), Switzerland (11.6%), andHong Kong (3.8%), and that of silverjewellery include: USA (35.2%), Italy(17.6%), UAE (12.4%), Hong Kong(12.3%), Thailand (6.1%), andTurkey (7.2%) (Annexure 4).

77

Tab

le 2

6:IN

DIA

’S E

XP

OR

TS

AN

D I

MP

OR

TS

OF

PL

AT

INU

M (

US

$ M

illio

n)

Co

de

Co

mm

od

ity

Nam

e20

05-0

620

06-0

720

07-0

820

08-0

9%

Cha

nge

% C

hang

e%

cha

nge

2006

-07

2007

-08

2008

-09

vsvs

vs20

05-0

620

06-0

720

07-0

8

Exp

ort

s

7110

Pla

tinum

, un

wro

ught

or

in s

emi-

man

ufac

ture

d fo

rm,

10.7

355

.84

155.

2629

79.1

773

.417

8.0

1818

.83

or i

n po

wde

r fo

rm

7113

1950

Jew

elle

ry o

f pl

atin

um g

roup

met

als

unse

t3.

921.

061.

240.

8324

1.9

17.0

-33.

06

Tota

l14

.65

56.9

015

6.50

2980

.00

75.0

175.

018

04.1

5

Imp

ort

s

7110

Pla

tinum

, un

wro

ught

or

in s

emi-

man

ufac

ture

d fo

rm,

32.2

14.0

921

.62

1474

.69

31.3

53.4

6720

.95

or i

n po

wde

r fo

rm

7113

1950

Jew

elle

ry o

f pl

atin

um g

roup

met

als

unse

t0.

313.

115.

0129

4.18

-20.

761

.157

71.8

6

Tota

l32

.51

17.2

026

.63

1768

.87

17.4

54.8

065

42.4

0

SO

UR

CE

: D

GC

IS

78

Tab

le 2

7:IN

DIA

’S E

XP

OR

TS

AN

D I

MP

OR

TS

OF

PE

AR

LS

(U

S $

Mill

ion)

Co

de

Co

mm

od

ity

Nam

e20

05-0

620

06-0

720

07-0

820

08-0

9%

Cha

nge

% C

hang

e%

cha

nge

2006

-07

2007

-08

2008

-09

vsvs

vs20

05-0

620

06-0

720

07-0

8

Exp

ort

s

7101

Pea

rls,

nat

ura

l o

r cu

ltu

red

, w

het

her

or

no

t w

ork

ed o

r2.

341.

952.

843.

34-1

6.7

45.6

17.6

1g

rad

ed b

ut

no

t st

run

g,

mo

un

ted

or

set;

pea

rls,

nat

ura

l o

r cu

ltu

re

7101

10N

atur

al p

earls

1.78

0.83

1.52

1.45

-53.

483

.1-4

.61

7101

2100

Cul

ture

d pe

arls

unw

orke

d0.

220.

080.

181.

58-6

3.6

125.

077

7.78

7101

2200

Cul

ture

d pe

arls

wor

ked

0.33

1.03

1.13

0.31

212.

19.

7-7

2.57

Imp

ort

s

7101

Pea

rls,

nat

ura

l o

r cu

ltu

red

, w

het

her

or

no

t w

ork

ed o

r4.

834.

377.

016.

46-9

.560

.4-7

.85

gra

ded

bu

t n

ot

stru

ng

, m

ou

nte

d o

r se

t; p

earl

s,n

atu

ral

or

cult

ure

7101

10N

atur

al p

earls

0.89

0.4

0.98

1.66

-55.

114

5.0

69.3

9

7101

2100

Cul

ture

d pe

arls

unw

orke

d3.

593.

385.

053.

59-5

.849

.4-2

8.91

7101

2200

Cul

ture

d pe

arls

wor

ked

0.36

0.6

0.98

1.21

66.7

63.3

23.4

7

SO

UR

CE

: D

GC

IS

79

Tab

le 2

8:IN

DIA

’S E

XP

OR

TS

AN

D I

MP

OR

TS

OF

SIL

VE

R (

US

$ M

illio

n)

Co

de

Co

mm

od

ity N

ame

2006

-07

2007

-08

2008

-09

% C

han

ge

% c

han

ge

2007

-08

vs.

2006

-07

2008

-09

vs 2

007-

08

Exp

ort

s

7106

Silv

er (

incl

udin

g si

lver

pla

ted

with

gol

d or

pla

tinum

),17

.98

11.5

914

.76

-35.

527

.4un

wro

ught

or

in s

emi-

man

ufac

ture

d fo

rms,

or

in p

owde

r fo

rm

7106

1000

Silv

er i

n po

wde

r fo

rm0.

0100

.00.

02N

egN

eg

7106

9100

Unw

roug

ht s

ilver

15.8

70.

001.

8N

egN

eg

7106

92S

emi-m

anuf

actu

red

:2.

111

.59

12.9

545

1.9

11.7

7113

11Je

wel

lery

of

silv

er,

whe

ther

or

not

plat

ed o

r cl

ad w

ith82

.93

99.0

819

5.01

19.5

96.8

othe

r pr

ecio

us m

etal

:

Tota

l10

0.91

110.

6720

7.77

9.7

87.7

Imp

ort

s

7106

Silv

er (

incl

udin

g si

lver

pla

ted

with

gol

d or

pla

tinum

),21

3.93

1152

.06

2061

.94

438.

579

.0un

wro

ught

or

in s

emi-

man

ufac

ture

d fo

rms,

or

in p

owde

r fo

rm

7106

1000

Silv

er i

n po

wde

r fo

rm30

8.14

1.27

-72.

9-8

4.4

7106

9100

Unw

roug

ht s

ilver

115.

2395

9.21

1982

.56

732.

410

6.7

7106

92S

emi-m

anuf

actu

red

:68

.718

4.7

78.1

116

8.9

-57.

7

7113

11Je

wel

lery

of

silv

er,

whe

ther

or

not

plat

ed o

r cl

ad w

ith7.

3414

.61

26.3

899

.080

.6ot

her

prec

ious

met

al:

Tota

l22

1.27

1166

.67

2088

.32

427.

379

.0

SO

UR

CE

: D

GC

IS

80

Government Initiatives

Gems and Jewellery, diamonds andprecious metals have been given aspecial thrust by the Ministry ofCommerce & Industry, Governmentof India, under the Foreign TradePolicy through the following measures:

� Allowing 100 per cent FDI inthe gems and jewellery sectorunder the automatic route;

� Abolishing duty on polisheddiamonds;

� Lowering import duty onplatinum, and exemptingrough, coloured, preciousgems stones from customsduty. Rough, semi-preciousstones are also exempted fromimport duty;

� Setting up of Gems andJewellery Parks and SEZs tostimulate sectoral investments;

� Allowing import of gold of 8 kand above underreplenishment scheme, subjectto the condition that importbeing accompanied by anAssay Certificate specifyingpurity, weight and alloycontent;

� Allowing personal carriage ofgems and jewellery products incase of holding/participating inoverseas exhibitions, up toUS $ 5 million, and up to US $1 million in case of exportpromotion tours;

� Increase in number of days, upto 90 days, for re-import ofunsold items in case ofparticipation in an exhibition inUSA;

� Allowing duty free import(based on FOB value ofexports during the previousfinancial year) of consumablesand tools, for:

o Jewellery made out of:

� Precious metals (otherthan Gold andPlatinum) – 2%

� Gold and Platinum –1%

� Rhodium finishedSilver – 3%

o Cut and PolishedDiamonds – 1%

� Following items, if exported,would be eligible for facilities:

o Gold jewellery, includingpartly processed jewelleryand articles includingmedallions and coins(excluding legal tendercoins), whether plain orstudded, containing gold of8 carats and above;

o Silver jewellery includingpartly processed jewellery,silverware, silver strips andarticles includingmedallions and coins(excluding legal tender

81

coins and any engineeringgoods) containing morethan 50% silver by weight;

o Platinum jewelleryincluding partly processedjewellery and articlesincluding medallions andcoins (excluding legaltender coins and anyengineering goods)containing more than 50%platinum by weight.

� Increasing the entitlement ofduty free import of commercialsamples up to Rs. 300,000;

� Allowing duty free re-import ofrejected jewellery with 2% ofFOB value of exports;

� Permitting import of Diamondson consignment basis forCertification/ Grading, andre-export by the authorizedoffices/agencies ofGemological Institute ofAmerica (GIA) in India or otherapproved agencies;

� Firms and companies dealingin purchase/ sale of rough orcut and polished diamonds/precious metal jewellery plain,minakari and / or studded with/without diamond and/or otherstones, with a track record ofat least two years in import orexport of diamonds / colouredgemstones/ diamond andcoloured gemstones studdedjewellery / plain gold jewellery,

and having an average annualturnover of Rs. 3 crores orabove during preceding threelicensing years, may also carryout their business throughdesignated Diamond DollarAccounts (DDA) (Box 4);

� In an endeavour to make Indiaa diamond international tradinghub, it is planned to establish“Diamond Bourse(s)”.

Investment Scenario

India has a favourable investmentclimate with the policy allowing100% FDI under the automatedroute. However, the FDI inflows intothis industry has been meager;during the period April 2000 toOctober 2009, the diamond andgold ornaments sector received anFDI inflow of US $ 263.56 million,constituting a share of 0.26% in thetotal FDI inflows during this periodinto India. This may be because,the industry is significantlyfragmented, and the large portionof the domestic market is in theunorganized sector.

However, of late, India is gainingprominence among foreign firms asinternational hub for manufacturing,retailing and sourcing for qualitydesigner jewellery. Global retailers,such as Wal-Mart, JC Penny, areincreasingly procuring jewellery fromIndia. The domestic players are alsolooking at expanding their footprintsin the country; especially in retail

82

space; some of the majordevelopments include9:

� Reliance Retail is planning anaggressive entry into thejewellery retail market. Thecompany has plans to openaround 400 to 500 jewelleryretail outlets across thecountry;

� Damas India, part of one ofthe largest jewellery retailoutlets in the world, is adding16 new stores to the 12 storesit has already established inIndia;

� Swarovski, the global crystalgoods manufacturer andmarketer, plans to set up

30 stores by 2009, up from thecurrent 13;

� The Gitanjali Group hasbought ‘Nakshatra’, thepremium brand of jewellerypromoted by Diamond TradingCompany (DTC);

� Gitanjali Gems, a diamond andjewellery manufacturer hasentered into an agreement withthe Mineral and Metal TradingCorporation of India (MMTC),a leading bullion trader, for ajoint venture;

� Thai company, PrandaJewellery, is foraying intoretailing in India and has planstowards retail expansion in thecountry;

Box 4:DIAMOND DOLLAR ACCOUNT SCHEME

Under the Diamond Dollar Account Scheme (DDAS), eligible firms andcompanies may be allowed to open Diamond Dollar Account with their bankers. Amaximum of two Diamond Dollar Accounts would be allowed with two separatebankers. The sources of dollars in Diamond Dollar Accounts shall be (i) bankfinance; (ii) export proceeds from shipments of polished/rough diamonds; and (iii)sale proceeds from local sales of polished/rough diamonds.

Through DDAS, firms and companies, dealing in the purchase/sale of roughor cut and polished diamonds/precious metal jewellery, plain, minakari and/orstudded with/without diamond and/or other stones with a track record of atleast 3years in import or export of diamonds/coloured gemstones/diamond and colouredgemstones studded jewellery/ plain gold jewellery and having an average annualturnover of Rs 5 crore or above during the preceding three licensing years, havebeen allowed to carry out their business. This scheme shall be optional and thoseimporters/exporters who wish to continue to use Rupee Accounts shall be allowedto do so under the existing policies.

Under this scheme, Dollars kept in such accounts and are available frombank finance and/or export proceeds shall be used only for import/purchase ofrough diamonds from overseas/local sources.

9 Source: Indian MSME Ecosystem, February 2009

83

Box 5:EXIM BANK’S ROLE IN SUPPORTING INDIAN

GEMS AND JEWELLERY INDUSTRY

Exim Bank of India seeks to create an enabling environment to promote two-way transfer of technology, trade and investments and operates a wide range oflending, service and support programmes. The Bank has a variety of loan productsto cater to the financing requirements of enterprises. The credit facilities areavailable for financing at all stages of export cycle of Indian firms. The Bank’sLines of Credit (LOC) extended to commercial banks, financial institutions, regionaldevelopment banks, and entities overseas serve as a market entry mechanism toIndian exporters and provide a safe mode of non recourse financing option toIndian exporters. Apart from LOC, the Bank offers buyer’s credit and supplier’scredit for exports on deferred payment terms. These facilities help companies,especially the SMEs, to offer competitive credit terms to the buyers and to explorenew geographical markets.The Bank has extended supplier’s credit, pre shipmentcredit, post shipment credit, and foreign currency packing credit (FCPC), to itsclients in the gems and jewellery sector.

Exim Bank has signed a Memorandum of Understanding (MOU) with theIndian Diamond Institute (IDI), which enables the development of human resourcesthrough professional training, and hence be supportive of the export efforts of theindustry. The Bank has provided grant to IDI for upgrading LRS (Laser RamanSpectroscopic Machine) equipment, and thereby enabling the Institute to providetraining to carry out in-depth study of all types of gems. The MOU will also enableboth the institutions to exchange literature, data, information and research outputon the gems and jewellery industry, and also facilitate the exchange of foreignexperts visiting the two institutions, and in organizing their respective trainingprogrammes.

� Geneva-based luxury watchand jewellery brand DeGrisogono is firming up itsplans to foray into the Indianmarket through establishingmono-brand outlets;

� Kiah, the diamond jewelleryretailer, which currentlyoperates 15 retail stores inIndia and one store in Dubai,is planning to expand the retailnetwork of ‘Kiah DiamondJewellery’ stores.

84

In this chapter, market analysishas been undertaken to understandthe competitive position of India vis-à-vis other competitor countries, andalso to identify the exportdestinations which have not beenfully tapped by India for its exportsof gems and jewellery under selectproduct categories. Since India isone of the major exporting countries,for articles of jewellery, the world’slargest exporters and importers, andIndia’s export destinations for thevarious categories under select sub-product groups have been analyzed.Other product groups which arecovered in this chapter are articlesof natural and cultured pearls,precious and semi precious stones;and imitation jewellery.

ARTICLES OF JEWELLERY

Articles of jewellery and partsthereof, of precious metal or ofmetal clad with precious metal(HS 7113): Major importers underthis category include USA, UAE,Hong Kong, Switzerland and UK.Among the major source countries,Italy exported to all the majorimporters. India was one of themajor exporters of articles of

jewellery and was one of the majorsource countries for USA and UAE.Even though India was exporting toall the major importers, Switzerlandwas one major importer where Indianeeded to improve its exports. Ofthe total exports of US $ 42.5 billionunder this category, India exportedUS $ 5.06 billion constituting ashare of 12% in the total worldexports in 2007. (Table 29).

Articles of jewellery and partsthereof of silver, whether or notplated or clad with other preciousmetal (HS 711311): Among the Asianmarkets, Thailand, Hong Kong andChina were major source countries,and among the western markets,Italy was a major source countryunder this category. The majorimporters include: USA, Hong Kong,Germany, UK and Singapore.Thailand was a major source countryfor USA, Hong Kong, Germany andUK. China was a major sourcecountry for USA, Hong Kong andGermany. India was not a majorexporter under this category; itsexports amounted to US $ 94.2million and had a share of only 2.4%in the world exports in 2007. India’s

6. MARKET ANALYSIS

85

Table 29:MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 7113)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 42554.14

USA 10086.29

UAE 5829.26

Hong Kong 3872.93

Switzerland 2842.76

UK 2714.45

NOTE: *Articles of jewellery and parts thereof, of precious metal or of metalclad with precious metal.

SOURCE: UN - COMTRADE

Indi

a

Hon

g K

ong

Italy

UK

Sw

itzer

land

Fra

nce

US

A

Chi

na

Table 30:MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711311)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 3844.93

USA 1306.33

Hong Kong 251.95

Germany 250.82

UK 249.87

Singapore 183.07

Note: *Articles of jewellery and parts thereof of silver, whether or not plated orclad with other precious metal.

SOURCE: UN - COMTRADE

US

A

Tha

iland

Chi

na

Hon

g K

ong

Italy

86

major markets include USA (55.3%),UK (8.3%), Germany (5.6%) andItaly (4.3%). However, India has thepotential to target USA, Hong Kongand Singapore as its export marketsunder this category (Table 30).

Articles of jewellery and partsthereof of other precious metal(gold or platinum group ofminerals), whether or not platedor clad with precious metal (HS711319): USA, UAE, Hong Kong,Switzerland and UK were the majorimporters of articles of jewellery andparts thereof of other precious metal,whether or not plated or clad withprecious metal in 2007 (HS 711319).Major source countries under thiscategory include: Italy and UK,

exporting to almost all the majorimporters of the world. Other majorsource countries include: India, HongKong and USA. India was one of themajor exporters under this category,and exported around US $ 5 billionduring 2007, constituting a share of13% in the total world exports. Indiawas a major source country for USA,UAE and Hong Kong. India shouldhowever improve its exports toSwitzerland, which is another majorimporter under this category(Table 31).

Articles of jewellery and partsthereof of other precious metal,whether or not plated or clad withprecious metal (HS 711320):Japan, UK, USA, New Zealand and

Table 31:MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711319)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 38343.25

USA 8749.95

UAE 5757.91

Hong Kong 3598.27

Switzerland 2759.48

UK 2411.15

NOTE: *Articles of jewellery and parts thereof, of precious metal (gold andplatinum group of mineral) whether or not plated or clad with precious metal.

SOURCE: UN - COMTRADE

Indi

a

Hon

g K

ong

Italy

UK

Sw

itzer

land

Fra

nce

US

A

Chi

na

87

Hong Kong were the major importersin this category, and the majorexporters include USA and Italy in2007. USA was among the world’smajor exporters, as also amongworld’s major importers. USA wasthe largest exporter constitutingalmost 52% of the total exports in theworld. Among the major importers,USA was a major source country forJapan, UK, New Zealand and HongKong; and Italy was a major sourcecountry for Japan, UK, USA andHong Kong (Table 32). India had veryminimal exports under this category,amounting to US $ 0.02 million.

ARTICLES OF NATURAL ANDCULTURED PEARLS,PRECIOUS ORSEMI-PRECIOUS STONESArticles of natural or culturedpearls, precious or semi-preciousstones (natural, synthetic orreconstructed) (HS 7116): Majorimporters under this categoryinclude: Hong Kong, Switzerland,UK, Netherlands Antilles and Japanin 2007. Major source countries forimports of pearls and preciousstones include: USA and China.China was a major source countryto all the major importers, except

Table 32:MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711320)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 365.95

Japan 88.57

UK 53.43

USA 30.01

New Zealand 27.57

Hong Kong 22.72

Note: * Articles of jewellery and parts thereof of base metal, whether or notplated or clad with precious metal.

SOURCE: UN - COMTRADE

Aus

tral

ia

UK

Irel

and

Ger

man

y

US

A

Italy

88

Netherlands Antilles, and USA wasa major source country for all themajor importers (Table 33). India hadvery minimal exports in this category,amounting to US $ 0.27 million.

Articles of natural/culturedpearls (HS 711610): Major importersof products under this categoryinclude: Hong Kong, USA, Japan,Switzerland and UAE in 2007. Majorsource countries for these importersinclude: China and Hong Kong.China dominated the export sceneby supplying to all the majorimporters, while Hong Kong was amajor source country for USA,

Japan, Switzerland and UAE. HongKong was both an importer andexporter under this category (Table34). India had negligible exports (US$ 0.02 million) under this category.

Articles of precious or semiprecious stones (naturalsynthetic/reconstructed) (HS711620): Switzerland, Hong Kong,Netherlands Antilles, UK and Japanwere the major importers under thiscategory in 2007. The only supplierto Netherlands Antilles was USA.USA was a major supplier to all themajor importers; Japan has mainlysourced from USA, Germany, China

Table 33:MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTURED

PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 7116)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 3844.93

Hong Kong 304.78

Switzerland 289.94

UK 176.08

Netherlands 174.26Antilles

Japan 167.93

Note: **Articles of natural or cultured pearls, precious or semi precious stones(natural, synthetic or reconstructed).

SOURCE: UN - COMTRADE

Hon

g K

ong

US

A

Sw

itzer

land

Chi

na

Italy

89

Table 34:MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTUREDPEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 711610)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 205.00

Hong Kong 72.94

USA 35.79

Japan 21.00

Switzerland 13.99

UAE 6.56

Note: * Articles of natural/cultured pearls

SOURCE: UN - COMTRADE

Chi

na

US

A

Japa

n

Hon

g K

ong

Ger

man

y

Fre

nch

Pol

ynes

ia

Aus

tral

ia

and Hong Kong. UK has mainlysourced from USA, China, Italy,Switzerland and Hong Kong (Table35). India had negligible exports (US$ 0.25 million) under this category.

IMITATION JEWELLERYImitation jewellery (HS 7117): TheAsian and European countriesdominated the export of imitationjewellery – Hong Kong, China,Austria and France. Major importersof artificial jewellery include USA,Germany, France, UK and Italy in2007. Hong Kong was a majorsource country for all the majorimporters, followed by China andAustria. India’s exports under this

product category amounted to US $117.46 million. Though India is alsoone of the major exporters ofartificial jewellery, India’s productsare mainly sourced by UK. Othermajor export destinations for Indiainclude: USA, UAE, Spain andSaudi Arabia; however, the volumesare insignificant as compared to thepotential. India needs to targetthese markets through variousstrategies (Table 36).

Cuff links & studs of basemetal w/n plated with preciousmetal (HS 711711): Major importersof products under this categoryinclude: USA, UK, Japan, France,

90

Table 35:MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTUREDPEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 711620)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 1741.00

Switzerland 275.95

Hong Kong 231.84

Netherlands 174.06Antilles

UK 170.94

Japan 146.93

Note: * Articles of precious or semi precious stones (natural synthetic/reconstructed)

SOURCE: UN - COMTRADE

Chi

na

Ger

man

y

Sw

itzer

land

Hon

g K

ong

US

A

Italy

and Hong Kong; major sourcecountries for products under thiscategory include: Thailand, UK,Hong Kong, China, and Germany in2007. Thailand served as a sourcecountry for all major importers of theworld (Table 37). India’s exportsunder this product group amountedto US $ 2.58 million. Though Indiawas not a major exporter under thiscategory, India was a major sourcecountry for USA contributing 8.1% ofthe total imports by the USA. In valueterms, India’s export to USA was US$ 2.09 million, a share of 81 % ofIndia’s total exports under thisproduct group.

IN SUM

The product-country analysis showsthat USA, EU, Japan and HongKong are the leading importers ofmajor gems and jewellery products.These countries have beensourcing their jewellery importrequirements mainly from countriessuch as Hong Kong, China, Italy,USA, Germany and UK, of whichUSA, UK and Germany areimporters as well as exporters.Hong Kong appears to be more ofa trading hub in the Asian continent.India served as one of the majorsource countries for diamonds, as

91

Table 36:MARKET ANALYSIS OF IMITATION JEWELLERY (HS 7117)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 4967.03

USA 974.73

Germany 365.01

France 364.99

UK 316.89

Italy 309.79

Note: * Imitation jewellery

SOURCE: UN - COMTRADE

Indi

a

Chi

na

Fra

nce

Hon

g K

ong

Aus

tria

Table 37:MARKET ANALYSIS OF IMITATION JEWELLERY (HS 711711)*

(US $ Million)

World’s ImportsMajor (US $ Million) Major Source CountriesImporters

World 123.45

USA 25.71

UK 10.7

Japan 7.93

France 6.48

Hong Kong 5.79

Note: * Cuff links & studs of base metal w/n plated with precious metal

SOURCE: UN - COMTRADE

Hon

g K

ong

UK

Ger

man

y

Italy

Tha

iland

Chi

na

92

also some articles of jewellery. Inthe case of diamonds, India is oneof the major importers of roughdiamonds, and one of the majorexporters of cut/polished diamonds.India’s exports of cut and polisheddiamonds have been to all majormarkets in the world. India is alsoa major exporter of articles ofjewellery and parts, and exportedto all the major importers of theworld. However, some of themarkets are not well-explored byIndian gems and jewelleryexporters. For example, India mayendeavour to concentrate onmarkets like: UK and Switzerlandfor articles of jewellery of gold andplatinum group of minerals (HScode 711319); USA, Germany, UKand Switzerland for articles of

jewellery made of silver (HS code711311); USA, Japan, Switzerlandand UAE for articles of natural andcultured pearls (HS code 711610);Switzerland, UK and Japan forarticles of semi-precious stones(HS code 711620); and USA,Germany, France, UK and Italy forarticles of imitation jewellery (HScode 7117).

India may leverage its traditionalcraft-skills, low-cost labour, andfabrication techniques in some of thejewellery products (such asprocessing of small-sizeddiamonds), and replicate suchadvantages in the production of otherproducts, and thereby become aglobal player across the gems andjewellery segments.

93

CHALLENGES

Unorganized Sector

India’s gems and jewellery industryis highly unorganized andfragmented with more than 90% ofthe players having family ownedbusinesses. According to a FICCIstudy, the gold processing industryhas around 15,000 players, withonly around 80 units havingrevenues of over US $ 5 million.India is also home to around450,000 goldsmiths, over 100,000gold jewellers, about 6,000diamond-processing players, and8,000 diamond jewellers. Theunorganized and small-scale natureof the sector hampers the ability ofIndian gems and jewellery industryto innovate, upgrade technologies,and emerge as a world-classsupplier.

Impact of Recession

There had been a loss of marketfor gems and jewellery exports dueto recession and global economicslowdown. As can be seen in Table38, during 2007-08, there was agrowth in gems and jewelleryexports by 23%, over the previous

year. The growth trend continuedeven in 2008-09 during which theexports showed a growth of 44%over the previous year.

However, during the period April-September 2009-10, due toeconomic slowdown, the demand forgems and jewellery shrank, whichresulted in export slowdown for India.This has been depicted in Table 38.

Following the economicslowdown, asset price devaluations,job losses and decrease indisposable income have happened,along with escalation in gold prices,which have changed theconsumption pattern of gems andjewellery. Further, the economicslowdown has also affected theconsumer buying pattern, withgrowing demand for single-linejewellery, low-carat jewellery, andgems-studded jewellery.

An analysis of India’s majorexport destinations of gems andjewellery reveals that during theperiod April – September 2009-10,exports to all the major exportdestinations, except Singapore hadwitnessed a decline (Table 39).Exports to countries like China, UAE

7. CHALLENGES AND STRATEGIES

94

Table 38:EXPORT PERFORMANCE OF INDIAN GEMS AND

JEWELLERY INDUSTRY(US $ Million)

2006-07 2007-08 2008-09

Exports 15,983.57 19,691.58 28,411.38Growth Rate — 23.2 44.3

Comparative Export Performance in April – September 2008 andApril – September 2009

2008 2009 Growth (%)

April – September 17,387.66 13,608.40 -21.7April 3,074.25 1,824.42 -40.7May 2,969.89 2,011.60 -32.3June 3,063.81 2,298.99 -25.0July 2,635.75 2,443.92 -7.3August 2,842.69 2,386.83 -16.0September 2,801.27 2,642.65 -5.7

and Singapore, which had witnessedtremendous increase during 2008-09witnessed a decline during the periodApril-September 2009-10.

The financial performance ofplayers in this sector has also beenimpacted by the recessionary trendsin demand. Out of the fourteenjewellery companies analyzed, 6companies witnessed a decline inincome, and eight companieswitnessed decline in profit during thefirst half of 2009-10. (Table 40).

Rise in Prices

As mentioned earlier, the prices ofprecious metals, especially goldand silver, has been witnessingsteep increase, since the last fewyears, which has been changingthe buying pattern of consumers.

Exhibit 13 shows the prices of goldand silver in the last one year,which has been on a rising trend.During the period December 2008 -December 2009, the price of goldper ten grams, has increasedfrom Rs. 13,445 to Rs. 16,870,witnessing an increase of 26%.Even though the prices of silverhad witnessed a decline afterFebruary 2009, it again startedrising after April 2009. From Rs.17,847 per kg in December 2008,the silver price increased to Rs.27,430 per kg in December 2009.

The steep rise in raw materialprices has squeezed the costefficiency of the Indian gems andjewellery sector. The ratio ofproduction cost to net sales of thisindustry, which hovered around 86%

95

Table 39:ANALYSIS OF MAJOR EXPORT DESTINATIONS OF INDIA

FOR GEMS AND JEWELLERY

(US $ Million)

Countries 2007-08 2008-09 % change Apr-Sep Apr-Sep % change2008-09 2009-10

UAE 4039.43 10967.06 171.5 6762.61 5805.52 -14.2

Hong Kong 5105.36 5294.56 3.7 3023.34 2913.49 -3.6

USA 4975.96 4660.00 -6.3 2840.01 2177.32 -23.3

Singapore 217.85 549.35 152.2 297.46 326.24 9.7

China 35.06 739.5 2009.2 341.21 235.29 -31.0

Subtotal of 14373.66 22210.47 54.5 13264.63 11457.86 -13.6Export of5 Countries

India’s Total 19691.58 28411.38 44.3 17387.66 13608.41 -21.7Export of Gemsand Jewellery

%Share of 12.07 15.33 - 15.97 17.77 -Gems andJewellery inIndia’s totalExports

SOURCE: Department of Commerce, Ministry of Commerce & Industry,Government of India

in 2004-05 increased to 92% in 2008-09, affecting the profitability of thissector.

Table 42 shows the ratio of costof production to net sales of variousindustries within the manufacturingsector, including gems and jewellery.The ratio reveals that the gems andjewellery industry is an exceptionallyhigh cost industry. After 2004-05, theratio has been showing an increasevarying between 85% and 95%.

Possible Threats from China,and From Other CountriesProducing Diamonds

Although India currently enjoysdominance in the world’s cut andpolished diamond market, Chinamay emerge as a rival in the long-term, mainly because of theavailability of cheap labour, growingdomestic demand, and also theimprovement in the quality ofworkmanship in the country. It may

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Table 40:FINANCIAL PERFORMANCE OF COMPANIES

(APRIL-SEPTEMBER 2009-10)

Company Name Income Net profit

Apr- Sep Apr-Sep % change Apr- Sep Apr-Sep % change2008-09 2009-10 2008-09 2009-10

Rajesh Exports Ltd. 4804.51 7695.48 60.2 60.92 50.95 -16.4Titan Industries Ltd. 1901.21 2034.47 7.0 120.49 123.64 2.6Gitanjali Gems Ltd. 1439.83 1687.35 17.2 68.74 75.35 9.6Su-Raj Diamonds & 1111.63 1416.65 27.4 24.61 25.56 3.9 Jewellery Ltd.Suashish Diamonds Ltd. 536.72 647.64 20.7 -10.28 30.44 -396.1Shrenuj & Co. Ltd. 413.99 407.07 -1.7 5.47 6.69 22.3Classic Diamonds 371.35 365.05 -1.7 9.13 10.39 13.8 (India) Ltd.Flawless Diamond 336.92 283.15 -16.0 13.55 10.50 -22.5 (India) Ltd.Renaissance 175.37 212.89 21.4 8.89 8.9 0.1 Jewellery Ltd.C G Impex Ltd. 145.41 179.44 23.4 1.59 0.98 -38.4Vaibhav Gems Ltd. 96.40 50.70 -47.4 -1.62 -11.73 624.1Goldiam International Ltd. 29.51 33.23 12.6 -7.88 -1.00 -87.3Shantivijay Jewels Ltd. 33.58 21.01 -37.4 0.72 -0.75 -204.2

Shukra Jewellery Ltd. 25.27 11.02 -56.4 0.12 0.05 -58.3

SOURCE: Prowess

Exhibit 13:PRICES OF GOLD AND SILVER (DECEMBER 2008 - DECEMBER 2009)

IN INDIA

SOURCE: MCX

97

be added that increasing numberof diamond processors are settingup their facilities in China due tothese reasons. Also, there hasbeen growing pressure in majordiamond producing countries inAfrica, like Botswana, Namibia andSouth Africa, to gain furthereconomic benefits from diamondvalue chain, seeking investments incutting and polishing industry. Suchdevelopments may affect theprospects of India.

Low level of TechnologyAbsorption

Utilization of hi-tech, speedy andefficient machinery and softwarehas led to the gradual replacement

of traditional / manual methods ofpolishing, manufacturing anddesigning of gems and jewellery.Proactive players in the Indiangems and jewellery industry arealways on the lookout for bettertechnology for their units. However,such technology absorption isrelatively low in Indian gems andjewellery industry, due to the smallsize, and unorganized nature ofmajority of the players. Also, mereabsorption of technology may notbe helpful, without a proper blendbetween manual labour andmachinery to provide ethnicity tothe end-products. Usage of semi-skilled and unskilled workforce inoperation of such high-end

Table 41:PRODUCTION COST*/NET SALES RATIO ACROSS

MANUFACTURING SECTOR

Industry Year2004-05 2005-06 2006-07 2007-08 2008-09

Food products 51.6 55.6 59.0 62.2 67.0

Textiles 67.0 62.7 66.1 70.6 69.3

Chemicals 62.7 63.3 58.6 60.4 62.7

Gems and jewellery 86.0 89.1 93.4 91.0 92.2Iron and steel 56.0 63.5 61.6 64.2 67.3

Non electrical machinery 70.9 69.8 74.7 74.8 76.3

Electrical machinery 74.3 78.3 76.5 69.5 66.6

Electronics 41.3 41.4 44.1 54.5 53.9

Transport equipments 72.9 72.7 72.2 72.0 73.6

Diversified 66.6 63.9 59.2 58.3 61.1

Note: *Production cost include: Raw materials, stores and spares & purchaseof finished goods; salaries and wages; power and fuel expenses, royalties,technical know-hows fees etc; rent and lease rent and interest expenses

SOURCE: Exim analysis; data derived from Prowess

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machines may result in significantunder-utilization of the machinery /technology, and may at times causelosses in operations. Skilldevelopment is therefore veryessential for proper reclassificationof the workmen in this industry.

R&D and Product Development

Another major challenge faced bythe industry is the low level of R&Dintensity and facilities forundertaking R&D and productdevelopment. Proper R&D solutionswould help in improving productquality, reducing wastage,introducing new designs andconcepts, and innovation in supplychain management and marketing.The gap between hi-end machinesand unskilled labour can also bereduced with innovative R&Dsolutions.

STRATEGIES

Branding of Jewellery

Branding of jewellery plays a veryimportant role in the jewellerymarket as it assures consumersthat the products are of certainquality, durability and conform toseveral social, environmental anddurability standards. Brandpromotion is therefore one of thebest modes of market penetration.

India’s gems and jewelleryindustry is highly unorganized andfragmented, and till the early 1990s,the average Indian had bought

unbranded jewellery from localjewellers. At that time, confidence inthe local jeweller was the hallmarkof the gold jewellery trade in India.This used to be a major challenge inthe way of development of brandedjewellery in India. However, since thelate 1990s, there has been a shift inconsumer preferences: women areincreasingly opting for fashionableand lightweight jewellery instead oftraditional bulky jewellery. There hasbeen change in consumer trend withthe buyers regarding jewellery as anaccessory and not as an investment.Consumers have also startedrealizing the value of brands, sinceit gave them the surety of quality anddurability.

Though in its nascent stage,branded jewellery in India has beenshowing encouraging signs, despitetough competition. According to anestimate by the Indian Brand EquityFoundation (IBEF), the market forbranded jewellery is expected tobecome US $ 2.2 billion by 2010.Some of the jewellery brands in Indiaare DeBeers, D’damas, Tanishq,Oyzterbay, and Gili. In order to gainmarket share, branded jewellers mayhave to come up with designs thatcustomers want, and win the trustand confidence of consumers byhallmarking and demonstrating thepurity of the gold used by them. Tocompete with traditional players,branded players may also find someways to differentiate themselvesfrom others. While the success of a

99

particular brand may depend ondifferentiation and affordability,quality will be a key element insustaining a brand. In addition,branded players require focusedadvertising and astute salesmanshipto compete with traditional jewellers.

In this context it may bementioned that the Gem & JewelleryExport Promotion Council haslaunched the brand ‘Anant’, anexquisite range of single linediamond jewellery, exclusively forIndian women. This initiative wasjointly undertaken by the Councilalong with Gold Souk, Rio Tinto,International Gemological Institute(IGI), and All India Gems andJewellery Trade Foundation (GJF),with the objective of promotingdiamond jewellery trade in India.‘Anant’ is available at over 200 retailoutlets across the country and isbeing promoted extensively throughprint, electronic and outdoor media.This promotional campaign covers15 major and mini metros such asMumbai, Delhi & Gurgaon,Ahmedabad, Rajkot, Baroda, Jaipur,Bangalore, Chennai, Hyderabad,Kochi, Kolkata, Kanpur, Nagpur andAkola.

Hallmarking of Jewellery

As the jewellery making andmarketing is largely at the handsof unorganized sector, often, Indianconsumers are faced with issuesrelated to quality and low caratage.In case of traditional handcrafted

jewellery often the joints aresoldered with the use of solderalloys of a much lower caratage.To counter this challenge, manycountries are promotingHallmarking Scheme to protect theconsumers against the adulteration,and guarantee the purity orfineness of gold jewellery.Hallmarking is the accuratedetermination and official recordingof the proportionate content ofprecious metal in jewellery.

Government of India has beenprotecting the interests of consumersfrom adulteration, and irregular metalquality, and launched theHallmarking Scheme throughBureau of Indian Standards. Theprincipal objectives of theHallmarking Scheme are to protectthe consumers against the fraud ofadulteration and to oblige themanufacturers to maintain legalstandards of fineness. However, it isdifficult to make Hallmarking of goldjewellery mandatory across thecountry due to insufficient number ofcertification centres. At present,there are over 100 BIS-recognisedassaying and hallmarking centresin India, which are centred aroundTier – 1 and Tier – 2 cities.

It is proposed that India mayconsider expanding the network ofhallmarking infrastructure across thecountry and help penetrate qualityproducts even in rural areas. Indiamay also consider becoming amember of international Hallmarking

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Convention, and derive the benefitsof such Convention.

Increasing Market Presence ofPlatinum Jewellery

With the gold prices increasing atrecord levels, consumers havestarted showing interest inornaments made from other metals,like platinum and palladium. The fallin prices of platinum has alsotriggered the demand for platinumjewellery across the world, includingIndia. During the past one year, theprices of platinum have witnesseddecline, which is one of the mainreasons for the consumers to optfor platinum jewellery (Exhibit 14).During March 2008, the price ofplatinum stood at US $ 2005 pertroy ounce (31.1 gms), and duringNovember 2008, the price fell downto as low as US $ 844 per troyounce. As on December 2009, theprice of platinum stood at US $1448 per troy ounce. As thedemand for platinum jewellery isincreasing, and especially when theconsumer preferences are shiftingto platinum jewellery, due to rise inprice of gold, Indian jewellers needto diversify their product range andconcentrate more in themanufacture of platinum-basedjewellery. Leading retail jewellersshould also add exclusive space forplatinum jewellery in their stores.

According to industry observers,at present, facilities for orebeneficiation and extraction of

platinum group metals do not existin the country. Technology has alsoto be imported for extraction ofplatinum group of metals, whichshould be promoted in India.

Change in Product Portfolio

As with all luxury products, thedemand for diamond and jewelleryis highly income elastic. With therecession affecting the demand forjewellery products worldwide, it isnecessary to diversify the exportproduct portfolio, and concentratemore on lesser-priced jewellery,such as imitation, fashion orcostume jewellery. One suchexample would be the concept ofone gram gold jewellery which haspicked up in the Indian retail marketrecently. Players in the jewelleryindustry, eyeing the domesticmarket has brought this idea ofproducing large jewellery item withminimal gold content, and therebymaking attractive and affordable tothe low-end consumers. Thisconcept could be carried forward tointernational markets, especiallydeveloping economies, targetingmiddle class population. Countrieswith ethnic Indian population couldalso be another range of targetmarkets. It is believed that in suchproduct range, the risk of volatilityin gold prices is likely to be lower,leading to improvement in margins,as compared to sale of pure goldjewellery. Another such example isthe changing demand trend from

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Box 6:BIS CERTIFICATION SCHEME FOR HALLMARKING OF

GOLD JEWELLERY

Government of India has identified Bureau of Indian Standards (BIS), a soleagency in India, to operate the BIS Hallmarking Scheme. The Scheme has beenaligned with International Criteria on Hallmarking (Vienna Convention 1972). Asper this Scheme, jewellers are granted with licences by BIS to sell jewellery afterhallmarking them from any of the BIS recognized Assaying and Hallmarking Centre.BIS maintains surveillance of the certified jewellers, at a defined periodicity. Marketsurveillance involves collection of hallmarked gold jewellery from licensee’s retailoutlet/manufacturing premises and having it tested for conformity in BIS recognizedHallmarking Centre. Deviations in degree of purity of fine metal and observanceof operation not in conformance to the system may result in cancellation of BISrecognition of the centre as per provisions under the BIS Act, Rules and Regulations.

BIS HALLMARK

A Hallmark, consists of five components i.e. BIS Mark, the Fineness number(corresponding to given caratage), Assaying and Hallmarking Centre’s Mark,Jeweller’s Identification Mark, and Year of Marking denoted by a code letter anddecided by BIS (e.g. code letter ‘A’ was approved by BIS for year 2000, ‘B’ beingused for the year 2001 and ‘C’ for 2002 and ‘J’ for 2008). The marking is doneeither using punches or laser marking machine.

BIS Hallmark for purity and fineness is as given below:

� 958 – Corresponding to 23 carat

� 916 –Corresponding to 22 carats

� 875 - Corresponding to 21 carats

� 750 - Corresponding to 18 carats

� 585 - Corresponding to 14 carats

� 375 - Corresponding to 9 carats

The BIS Precious Metals Sectional Committee (MTD 10) has also formulatedand published the following Indian Standards on Gold and Gold Alloys:

� IS 1417 (Grades of gold and gold alloys, Jewellery/ artifacts – Fineness andMarking)

� IS 1418 (Assaying of Gold in Gold Bullion, Gold Alloys and Gold Jewellery/Artifacts Cupellation (Fire Assay Method))

� IS 2790 (Guidelines for manufacture of 23,22,21,18,14 and 9 carat goldalloys)

� IS 3095 (Gold Sellers for use in manufacture of Jewellery)

SOURCE: http://bis.org.in

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Box 7:BENEFITS OF BECOMING A MEMBER OF HALLMARKING CONVENTION

Export facilitation

Articles bearing the Convention Common Control Mark (CCM) – togetherwith national mark from the Assay Office – do not have to be re-hallmarked uponimport in a HMC Contracting State. The CCM system is applied independentlyfrom the marking / hallmarking system in place in a country. Thus, it is always avoluntary mechanism. CCM is also considered as quality mark in many countriesaround the world.

Avoids duplication in controls

Since articles marked with CCM can be imported without further testing, theConvention considerably reduces the time and costs involved in control, certificationand marking.

International Harmonisation

CCM is the only worldwide instrument which harmonises the control andmarking of precious metals. The participant countries also contribute to thedevelopment and harmonization of international standards.

Mutual recognition

The Convention not only strengthens international harmonization, but alsohelps in establishing systems for mutual recognition of control marks (Marks ofAssay Offices).

Networking and Sharing of Experiences

Members of the Convention benefit from personal contacts with other AssayOffices, which help them establish systems for exchange of information and sharingof experiences. This helps the Assay Offices to keep up high standards and trackfraudulent practices.

Fair Trade

The Convention encourages Fair Trade between precious metals operators,especially to avoid under-carrating from the stage of metal trading. Consumersatisfaction is also maintained through quality in nature of articles made out ofsuch metals.

SOURCE: Hallmarking Convention

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small diamonds to single diamondjewellery. Accordingly, capabilitiesneed to be developed in cutting,polishing and marketing of singlediamond jewellery.

Indian gems and jewelleryindustry may also diversify the exportproduct portfolios on the lines of thechange in perception of theconsumers. It may be mentioned thatthe new-age consumer perceivesjewellery as a personal accessorythat manifests the wearer’s attitude,personality and lifestyle. Significantopportunities may be available to theplayers in the Indian jewelleryindustry, if they leverage andpackage the products with theblending of tradition and culture indesigns that are universal andcontemporary in their aestheticappeal. While the products with such

blend would stand out withresemblance of cultural and regionalidentity, they may not significantlylook as ethnic products. In otherwords, the products should be a new-look piece, but with traditionalinspiration. Branding and packagingare very important in marketing suchproducts. Focusing on such productlines would enable the players inestablishing an edge over theircompetitors. Players should alsohave desire for product innovation tocatch-up with the change inconsumer trends.

Continuous Skill Development

Human resource is one of thecritical factors for the gems andjewellery industry, as the industryis labour-centric. Non-availability ofskilled workers is often cited as oneof the major reasons for the inability

Exhibit 14:PRICES OF PLATINUM (January 2008 - December 2009)

SOURCE: Platinum today

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of the players in this industry toscale up their operations. Thus, theplayers need to constantly upgradethe skills of the workmen, throughtraining and retraining strategies, toenhance their productivity. Some ofthe focus areas for imparting skill-upgradation include: technologyinterface of design and productdevelopment, innovation inmanufacturing process andreduction of wastage,standardization and quality control,and international networking andmarketing. In addition to firm levelstrategies, the industry also needsto address the challenge of skilldevelopment collectively. Supply ofcraftsmen / artisans that comethrough generations need to becomplemented by fresh talents,trained in a professional manner, tohave access to wider talent pool.The industry may establish closelinkages with the existing learningcentres, and help them in impartingskills / training that are needs ofthe hour. At present, there are fewinstitutes which provide training injewellery design, viz., IndianInstitute of Gems and Jewellery,Indian Diamond Institute, andNational Institute of Design. Also,the National Skill DevelopmentCorporation (NSDC), initiated by theGovernment of India, is expectedto give thrust on skill developmentof various sectors, including gemsand jewellery. It is also importantfor the players to accomplish

greater degree of professionalismand establish appropriateorganization structure that wouldattract and retain best talent in theindustry.

Technology Upgradation

Players in this industry need toadopt latest technology, includingthe ICT interface in all aspects,starting from mining, cutting andpolishing, to fabrication andmarketing. Technological solutionsare available for several of thechallenges faced by the gems andjewellery industry; these solutionsinclude: innovations in designs(through CAD/CAM machinery),quality and finish of products(through infrared, photo-typing,etching, wax-casting), cost controlin process and reduction ofwastage (laser cutting, hollow-tubeprocessing). Imparting oftechnological solutions may reducecost and time, which may not befeasible under conventionalmethods. Technology also helps thefabricators to churn-out the new-design products in a much speedyway.

Establishing Diamond Bourses

At present, one diamond bourse,Bharat Diamond Bourse, has beenestablished in Mumbai.Nevertheless, the traders have tovisit Antwerp, Israel, Hong Kongand other locations to buy and sellrough and polished diamonds.

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Establishment of more diamondbourses would give a major fillip toIndia to emerge as an internationaldiamond trading hub, and also tomake trading in diamonds easierfor the players in India. It will beeasier to get the rough diamondsthrough these trading centres andalso for getting buyers for the cutand polished diamonds.Government of India has alreadyannounced the plan for establishingmore diamond bourses to make thecountry an international trading hubto boost the gems and jewelleryexports. These diamond boursesare expected to provide a singleplatform for traders and it wouldmake India more of a trading centre.

Increase in ExplorationActivities

India is a vast country with alandmass of 3.28 million sq.kms, ofwhich about 2.42 million sq.kmsconsist of hard rock. Out of the totalhard rock area, around 700,000sq.kms have been identified ashaving geological association, withthe surface showing possiblemineral occurrences. As per UnitedNations Framework Classification,total resources (reserves andremaining resources) of gold ore(primary) in India as on April 1,2005, were estimated at 390.28million tonnes, of which only 19.25million tonnes are placed underreserve category, and the rest371.03 million tonnes, under

resources category. Besides, it hasbeen estimated that the totalresources of gold of placer type inthe country would be around 26million tonnes. However, resourceaugmentation and gold productionhave not been significant in India.This may require increase inexploration activities withimprovements in technology andknow-how. According to a report bythe Planning Commission,Government of India, the miningsector also requires improvedmethod of narrow-vein-mining forachieving full economic benefits.Introduction of small scale miningculture in the gold industry is alsoanother requirement with adoptionof modern gold extractiontechnology. Cluster mining of smallgold deposits may also deserveconsideration and should beencouraged. The metallurgicaltechnique for extraction of platinumgroup of elements from low gradeore is also required to be sourcedfrom developed countries, in orderfor India to become a producer ofplatinum. Efforts should be madeto increase the production of roughdiamonds from India to partly meetthe requirement of Indian diamondcutting and polishing industry.Exploration activity in differentstates is required to be boosted fordiscovering new economicallyviable kimberlite / lamporite rocksfor indigenous production ofdiamonds.

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Enhancing Visibility throughContinuous Participation inInternational Exhibitions

Continuous participation ininternational trade shows andjewellery exhibitions is veryimportant for the Indian gems andjewellery industry as such strategywould help in projecting the industryas a player in entire value chain,from cutting, polishing, fabricatingof wide variety of plain and stone-studded jewellery. Participation ininternational exhibitions would alsohelp establish new business linksfor the Indian gems and jewelleryindustry, and would also pave theway for the industry to developfurther business links to enhancethe level of their innovations indesigns and technology. Thisplatform would also help inattracting and mobilizing the majorbuyers of gems and jewellery,internationally, and also provideexhibitors with learningopportunities and exposure to newmarkets and trends. The recentforeign trade policy has increasedthe personal jewellery carriage limitto US $ 5 million, from US $ 2million, and the limit in case ofpersonal carriage, as samples, forexport promotion tours, has alsobeen increased from US $ 0.1million to US $ 1 million. This wouldalso help the industry promoteexports, as it will be able toshowcase more jewellery inexhibitions abroad.

CONCLUSION

World gems and jewellery industryis on the verge of transformationdue to both supply-side anddemand-side factors. Some of therecent trends in the global gemsand jewellery industry include:fragmentation of rough diamondsupply positions; emergence of newmining areas; beneficiationmovement in mining countries, andever-growing raw material prices. Atfabrication level, fashion and styleshave been changing significantly;the ratio of cost of raw materialsto sales has been increasing,squeezing the profit margin of thefabricators.

There has been volatility in rawmaterial prices; the global slowdownled to low capacity utilization in thisindustry bringing down the marginsin the jewellery manufacturing. Insome countries, including India,some of the processing units havebeen partially shut down due toslackening demand. As a result, thevalue chain in the gems and jewelleryindustry may witness consolidation;only select major players are likelyto cope with the trends and sustainthe competitive pressures.

It is expected that the spike ingold and silver prices might changethe consumer preferences, as alsoimpact their demand pattern. Thegrowing consumer sophistication,decline in investment-driven(jewellery) demand, and competition

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from other luxury goods are alsolikely to impact the demand patternof gems and jewellery. Further, theconsumer awareness andconsciousness, generated throughthe vigilant measures adopted byvarious national Governments, areexpected to drive the demand forbranded and hallmarked jewellery.

At national level, India has beenadopting various strategies to copewith the global trends in gems andjewellery business. World GoldCouncil and the Indian gems andjewellery industry have jointlyintroduced international jewellerydesigning competitions among theIndian artisans to generateawareness about the skills of Indianartisans in the global market, as alsoto expose Indian artisans to newdesign developments emergingaround the world. There have beeninitiatives taken by many designingcenters to train Indian jewellers ininternational manufacturing anddesigning skills. This is expected toenhance demand as well as sales forthe Indian gems and jewelleryindustry.

The Gemological Institute ofIndia (GII) and the Gems andJewellery Export Promotion Council,along with other major industryassociations, have established aNational Research Centre, which willbe engaged in certification, trainingof students and new entrepreneurs,and initiate market based research.

A R&D centre has also been openedat the premises of Indian Institute ofGems and Jewellery, Jaipur, toprovide the requisite research anddevelopment support to the industry.

Indian gems and jewelleryindustry is increasingly building itsability to produce full range of sizesand qualities of stones, utilizing notonly the low-cost and abundantworkforce, but also advancedtechnologies. The industry has beenseeking further growth throughprocessing of larger size stones andmanufacture of diamond jewellery.Both the Government and the gemsand jewellery industry haverecognized the use of IT in diamondclusters in order to enable seamlessflow of information between thefunctional areas, right from jobcontractors to small / mid-sized firms,to large, integrated units. The ITinterface would also provide thenecessary platform for firms to scaleup their operations.

While several such measureshave been taken, at firm-level,industry-level, and Government-level, there exists still need tostrengthen the position of India in theglobal market place through aconcerted strategy, addressing thechallenges of raw-material sourcing,technological infusion at processingstage, adoption of dynamism indesign and product development,and sustainable market entryapproach.

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World gold demand

2007 2008 % Change Jan-Sept Jan-Sept % Change2008 2009

In tonnes

Jewellery consumption 2404.4 2185.8 -9.1 1637.6 1220.7 -25.5

Industrial & dental 461.6 435.5 -5.7 345.9 273.2 -21.0

� Electronics 310.6 292.7 -5.8 238.2 179.3 -24.7

� Other industrial 93.2 86.9 -6.8 65.5 54.6 -16.6

� Dentistry 57.8 55.9 -3.3 42.2 39.3 -6.9

Identifiable investment 685.8 1183.3 72.5 742.7 1061.0 42.9

� Net retail investment 432.5 862.4 99.4 516.5 497.8 -3.6

� Bar hoarding 236.5 391.8 65.7 268.0 117.0 -56.3

� Official coins 137 191.3 39.6 126.9 179.3 41.3

� Medals/imitation coins 72.6 69.6 -4.1 50.2 20.4 -59.4

� Other identifiable retail invt -13.6 209.7 -1641.9 71.4 181.1 153.6

� ETFs & similar products 253.3 320.9 26.7 226.2 563.2 149.0

Total identifiable demand 3551.8 3804.6 7.1 2726.2 2554.9 -6.3

US $ million

Jewellery consumption 53,696 61,073 13.7 47,063 36,616 -22.2

Industrial & dental 10,307 12,275 19.1 9,983 8,185 -18.0

� Electronics 6,938 8,270 19.2 6,877 5,380 -21.8

� Other industrial 2,078 2,437 17.3 1,888 1,631 -13.6

� Dentistry 1,291 1,568 21.5 1,218 1,174 -3.6

Identifiable investment 15,293 32,486 112.4 21,225 31,465 48.2

� Net retail investment 9,515 23,601 148 14,761 14,924 1.1

� Bar hoarding 5,176 10,832 109.3 7,667 3,577 -53.3

� Official coins 3,020 5,280 74.8 3,633 5,349 47.2

� Medals/imitation coins 1,586 1,933 21.9 1,438 617 -57.1

� Other identifiable retail invt -267 5,556 -2180.9 2,023 5,381 166.0

� ETFs & similar products 5,778 8,885 53.8 6,464 16,541 155.9

Total identifiable demand 79,296 105,834 33.5 78,271 76,266 -2.6

SOURCE: World Gold Council

ANNEXURE 1: WORLD GOLD DEMAND

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Countries 2005 2006 2007 % Change % Change % Share2006 2007vs. vs.

2005 2006

Volume (in thousand carats)

Russian Federation 38,000.99 38,360.81 38,291.20 0.9 -0.2 22.8

Botswana 31,889.77 34,293.40 33,638.00 7.5 -1.9 20.0

Congo 33,054.99 28,990.24 28,452.49 -12.3 -1.9 16.9

Australia 32,941.06 29,940.45 18,538.64 -9.1 -38.1 11.0

Canada 12,314.03 13,277.70 17,007.85 7.8 28.1 10.1

South Africa 15,559.53 14,934.70 15,210.83 -4.0 1.8 9.0

Angola 7,079.12 9,175.06 9,701.71 29.6 5.7 5.8

Namibia 1,866.32 2,402.47 2,266.09 28.7 -5.7 1.3

Guinea 548.52 473.86 1,018.72 -13.6 115.0 0.6

Zimbabwe 248.26 1,046.02 695.01 321.3 -33.6 0.4

India 60.12 10.27 0.00 -82.9 0.0 0.0

World 176,701.08 176,030.23 168,198.85 -0.4 -4.4 100.0

Value (US $ million)

Botswana 2,870.07 3,207.57 2,960.14 11.8 -7.7 24.5

Russian Federation 2,531.30 2,574.28 2,625.10 1.7 2.0 21.7

Canada 1,453.69 1,409.65 1,657.01 -3.0 17.5 13.7

South Africa 1,319.08 1,361.81 1,417.33 3.2 4.1 11.7

Angola 1,089.17 1,132.51 1,271.95 4.0 12.3 10.5

Namibia 696.70 900.97 715.43 29.3 -20.6 5.9

Congo 615.43 431.93 364.78 -29.8 -15.5 3.0

Australia 547.08 559.57 364.62 2.3 -34.8 3.0

Lesotho 64.30 167.09 328.14 159.9 96.4 2.7

Sierra Leone 141.94 125.30 141.56 -11.7 13.0 1.2

India 9.78 1.76 0.00 -82.0 0.0 0.0

World 11,605.93 12,129.03 12,106.55 4.5 -0.2 100.0

SOURCE: World Diamond Council

ANNEXURE 2: PRODUCTION OFDIAMOND IN THEWORLD AND IN INDIA

110

Exporters Importers

Countries US $ Million % Share in Countries US $ Million % Share inworld exports world imports

Gold,

(Including gold plated with platinum) unwrought or in semi-manufactured forms, or inpowder form

(7108)

USA 11792.11 19.9 Switzerland 15231.41 25.7

Australia 9395.53 15.9 UK 11627.47 19.6

Canada 5482.77 9.3 USA 4963.01 8.4

Hong Kong 4349.27 7.3 India 4430.99 7.5

Peru 4178.20 7.1 South Africa 2605.44 4.4

World 59216.05 100.0 World 59216.05 100.0

Diamonds,Whether or not worked, but not mounted or set (7102)

Israel 18416.94 19.7 USA 16514.49 17.7

Belgium 18308.22 19.6 Belgium 15126.96 16.2

India 13365.67 14.3 India 12245.43 13.1

USA 11911.36 12.8 Israel 12178.19 13.0

UK 8514.50 9.1 Hong Kong 12056.49 12.9

World 93373.85 100.0 World 93373.85 100.0

Precious stones(Other than diamonds) and semi-precious stones, whether or not worked or graded butnot strung, mounted or set; ungrated precious stones (other than diamonds) and semi-precious stones, unit(7103)

Hong Kong 523.26 17.1 USA 808.78 26.5

USA 403.02 13.2 Hong Kong 440.29 14.4

Switzerland 386.35 12.7 Switzerland 279.64 9.2

Thailand 371.29 12.2 Thailand 220.59 7.2

India 275.15 9.0 India 191.55 6.3

World 3053.59 100.0 World 3053.59 100.0

ANNEXURE 3: WORLD EXPORTS ANDIMPORTS (2007) OFSELECT PRECIOUS METALS,GEMS AND JEWELLERY

(Contd...)

111

Pearls,

Natural of cultured, whether or not worked or graded but not strung, mounted or set;ungraded pearls, natural or cultured, temporarily strung for convenience or transport

(7101)

Hong Kong 482.92 30.2 Hong Kong 531.49 33.2

Japan 296.46 18.5 Japan 292.42 18.3

China 208.37 13.0 USA 253.24 15.8

Australia 205.67 12.9 Germany 69.90 4.4

French Polynesia 106.72 6.7 Australia 63.43 4.0

World 1599.66 100.0 World 1599.66 100.0

Platinum,Unwrought or in semi-manufactured forms, or in powder form(7110)

South Africa 9823.07 32.5 USA 7358.67 24.4

UK 4056.44 13.4 Japan 5816.35 19.2

USA 3900.05 12.9 Germany 3848.76 12.7

Germany 2985.95 9.9 UK 2607.59 8.6

Switzerland 2948.75 9.8 Switzerland 2195.93 7.3

World 30215.23 100.0 World 30215.23 100.0

Silver(Including silver plated with gold or platinum), unwrought or in semi-manufactured forms,or in powder form(7106)

China 2017.17 15.9 USA 2309.13 18.2

Mexico 1418.22 11.2 Hong Kong 1992.55 15.7

Hong Kong 1103.16 8.7 UK 1215.49 9.6

Germany 1029.77 8.1 Germany 956.56 7.5

UK 872.88 6.9 India 819.73 6.4

World 12717.68 100.0 World 12717.68 100.0

Articles of jewelleryAnd parts thereof, of precious metal or of metal clad with precious metal(7113)

Italy 6044.74 14.2 USA 10086.29 23.7

India 5060.02 11.9 UAE 5829.26 13.7

USA 4470.03 10.5 Hong Kong 3872.93 9.1

Hong Kong 4201.69 9.9 Switzerland 2842.76 6.7

Switzerland 3907.66 9.2 UK 2714.45 6.4

World 42554.14 100.0 World 42554.14 100.0

Exporters Importers

Countries US $ Million % Share in Countries US $ Million % Share inworld exports world imports

(Contd...)

(Contd...)

112

Articles of natural and cultured pearls precious or semi-precious stones(7116)

USA 1486.92 76.4 Hong Kong 304.78 15.7

Hong Kong 124.33 6.4 Switzerland 289.94 14.9

China 105.55 5.4 UK 176.08 9.0

Switzerland 39.02 2.0 Netherlands Antilles 174.26 9.0

Japan 25.10 1.3 Japan 167.93 8.6

World 1945.99 100.0 World 1945.99 100.0

Imitation JewelleryOf base metal whether or not plated with precious metal(7117)

Hong Kong 1089.50 21.9 USA 974.73 19.6

China 855.00 17.2 Germany 365.01 7.3

Austria 397.87 8.0 France 364.99 7.3

France 317.04 6.4 UK 316.89 6.4

Italy 280.74 5.7 Italy 309.79 6.2

World 4967.03 100.0 World 4967.03 100.0

SOURCE: UN Comtrade

(Contd...)

Exporters Importers

Countries US $ Million % Share in Countries US $ Million % Share inworld exports world imports

113

Items Exporter % Share Importer % Share(HS Code)

GOLD

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, orin powder form

UAE 72.2 Switzerland 44.6USA 11.9 Australia 19.7

7108 UK 11.4 UAE 19.6Singapore 2.2 South Africa 10.4Hong Kong 1.4 USA 2.3

Jewellery of gold set with diamond

UAE 36.5 UAE 49.6USA 30.7 USA 25.8

71131930 Hong Kong 9.1 Hong Kong 9.4China 7.0 UK 2.8UK 5.0 Singapore 1.6

Jewellery of gold set with pearls

USA 35.9 Australia 47.2UAE 31.8 USA 30.5

71131920 Hong Kong 6.2 UAE 13.5UK 5.4 Hong Kong 4.8Singapore 2.7 UK 2.3

Jewellery of gold set with precious and semi precious stones other than diamonds

USA 44.1 UAE 35.3Hong Kong 34.4 Thailand 22.7

71131940 UK 7.9 USA 21.0Italy 3.9 Hong Kong 4.1Germany 1.5 Switzerland 1.7

ANNEXURE 4: INDIA’S MAJOR EXPORTDESTINATIONS AND IMPORTSOURCE COUNTRIES OFPRECIOUS METALS, GEMSAND JEWELLERY (2008-09)

(Contd...)

114

Jewellery of gold unset

UAE 76.7 USA 32.0USA 6.3 UAE 25.4

71131910 UK 2.7 Hong Kong 8.8Hong Kong 1.8 Japan 5.7Germany 1.2 Kuwait 3.6

DIAMONDS

Hong Kong 30.1 Hong Kong 27.6UAE 22.5 UAE 25.6

7102 USA 17.6 Belgium 24.4Belgium 11.4 UK 6.4Israel 5.0 USA 4.8

SILVER

Silver (including silver plated with gold or platinum), unwrought or in semi- manufacturedforms, or in powder form

Switzerland 29.7 UK 37.8USA 21.3 China 15.4

7106 UK 13.8 Russia 11.8Iran 11.5 Switzerland 11.6Japan 9.3 Hong Kong 3.8

Of silver, whether or not plated or clad with other precious metal:

USA 38.1 USA 35.2China 12.6 Italy 17.6

711311 UAE 10.4 UAE 12.4Hong Kong 7.1 Hong Kong 12.3UK 5.8 Thailand 6.1

PRECIOUS STONES

Precious stones (other than diamonds) and semiprecious stones, whether or not workedor graded but not strung, mounted or set

USA 30.5 Thailand 23.3Hong Kong 22.7 Hong Kong 19.1

7103 Thailand 13.9 Zambia 13.9Japan 5.8 USA 12.2Singapore 5.0 Brazil 8.8

Articles of precious or semi precious stones (natural synthetic/reconstructed)

USA 38.8 Hong Kong 27.8Germany 23.9 Sri Lanka 22.2

71162000 Switzerland 9.0 Germany 16.7Argentina 6.0 USA 11.1Canada 4.5 Thailand 11.1

Items Exporter % Share Importer % Share(HS Code)

(Contd...)

(Contd...)

115

PEARLS

USA 38.6 Japan 34.5UAE 14.1 China 31.9

7101 Austria 12.0 Hong Kong 21.1Hong Kong 10.8 Thailand 5.7Japan 7.5 USA 2.0

PLATINUM

Platinum, unwrought or in semi- manufactured form, or in powder form

UAE 49.1 UAE 78.7USA 8.2 South Africa 15.3

7110 UK 8.1 Switzerland 2.7Germany 7.9 UK 1.9Switzerland 3.0 Germany 0.8

Jewellery of platinum group metals unset

UAE 22.4 Thailand 68.7Australia 21.4 Belgium 13.3Germany 9.9 Japan 9.6UK 9.4 USA 7.2Hong Kong 3.6 UK 1.2

SOURCE: DGCIS

Items Exporter % Share Importer % Share(HS Code)

(Contd...)

116

The following nations with the exception of those indicated with an asterisk (*),meet the minimum requirements of the Kimberley Process Certification Scheme:

Members of Kimberley Process

Angola Canada Ghana Korea Republic Mexico Singapore Turkey

Armenia Central Guinea Lao, Namibia South UkraineAfrican Democratic AfricaRepublic Republic of

Australia China Guyana Lebanon New Sri Lanka UAEZealand

Bangladesh Congo, India Lesotho Norway Switzerland USADemocraticRepublic of

Belarus Cote Indonesia Liberia Republic Tanzania Venezuela*d’Ivoire** of Congo

Botswana Croatia Israel Malaysia Russian Thailand VietnamFederation

Brazil European Japan Mauritius Sierra Togo ZimbabweCommunity Leone

Note: *Venezuela has voluntarily suspended exports and imports of rough diamonds until furthernotice

** Cote d’Ivoire is currently under UN Sanctions and is not trading in rough diamonds

SOURCE: Kimberley Process

ANNEXURE 5: MEMBERS OFKIMBERLEY PROCESS

117

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