jewel final

8/7/2019 jewel final

1/26

AN ANALYSIS

OF INDIASGEMS AND JEWELLERY

SECTOR_________________________________________________________________________________________________________

A report submitted towards the partial fulfilment of therequirements of B.Com(Hons.) from Shri Ram College OfCommerce, Delhi University.

Mrs. Renu Aggarwal Dr. V.K Singhania(Head Of Department) (Project Mentor)

Submitted By : Atishay JainB.Com(Hons.) part III

Section - FRoll No. - 16


2/26

CERTIFICATE

This is to certify that the project work done on An analysis of the gems andjewellery sector by Atishay Jain in partial fulfilment for the award of B.Com(Hons.) is a bonafide work carried on by him under my supervision andguidance.

Dr. V.K. Singhania


3/26

STUDENTS DECLARATION

I hereby declare that the project prepared on An Analysis ofIndias Gemsand Jewellery Sector is my original work and the same has not beensubmitted for the award of degree/diploma/fellowship or other similar titlesor prizes. The report is made under the guidance of Dr. V.K. Singhania andis submitted in partial fulfilment of the requirement of B.Com(Hons.)

Atishay Jain


4/26

ACKNOWLEDGEMENTS

A project report might seem to be an individual effort but in fact it is a team effort. I am

indebted to all those who helped me gain an insight and understanding of the indianGems and Jewellery sector.

I wish to express my deepest gratitude to Dr. V.K Singhania, my project mentor, who

has rendered his valuable counsel and guidance throughout the making of this project.

I also wish to thank Mr Ajay Jain, my father, who is a jeweller by profession and

provided me with first hand experiences and ground reali9ties of the trade which were

very helpful in carrying out the analysis.

Atishay Jain


5/26

Project Outline

y Introduction to the Gems and Jewellery Sectory Structure

o Presence of traditional pockets of jewellery manufacture

o Industry Compositiony Market Potentialy Importance to the Economyy Exportsy Goldy Diamondy Key issues facing the playersy Growth Drivers and Opportunitiesy Government supporty SWOT Analysis ofIndian Gems & Jewellery Industryy Recommendations

o To the Industryo To the government

y Future outlook


6/26

INTRODUCTION TO THE INDIAN GEMS AND JEWELLERY INDUSTRY

The primary function of gems and jewellery (GJ) is to decorate and adorn. However,demand for different types of GJ is influenced by several factors including buyerpreferences, properties, varieties, unit values, application, etc. The GJ sector may be

further categorized into the following sub-sectors based on characteristics, processingtechniques, preciousness in terms of price range and marketability.

The two major segments of the GJ business in India are gold jewellery and diamondjewellery. While a predominant portion of gold jewellery manufactured in India is fordomestic consumption, a predominant portion of rough, uncut diamonds processed inIndia in the form of either polished diamonds or finished diamond Jewellery is exported.Preference for gold dominates the domestic jewellery demand. The domestic demandfor gold jewellery accounts for an estimated 80% of the Indian jewellery market. Thebalance comprises diamond jewellery and other fabricated jewellery.

The Indian gems and jewellery industry is competitive in the world market due to its lowcost of production and availability of skilled labor.

India is the largest consumer of gold in the world.

India is also estimated to hold nearly 14,000 tonnes of gold, accounting for 9% of theworld's cumulative mine production of around 153,000 tonnes. India is typically also thelargest purchaser of coins and bars for investment.


7/26

Traditionally the focus of the gems and jewellery manufacturers has been on the largeglobal markets. Indeed for years, these international markets have given large andgrowing business to the Indian exporters and have contributed in creation of significantjobs in the country. The Indian players, duly supported by the Government ofIndia are

placed highly competitively in the market.In the last few years, on the other hand, theIndian domestic market has shown very promising signs.

STRUCTURE

The market is fragmented across the value chain with a large number of domesticprivate companies. There are more than 300,000 Gems & Jewellery players across the

country, with majority being small players. Modern retail players have only 4%-6%share, which is perhaps one of the lowest when compared to Apparel (20%), Footwear(35%), Books and Music (11%) and CDIT (7%).

The Industry comprises of:


8/26


9/26

Presence of traditional pockets of jewellery manufacture


10/26

Jewellery crafting by traditional goldsmiths is confined to a few regions in India. Thesepockets are widely separated and involve craftsmen whose skills have been handed

downover generations.The centre ofIndia's GJ industry is Mumbai. Most imports of gold and rough diamondarrives in Mumbai. However, most of the processing of diamonds takes place in theneighboring state of Gujarat, mostly in Surat,Bhavnagar,Ahmedabad,Bhuj, andNavasari. Gujarat accounts for an estimated 80% of the diamonds processedin India. Of this, 90% are processed by around 10,000 diamond units located in andaround Surat alone. Mumbai itself has an increasing number of modern semi-automatic

factories and laser-cutting units. Indian diamond merchants have good internationalreach having offices in Antwerp, New York, Los Angeles, etc. There are also diamondprocessing units in Trichur in Kerala, Coimbatore in Tamil Nadu, Jaipur in Rajasthan,and Goa. Mumbai continues to be the main diamond trading center of India accountingfor the dispatch of 93% of diamond exports

Market Potential


11/26

Gems & Jewellery exports are the back-bone of the sector and also of our overallexports slowdown had hit the sector badly and in 2008 some months showed negative

growth. However the sector is expected to grow at a CAGR of 15% to reach a size ofUS $ 58 billion by 2015 from the current US $ 25 billion. The government has takensignificant steps for the Gems & Jewellery exports in terms of duties and taxes,

infrastructure (SEZ, EPZs etc) and policy (EXIM Policy for 2002-07) but this is not thetime to get complacent for the government or the industry as the recent global economiccrisis has shown. We need to keep working at making the sector more resilient and

competitive especially in the wake of rising competition from countries such as China.The domestic market of gems and jewellery is estimated to be in the US $ 18-20 billion

range and is expected to grow by about 13% per annum to reach US $ 35-40 billion by2015. Given the fragmented nature of the business it is very difficult to estimate the

exact range. With per capita consumption almost 1/10th that of any matured marketIndia presents a very large potential market. More importantly there is a significantopportunity to create additional value through higher margins possible through

differentiation and branding.

The industry has also lagged behind relatively to attract the capital; professionals andprocess/technology know-how to scale up the operations and take the industry into a

different orbit. Traditional jewellery retail is essentially characterized by commoditizedselling with price being the selling point in most cases. As 94-96% % of the retail is

unorganized it is a great challenge to address the collective problems of a fragmentedindustry with a very traditional and sometimes change resistant mindset. The good partis that India is now beginning to move towards branded jewellery and the consumershave accepted the modern retail formats. However I strongly believe that the traditionalplayers would coexist with the modern players - this is in fact the trend in international

markets where the independents still hold significant share of the market.

Importance to Economy


12/26

The GJ industry has an important role in the Indian economy. While a predominantportion of gold jewellery manufactured in India is for domestic consumption, apredominant portion of rough, uncut diamonds processed in the form of either polisheddiamonds or finished diamond jewellery is exported. India is the largest consumer of

gold in the world. India is also estimated to hold nearly 14,000 tonnes of gold,accounting for nearly 9% of the world's cumulative mine production. Apart from itshistorical religious significance, gold is valued as an important savings and investmentvehicle. The GJ industry also contributes around 15% ofIndia's exports.

The bulk of the Indian GJ exports comprises import of rough diamonds, cutting andpolishing in India, and reexport. As per data released by the Gems & Jewellery ExportPromotion Council (GJEPC), cut & polished diamonds (CPDs) accounted for 71.1% ofIndia's GJ exports, followed by gold jewellery (23.2%), rough diamonds (3.4%), andothers (2.3%).Thus, two items-CPDs and gold jewellery-account for around 95% ofIndia's GJ exports. The Indian GJ industry is also a major earner of foreign exchange

With negligible production of gold and diamonds, the Indian GJ industry is almostentirely dependent on imported raw materials. Imports of pearls, precious & semi-precious stones account for 11.2% ofIndia's non-bulk imports, and 6.4% of totalimports.

India is the largest diamond cutting & polishing centre in the world, followed by Israel.The bulk of the GJ industry in India is concentrated in the unorganized sector andemploys an estimated 2 million workers serving over 0.45 million goldsmiths, andaround 0.1 million diamond processing units. The majority of India's diamond workforceis employed by small units, that process diamonds on a job-lot basis. The number of

gold jewellery manufacturing units is put at 0.1 million. Also, a large number of skilledgoldsmiths/gold merchants from India are engaged in gold trade and industry in almostall the oil-rich Middle Eastern countries.

Exports

During April 2009-January 2010, the total exports for gems and jewellerystood at US$ 22.54 billion as compared to US$ 20.98 billion during April2008-January 2009. During the same period, the sector registered a growth

of 7.42 per cent over the previous year.

Composition of Exports

Composition of exports:


13/26

y Gold Jewellery Exports

y Cut and Polished Diamonds:

y Coloured Gemstones

Net Exports of Gems and Jewellery

ITEMS April'09 -January'10

(Provisional)

April'08-January'09

(Same ports as currentyear)

% Growth / decline overprevious Year

Rs. InCrores

US $ inMillion

Rs. InCrores

US $ inMillion

Rs. US $

Cut & PolDiamonds*

65693.04 13789.99 55453.91 12458.65 18.46 10.69

(Quantityin LakhCarats)

460.19 384.16 19.79

GoldJewellery-D.T.A

7958.04 1668.83 7919.18 1812.35 0.49 -7.92

SEZ / EPZ 28512.77 5977.65 25623.59 5596.84 11.28 6.80

Total 36470.81 7646.48 33542.77 7409.19 8.73 3.20

ColouredGemstones

1159.82 243.31 1012.16 225.18 14.59 8.05

Others 1305.19 274.81 972.28 215.66 34.24 27.43

NetExports

104628.86 21954.59 90981.12 20308.68 15.00 8.10

Exports ofRoughDiamonds

2789.66 584.21 2998.12 673.17 -6.95 -13.22

(Quantity

in LakhCarats)

182.99 269.99 -32.22

TotalExports

107418.52 22538.80 93979.24 20981.85 14.30 7.42

Gold


14/26

Gold usually only occurs in a metallic state. It is commonly associated with sulphideminerals such as pyrite,but it does not form a separate sulphide mineral. Gold jewelleryis usually manufactured using casting and moulding techniques. Gold is found in avariety of environments globally, but generally requires grades in excess of 1gram/tonne (1 part per million) to be considered economic. Economic gold can be found

in primary ore deposits as fine disseminations throughout the host rock or asconcentrations caused by favourable chemical and structural environments. Weatheringof these primary ores can produce secondary gold concentrations, often as alluvial goldoccurrences (often called `placer' gold).Economic gold extraction can be achieved fromore grades as little as 0.5 gms/tonne (referred to as 0.5 parts per million or ppm) onaverage in large easily mined deposits. Grades vary enormously with ore bodies.Typical ore grades in open-pit mines are 1-5 gms/tonne; ore grades in underground orhard rock mines are usually at least 3 gms/tonne. At a grade of 10 grams/tonne,therefore, it takes more than 3 tonnes of ore to produce one ounce (oz.)or 31.1 gms. of gold. Many of the world's operations are open pits, which tend to be oflower grade than the underground mines, running from 1 to 3 or 4 grams per tonne. The

world's deepest gold mine is currently the Savuka mine on the North-West rim of theWitwatersrand Basin in South Africa. Some of Savuka's miners are working at a depthof almost 4 kms, mining an ore grade which contains almost 20 cubic centimetres ofgold in every cubic metre of rock, or 20 ppm. Production costs for gold mining varywidely, according to the nature of the mine (open pit or underground), depth of the mine,the nature and distribution of the ore-body and the grade.

Domestic Gold JewelleryFrom historic times, gold has played a pivotal role in the Indian social fabric. Even inpresent times, gold remains the Indian bride's `Streedhan', the wealth she takes withher when she marries and which remains hers. Gold jewellery is the preferred jewelleryworn by women in India irrespective of their religious beliefs. In marriages, goldjewellery is the gift preferred by the near relatives of the bride and the groom. Goldjewellery is very popular among farmers, with an upsurge in gold sales after a goodagricultural season. Buying of gold is an important part of every stage of an Indiancitizen's life-at birth, marriage, construction of home, festivals, religious ceremonies,setting up of new business, and death. Apart from its religious and social significance,gold is valued as an important savings and investment vehicle in India, and is thesecond preferred investment behind bank deposits.Apart from its historical religious significance, gold circulates within the system androughly 30% of gold jewellery fabrication is from recycled pieces. In India (also in theMiddle East and South East Asia), jewellery is traditionally 22 carat. The most widelyused alloys for jewellery in Europe are 18 and 14 carat. While 14 carat gold jewellerydominates in the US, 9 carat is popular in Britain. In China, Hong Kong and some otherparts of Asia, `chukkam' or pure gold jewellery of 990 fineness (almost 24 carat) ispopular.

Diamonds


15/26

Diamond is carbon in its most concentrated form. Except for trace impurities like boronand nitrogen, diamond is composed solely of carbon, the chemical element that isfundamental to all life. Diamond is the hardest substance known. Hardness is themeasure of a substance's resistance to being scratched, and only a diamondcan scratch another diamond. Diamonds are crystals made up entirely of carbon atoms

that are arranged in an isometric, or cubic, matrix. However, most diamond crystalsencounter varying heat or pressure, other elements, or even other diamondcrystals during their growth, and this can alter their form somewhat. The resulting formand characteristics of the crystal, once it emerges from the earth, help to determinewhat shape, color and clarity the polished gemwill have. The first known source ofdiamonds was India, but presently Australia, Botswana, Congo, Russia, Canada, andSouth Africa produce as much as 90-95% of the world's annual production diamonds.Diamonds are not easy to mine. Kimberlite, a plutonic igneous rock, ascends from adepth of at least 100 kilometers to form a diatreme (narrow cone-shaped rock body or"pipe"). Moreover, because much diamond is not of gem quality, the average stone inan engagement ring is the product of the removal and processing of 200 to 400

million times its volume of rock. Most diamond-bearing ore bodies have a diamondcontent that ranges from less than 1 carat per ton to about 6 carats per ton.

The major gem diamond reserves are in southern Africa, Australia, Canada, andRussia. The average grade of the richest diamond kimberlite pipes inAfrica is about 1 part diamond in 40 million parts ore. Production costs for kimberlitesand lamproites can be as low as US$15 per tonne for large and easy-to-accessdiamond mines operating in good climatic conditions and are up to about US$40-45 pertonne for small mines located in remote areas and operating under harsh climaticconditions. A newly mined rough diamond looks somewhat like a piece of glass washedup on the beach than like the polished gems sold in jewelry stores. Bringing out theirbeauty requires the skill and art of a trained diamond cutter. While incredibly precise,computerized machinery is now used in some parts of the cutting process forsome diamonds, most of the work is still performed by hand using exacting andmeticulous techniques. Four characteristics, known informally as the four Cs, are nowcommonly used as the basic descriptors of diamonds: these are carat, clarity, color, andcut. Most gem diamonds are traded on the wholesale market based on single values foreach of the four Cs. Other characteristics not described by the four Cs caninfluence the value or appearance of a gem diamond. These include physicalcharacteristics such as the presence of fluorescence, data on a diamond's historyincluding its source, and which gemological institute performed evaluation services onthe diamond. The carat weight measures the mass of a diamond. One carat is definedas exactly 200 milligrams (about 0.007ounce). The point unit-equal to one 0.01 carat or2mg-is commonly used for diamonds of less than one carat. Individually, roughdiamonds can range in size from micro-sized to stones weighing in excess of 1000carat. A significant measure of a mine's production is the average size of its roughdiamonds. Depending on the mine, the average size of rough diamonds recovered canvary from 0.01 carat (about 1 mm. in size) to more than 0.7 carat. Many mines in theworld average about 0.4-0.5 carat per stone.


16/26

KEY ISSUES FACING THE PLAYERS

Large Presence of Unorganized SectorThe bulk of the GJ industry in India is concentrated in the unorganized sector andemploys around 2 million workers serving over 0.1 million gold jewellers and over 8,000

diamond jewellers. The majority ofIndia's diamond workforce is employed by smallunits, that process diamonds on a job-lot basis. At the low-end, familyunits process diamonds/make jewellery. However, the share of the unorganized sectorin the Indian GJ business is declining. For example, according to a surveycommissioned by GJEPC, the share of the organized sector in diamond processingincreased from 9% in 1995 to 45% in 1998. This was because of the shift in processingtowards higher stones, implementation of advanced cutting techniques, and preferenceof buyers towards fewer sellers.

Limited Potential for Greater Value Addition in Gold Jewellery

In India, jewellery consumption is primarily of gold. The bulk of the Indian jewellerybuying is still rooted in tradition, and jewellery is sold in traditional designs. Goldjewellery is fabricated mainly in 22-carat gold and, lower caratage is not favoured as theIndian mindset does not accept low purity gold jewellery.Gold jewellery is primarily bought as an investment in gold as a store of value, andbuyers do not prefer to invest in a low purity product. Designer jewellery is generally notvery popular and may not pick up significantly, because the investment is made for thegold content in the jewellery. The bargaining power of the buyer is typically limited to thefabrication charges. Confidence has been the anchor of the gold jewellery trade in India.A jeweller or goldsmith of reasonable standing in a local area has a fixed and loyalclientele. The buyer has implicit faith in his jeweller, and may not negotiate too much.Standardisation of jewellery designs across the country is not feasible due to thepredominance of local tastes. In the present system of selling gold jewellery, the puritymay or may not be as marked, and the buyer can lose. The original labour component isalso a loss when gold is sold in the market. Cheating on caratage (and purity) iswidespread. Thus, in 2000, the GoI introduced voluntary hallmarking ofgold jewellery through the Bureau ofIndian Standards (BIS). The system of hallmarkingis expected to increase the buyer's confidence in the jewellery's purity. However, theprogress on hallmarking has been slow. Presently, the BIS grants hallmarks forjewellers from one of its 34 facilities, but only as demanded as this is voluntary. B IS alsoexpects to expand its facilities to cater more for gold jewellers in rural areas and smalltowns as populations from these make up 70% of the gold demand in the wholecountry. It is estimated that just one such assaying centre could cost US$12 million.Recently, the GoI has announced that hallmarking of gold will be mandatory fromJanuary 1, 2008. This is expected to eliminate cheating on caratage (and purity), whichis widespread in India. To ensure that all jewellers comply, the BIS will charge Rs.10,000 for a three-year licence if the jeweller is from outside a metro or districtheadquarters. Jewellers within district regions will be charged Rs. 20,000 for a three-year period, while those in metros will be charged Rs. 25,000.

Possible Long-term threat from China


17/26

Although India currently enjoys dominance in the world's cut and polished diamondsmarket, China may emerge as a viable rival, if not in the near term, certainly in thelonger term. An increasing number of diamond processors from Israel and Belgium, andeven India, are setting up facilities in China, for a variety of reasons: (a) the labourforce, like in India, is cheap and disciplined; (b) high economic growth over the past

decade has resulted in a significant increase in potential consumers in the high-incomesegment within the country; by comparison, India has to rely almost solely on exports;(c) quality of Chinese workmanship is steadily improving. However, India still has anoverwhelming advantage over China. China processes an estimated 3 million carats ofdiamonds annually, as compared with 180-200 million carats in India. China has about0.03 million people working in the industry, compared to India's well over a million.However, China has rapidly become the world's second largest diamond manufacturingcentre, when measured in manpower terms. Technology is another area where theIndian industry faces a long-term threat from China. Until now, a combination of manualskill and semi-automatic machines have helped the Indian industry to maintain aleadership position. However, China with its modern and automatic factories is today in

a similar position to manufacture jewellery at competitive prices.I

ncreased competitionwill force the Indian industry to focus on higher-end products, with the concommitantrequirement of increased investment in modern technology.

Threat from Polishing in Producing NationsOver the last few years, there has been increased political pressure by major diamondproducing countries in Africa-Botswana, Angola, Namibia and South Africa-to gainfurther economic benefits from diamond production through jobs creation in a domesticcutting and polishing industry. Most of these countries have no history of diamondpolishing but the skills can be taught as has been seen by the recent rapid growth ofjobs in other non-traditional centres such as the Far East and Armenia. The pressuretowards polishing in the producing countries is growing and increasingly it is a part ofthe overall agreement permitting mining, or of not imposing high taxes. As a result, DeBeers has recently announced restructuring of their sorting and sales operations tosupport the CPD industry in South Africa, Botswana and Namibia. The Indian diamondindustry has thrived because for economic reasons, most smaller stones cannot beprofitably cut in higher cost locations. However, with larger (and higher-value) stones,the cost disadvantage is not a significantly material component of the finished value ofthe stone, and higher cost polishing can be economically feasible.

Upgradation /ModernizationThe industry needs to modernize itself. It is highly fragmented with minimal benefits ofeconomies of scale, latest production techniques or design centers. All of them are

critical for the industry to move towards the high end of the value chain. The Indianindustry can perhaps learn significantly from Turkey where the industralization of thejewlery segment has transformed it into the one representing the modern flexibleproduction techniques, supreme craftsmenship, excellent quality and immense variety.


18/26


19/26

Growth Drivers and Opportunities

Availability of factor conditions

Availability of skilled manpower is a key strength that has enabled growth in Indias gem

and jewellery sector. India has a large pool of skilled artisans with vast traditionalknowledge and expertise in jewellery making. It also has the largest resource pool indiamond cutting and processing. India has also a good blend of technically traineddesigners.Growing Spending PowerMany socio-economic factors influence the high demand for gems and jewellery inIndia. The main driver of demand in India is still the investment factor gold and goldjewellery is regarded as investment, as they can be easily converted to cash eitherthrough sale or for guarantying loans.Despite recent slowdown, the move from aPyramid to a Diamond shaped structure of the Indian consumer segments is well andtruly underway. Indias affluent & rich will number more than the adult populations ofmany large countries. The new Indian consumers demand greater transparency, betterservice and a more compelling value proposition driven by brand and fashion. At thesame time they are also willing to pay justified premium for the right proposition anddesign. The key here would be to position jewelleryas a lifestyle product.

Organized Players Acting as CatalystWe anticipate that large investments of about US $ 1 billion in the coming years wouldbe made by large retailers/brands which would catalyze the growth of the industry, sethigher standards and create value across the value chain. As is evident from the Exhibit2 below, that retailing of gems and jewellery could be financially very lucrative. Theleading brands pulling the organized market have now reached a critical mass and are

looking for more opportunities to grow. Their network being already large in top tiercities and state capitals, their strategy is to concentrate on their existing base andextend to other categories, as much as opening new stores in tier 2 and tier 3. Tanishq,for example is planning to triple its turnover in the next five years timeframe. RelianceJewels has announced plans to add 85 more stores to its existing 15 in the next 3years.Another heartening fact is that in the past leading brands have been able to growthe market through wider range, new designs and through innovative marketingconcepts. Newer ways of segmentation and usage has attracted new set of consumersand created new occasions. It is thus very important to gain the momentum in thisdirection.

Real Estate and Other Costs Under Manageable LimitsThe last year slowdown has pushed the real estate prices southwards with substantialdrop in the rental values with far better terms. This is a good sign for the jewelleryretailers looking for expansion opportunities. Similarly the other costs such asmanpower have shown stability, which would favorably impact the industry.


20/26

Export Facilitation Measures by the Ministry of Commerce & Industry during theYear 2009

y MSTC Limited and STCL Limited have now been added under the list ofnominated agencies notified under para 4 A.4 of Foreign Trade Policy for the

purpose of import of precious metals.

y Surat in Gujarat, which is home to thousands of diamond units with lakhs ofdiamond workers, has been recognized as "Town of Export Excellence".

y The authorized persons of gems and jewellery units in Export Oriented Unitsshall be allowed personal carriage of gold in primary form up to 10 kg in afinancial year subject to Reserve Bank ofIndia and customs guidelines.

Foreign Trade Policy (2009-2014) Initiatives

Shri Anand Sharma, Honble Union Minister of Commerce and Industry haveannounced the following measures for gems and jewellery sector in the new ForeignTrade Policy (2009 14)on 27th August, 2009:

1. Import of gold of 8k and above is allowed under replenishment scheme subject toimport being accompanied by an Assay Certificate specifying purity, weight andalloy content.

2. Duty Free Import Entitlement [based on Free On Board (FOB) value of exportsduring previous financial year] of consumables and tools, for:

Jewellery made out of:

a) Precious metals (other than gold & platinum) - 2%b) Gold and platinum - 1%c) Rhodium finished silver - 3%

d) Cut and polished diamonds - 1%

3. Import of diamonds on consignment basis for certification/ grading & re- exportby the authorized offices/agencies of Gemological Institute of America (GIA) inIndia or other approved agencies will be permitted.

4. Personal carriage of gems & jewellery products in case of holding/participating in

overseas exhibitions increased to US$ 5 million and to US$ 1 million in case ofexport promotion tours.

5. Extension in number of days for re-import of unsold items in case of participationin an exhibition in USA increased to 90 days.

6. In an endeavour to make India an international trading hub for diamond, it isplanned to establish "Diamond Bourse (s)".


21/26

SWOT Analysis of Indian Gems & Jewellery Industry

Strengths

y About one million craftsmen are associated with this industry. Their skills can be utilized fordesigning and making modern Jewellery.

y Availability of abundance of cheap and skilled labor in India.y Presence of excellent marketing network spread across the world.y Supportive government industrial/ EXIM policy.

Weaknesses

y Small firms lacking technological/ export information expertise.y Low productivity compared to labor in china, Thailand and Sri Lanka.y As the major raw material requirements need to be imported, companies normally stock huge

quantities of inventory resulting high inventory carrying costs.

Opportunities

y New markets in Europe & Latin Americay Growing demand in South Asian & Far East countries.y Rupee value depreciating resulting in a windfall increase in the profitability.y Industry moving from a phase of consolidation

Threats

y China, Sri Lanka and Thailand's entry in small diamond segmenty Infrastructure bottlenecks, absence of latest technologyy Unusual increase in the prices of gold and rough diamond


22/26

Recommendations to Stakeholders

To the Industry

1. Potential Assessment and Strengthening Consumer Understanding

The domestic market holds a significant opportunity and its potential needs to be fullyexplored. The consumers have evolved rapidly and the traditional ways of segmentation& usage have failed to provide any meaningful results to the brands and retailers. Thereis dire need for the industry to first understand the various segments of the consumersand their purchasing and shopping needs. The proposition, design and brands can becreated around these needs.

2. Invest in Retailing and BrandsThe organized retail and brands can provide impetus to the sector. Appropriateinvestments can potentially put the category on a higher priority in the consumer basketand can generate the higher margins. An overall investment of US $ 2 billion is required

by for branded jewellery to achieve 15% share of the market. A possible solution here isto create highly active Industry Co-ordination Cells by the industry promotion bodies.This could bring together the outside investors and industry stars to create high-potential, low-risk joint-ventures and partnerships.

3. Improve Skill Sets & Quality of PeopleThe Gems & Jewellery industry needs to systematically and collectively invest inupgradation of the skill sets of its workforce through increased training and manpowerdevelopment programs. A joint effort by the Industry to invest in the development ofvocational training institutes could be a way forward with Industry captains showing theway forward by leading efforts to underwrite recruitment of graduates and participate in

syllabus design & development. There is also a need to present the case andopportunities that the industry offers to the corporate talent management students

4. Enhance Product Design & Manufacturing Quality StandardsA National Institute of Jewellery Design & Development would go a long way inproviding the platform for development of a pipeline of innovative high quality designersthat can serve the industry as a whole. The Institute can play a role similar to NIFT which ultimately proved to be a fertile ground that gave birth to a number of marqueedesign brands in the country in Apparel and improved product design andmanufacturing quality. Indian Institute of Gems & Jewelry (IIGJ) is a step in the rightdirection but the scale and reach needs to be even greater to meet the huge demand. If

Industry captains come together to invest in setting up the institute or expandingexisting ones, efforts can be made to lobby to obtain Government support and createnational centres of excellence like NIFT with multiple campuses and courses.

5. Promote Adoption ofIndustry Wide Standards for Gaining Consumer TrustEnhancement of product quality standards and incentives for increasing adoption of thestandards will go a long way in enhancement of consumer trust and enable the industryto gain share of wallet of the consumer in the long run. Eventually it will also help in the


23/26

spread of e-selling in India which in recent years has been the most excitingdevelopment in western markets.

6. Co-operative Use of ResourcesTo bring down cost of operation and investments in the sector, industry players should

adopt co-operative use of technology and marketing. Even retail space can be hired byco-operatives when foraying into international markets.

To the Government

Government and Apex bodies could act as facilitators in broadening the outlook of theexporters /players and help them in familiarizing with the changing scenario both in thedomestic and international fronts, where moving up the value chain and adoption ofmodern practices has become compelling imperatives.1. Provide Industry Status to Gems & Jewellery Sector

Special cell to look into specific needs ofIndustry- At ~US $15 bn, the domestic Gems &Jewellery industry deserves the same attention and interest as a number of other

industries such as Textiles & Steel. As a first step, the domestic Gems & JewelleryRetail sector could benefit tremendously from Industry status.

2. Creating Technology Upgradation FundFor facilitating the modernization of the manufacturing and design facilities. These fundshave been successfully created and implemented in other labor intensive industries likeTextiles.

3. Creation of Design Centers /Studios, Holding Fairs

The importance of design has been highlighted by us in this report. This can helpsignificantly in moving the industry from commoditized selling to design based selling.Perhaps this can be taken up by Ministry of Education.

4. Asset (Gold) Based LeverageBanks as a practice do not mortgage jewellery from individuals as collateral for lendingalthough some companies in the private sector do so. If banks also start lending byusing jewellery as a collateral after keeping a safe margin on the price of the material,then precious metal jewellery and precious stone jewellery will become more attractivefor their investment value. Perhaps RBI can think and act on this suggestion which canpotentially unlock significant value

5. Regulatory Laws & TaxationThere are some regulations which are restricting the growth of the industry such assearch & seizure laws. Perhaps there is case of rationalizing /removing these restrictivelaws. At the same time there is dire need to standardization in the industry, which canrestore the credibility of the industry. In terms of taxation there should be a continuationand further enhancements of tax benefits. Notably Deduction under section 10A / 10B /10AA ofIncome tax Act should be modified to have a longer period of benefit both for


24/26

future as well as retrospective effects. Removal of Octroi from Mumbai will also go along way in supporting the large presence of the sector in that city.

6. Modernize Labor LawsThis will enable Indian manufacturers to improve efficiencies, serve Indian consumers

better and also grow exports fromIndia by allowing manufacturers to adopt moreflexible labor practices.

7. Increase the Setting up of Export Focused SEZsThis would help to meet and the growing needs of exporters and create theinfrastructure for even faster export growth. The policy could also help to promote thespread of industry across India from besides the current pockets in western & southernIndia.

8. Gold ExchangeA physical or internet based exchange to trade precious metals could involve the

promote theI

ndian population to rediscover their age old investment preference for theprecious metals which have time and again proved to be safe instrument with goodreturns.


25/26

FUTURE OUTLOOK

Future growth in gold jewellery business is likely to driven by increased exports to USand other markets, and domestic consumption. Historically, Indian gold jewellerydesigns have not found much favour in global markets because of their local and

chunky designs. India has not adapted its designs to meet the occidental tastes. Thus,the Indian industry and WGC has introduced international jewellery designingcompetitions among the Indian artisans to create greater awareness about Indianartisans in the global market and also to expose Indian artisans to global designdevelopments. There has also been an initiative by Gems and Jewellery ExportPromotion Council (GJEPC) and the WGC to set up a number of design centres,targeted at training Indian jewellers in international manufacturing and designing skills.Such initiatives are likely to enhance the prospects ofIndian gold and GJ jewelleryexports business.

The Indian diamond cutting and polishing industry has thrived because of increased

exports. At present, India is the world's leading diamond cutting and polishing centre.The sharp increase in the exports of GJ during recent years is primarily attributable topick-up in demand in major markets like the US, Belgium, Israel, and Hong Kong. TheIndian GJ industry has been built on polishing lower size and quality stones. Lookingforward, since India already enjoys domination in the world cut and polished diamondmarket in general, and for smaller-sized diamonds in particular, the scope for significantincrease in market share and growth in the traditional small size diamond exports islimited. Industry leaders are now seeking further growth through processing of largersize stones, and manufacture of diamond jewellery. Indian industry can nowincreasingly process the full range of sizes and qualities of stones utilising not only acheap and abundant workforce, but also advanced technologies. Future growth is likely

to be largely driven by the cutting and polishing of medium and large stones

Bulk buyers from the US and the European Union are increasingly buying Indiandiamond studded jewellery, because of its affordability. Significant domestic and exportopportunities forIndian industry could also arise because of a major promotionalprogramme launched by DTC for leading Indian diamond and Jewellerymanufacturers and exporters to boost the marketing of their products in India andabroad. Under this programme, which is known as supplier of choice, the DTC takesmarketing initiative, targeted at creating incremental demand for diamonds and jewellerythrough direct partnerships with sight holders and retailers.

The long-term outlook for theIndian diamond and jewellery industry continues to bepositive. India's competitive advantage is likely to centre on its skilled labour combined

with a ready adoption of leading-edge technology and an increasing degree of verticalintegration. The industry can be put on accelerated growth path provided the industry,the government and other stakeholders plan and act wisely. In the process the industryshall continue to generate large amounts of foreign exchange and employment to theIndian socioeconomic fabric.


26/26

jewel final

Documents