Scope of International Jewelry Sector

In India

Submitted by: - Hemali Manek

Subject: - Ex-Com Assignment

Gems & Jewelry: The Eternal Fascination

Mankind has been captivated by gems and jewelry from time immemorial. India has given the world the Kohinoor and the Hope diamond, with their associated legends and fables. Today, gems and jewelry are a global industry with mining of gold, diamonds and platinum in Africa, Russia, Canada and Australia, polishing and jewelry manufacturing in Belgium, Netherlands, Israel, India, China and Turkey and retailing all over the world.

The industry contributes over 15 per cent of our total exports and employs 1.3 million people. It is second only to Information Technology (IT) related exports and contributes 3.75 per cent to our Gross Domestic Product (GDP). Gold jewelry represents about 80 per cent of the market and the balance comprises studded diamond and gemstone jewelry. While most of the gold jewelry manufactured in India is consumed in the domestic market, a major portion of rough, uncut diamonds produced in India is processed and exported as polished diamonds and finished diamond jewelry. India is the world’s largest diamond processing (cutting and polishing) centre handling over 57 per cent of the world’s rough diamonds by value.

RAW MATERIAL BASE:GLOBAL SCENARIO

GoldThe major producer of gold in the world in the year 2008 was China with a production of 295 metric tonnes (growth rate of 7.3% over the previous year); China held a share of 18.9% of the total world production of gold during 2008, followed by South 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 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 in production of gold.

During the third quarter of 2009, the demand for gold has shown a decline in almost all the segments. This may be partially owing to global economic slowdown and increase in prices, reducing the disposable income with the consumers.

DiamondDuring 2007, Botswana was the largest diamond producing country, in terms of value, estimated at US $ 2.96 billion, recording a decline in growth of 7.7% over the year 2006. Botswana constituted a share of 25% in the world production of diamonds. Botswana was followed by Russian Federation (21.7%), Canada (13.7%), South Africa (11.7%) and Angola (10.5%), as the world’s largest producers of diamond. Lesotho (growth of 96.4%), Canada (17.5%) and Sierra Leone (13%) were countries, which showed impressive growth rates in their production of diamonds during 2007.

Russia was the largest diamond producer by volume with a production of 38.3 million (23% of world’s diamond production) carats in 2007, followed by Botswana (20%), Congo (17%), Australia (11%) and Canada (10%). In terms of growth in volume of production, Guinea

recorded 115% growth in 2007 (over 2006), followed by Canada (28%) and Angola (5.7%).

Silver, Gemstones and PlatinumMajor producers of silver in the world in the year 2008 include Peru (19%), Mexico (15.8%), China (13.7%), Chile (10.5%), and Australia (9.5%). There has been an increase in the production compared to the previous year in almost all the major countries, except USA and Australia, which witnessed a decline of (–) 11.1% and (–) 4.3%, respectively. In the case of gemstones (other than diamond), major producers of the world include: Botswana (26.5%), Russia (24.7%), Canada (19.1%), Angola (10.6%) and South Africa (6.5%). Though most of the countries haven’t shown an increase in its production in 2008, over 2007, some countries such as Sierra Leone (66.7%), Guinea (35%), Central African Republic (27%), and Angola (14.9%) have shown tremendous increase in production in the year 2008, over the previous year. Brazil (-33.3%) and Australia (-0.4%) were the few major countries, which showed a decline in production, over the previous year.

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

Gems and Jewelry Industry in India

The gems and jewelry sector has been one of the fastest-growing sectors in India in the past few years. The sector has gained global popularity because of its talented craftsmen, its superior practices in cutting and polishing fine diamonds and precious stones, and its cost-efficiencies. The sector has been vital to the Indian economy as well; during 2008-09, the sector accounted for around 13% of the country’s total exports.

The gems and jewellery sector in India is engaged in sourcing, manufacturing, and processing, which involves cutting, polishing and selling precious gemstones and metals such as diamonds, other precious stones, gold, silver and platinum.

Gold jewelry is the most preferred form of jewelry in demand in India as it is considered auspicious to purchase gold on major occasions like festivals, marriage, birth etc. Also, gold occupies the second position among all investment instruments and is considered as the safest investment option. According to the data released by the World Gold Council (WGC), India is the largest consumer of gold. In 2008, India consumed approximately 660 tonnes of gold and accounted for 22.71% of the total gold consumed all over the world, most of which was used in jewelry. Even though the gold demand remained weak, India continued to maintain its second position in the third quarter-ended 2009 as well and accounted for 20.87% of the total gold consumed all over the world.

India is also one of the largest diamond processor in the world and its artisans have specialized skills in processing small diamonds (below one carat); in fact, the Indian craftsmen have achieved excellence in cutting and polishing small diamonds. However, the real uniqueness of the Indian craftsmen lies in the fact that they do most of the cutting and polishing manually which sets India apart from its other peers. India (especially, Surat and Mumbai) ranks among the ‘big four’ diamond cutting centres of the world — the other three being, Belgium (Antwerp), the US (New York) and Israel (Ramat Gan). Currently,

diamonds processed in India account for 85% in volume, 92% in pieces and 60% in value of the total world diamond market.

The gems and jewelry sector in India is highly export-oriented, labour-intensive and a major contributor to the foreign exchange earnings; therefore, the Indian government has declared the sector as a thrust area for export promotion.

Traditionally, India has been the world's largest consumer and importer of gold. Gold dominates the Indian jewelry market and formulates almost 80 per cent of the market share, which is followed by fabricated studded jewelry including diamond and gemstone studded jewelry. Further, India has emerged as the largest cutting and polishing industry for diamonds in the world.

In fact, the two major segments of the gems and jewelry business in India are gold and diamond jewelry. India and China are driving global demand for platinum jewelry, according to Dr Jonathan Butler, an expert on the precious white metal.

Kolkata, the cultural capital of the east, witnessed its first-ever Gem & Jewelry Regional Leadership Summit at ITC Sonar Bangla. The event was jointly hosted by Gemological Institute of America (GIA) and the All India Gem & Jewelry Federation (GJF).

Industry Structure

Indian gems and jewelry sector is expected to grow at a compound annual growth rate (CAGR) of around 13 per cent during 2011-2013, as per a RNCOS report titled 'Indian Gems and Jewelry Market Forecast to 2013'.

Shipments of gems and jewelry constitute 14 per cent of India's total exports, and employ 3.4 million workers, with the Middle East taking most of the market.

GoldIndia's culture and mythology embrace gold. India's traditions of unparalleled craftsmanship and skill are exemplified by its gold jewelry manufacturing, with the majority of pieces still made meticulously by hand. Gold with its intrinsic luster and ease of fabrication has always been the jewellers' favourite metal. Gold jewelry forms the backbone of the precious jewelry industry.

Kerala-based Malabar Gold and Diamonds, the flagship division of the Malabar Group of Companies, plans to invest Rs 1,000 crore (US$ 18.77 million) to expand its retail network to 120 outlets from the current 80 inIndia and abroad by December 2013.

DiamondsDiamonds have always enjoyed a special place among precious gemstones. India has the distinction of being one of the first countries to introduce diamonds to the world. Earlier, diamond jewelry was limited to a very small elite segment of the population but now it has found way in various segments of consumers. Besides, India has emerged as one of the world's leading diamond cutting and polishing centers. eForevermark, the diamond brand from the De Beers Group of companies has partnered with Kundan Jewellers - one of the renowned jewelry house in Mumbai, known for its traditional haute couture as

their retail partner Nakshatra has unveiled Gitanjalishop.com, the latest innovative step taken by Gitanjali Group, the world's largest branded jewelry manufacturer-retailer. The new premium portal brings all brands of the Group onto a single platform

Colored GemstonesThe colored gemstones segment includes remaining forms of jewelry which includes precious gemstones like emeralds, sapphires, rubies and tanzanite; and semi-precious gemstones like silver, pearls, etc. Traditional Indian gemologists identified around 84 precious and semi-precious stones, amongst them nine stones form the 'Navratnas or the nine gems'. Gitanjali Group, the world's largest integrated branded jewelry retailer-manufacturer, has acquired two well known Indian jewelry brands, Nirvana and Viola through its subsidiary 'Spectrum Jewelry Ltd, adding to the vast spectrum of branded jewelry it offers to the Indian consumer.

The key players

The industry is dominated by family jewelers, who constitute nearly 96 per cent of the market. Organized players such as Tata, with its Tanishq brand and Gitanjali have entered the market with branded jewelry which has a four per cent market share. The Department of Revenue under the Ministry of Finance is responsible for the tax administration of this sector. The Central Board of Excise and Customs, through its field formations spread across the country, is the main executive authority for collection of revenue. The Director General of Foreign Trade under the Ministry of Commerce implements various Export promotion schemes.

The Gems and Jewelry Export Promotion Council (GJEPC) is the apex body of the industry set-up in 1966. It is primarily involved in promoting the Indian gems and jewelry products in the international market. It also acts as trade facilitator, a nodal agency for diamond certification and organizes training and research for the industry.

Major initiatives by the Government to promote the industry

This industry has been identified as a thrust sector in our Foreign Trade Policy (FTP). The Government set up an Expert Committee on Gems and Jewelry in 2006 to suggest measures for making India a global hub. The committee recommended various measures for providing a competitive edge to the Indian industry which included removal of import duty on cut and polished diamonds and reduction in the import duty on gold, gold items, machinery used in cutting and polishing industry etc.

In international trade, India’s import for the period 2005-07 was US$ 70.74 billion (equivalent to Rs. 3,18,348 crore), which was ten per cent of the world import and the export share of US$ 50.53 billion (Rs. 2,27,389 crore) was seven per cent of the world export for the same period. Bulk of exports and imports are effected through a specialised customs clearance centre called the Diamond Plaza Customs Clearance Centre (DPCC), Mumbai.

With a view to doubling our percentage share of global exports within five years, the Government, in the Foreign Trade Policy (2004-09), announced (April 2004) special initiatives for the gems and jewelry sector. Import of gold of eight carats and above were allowed under replenishment scheme; duty free import of consumables for semi-precious metals other than gold and platinum, commercial samples and re-import of rejected jewelry was allowed; and cutting and polishing of gems and jewelry was treated as manufacturing for the purpose of exemption under section 10A of the Income Tax Act. In the New Annual Supplement to FTP (2004-2009), duty free import of machinery, precious metals and gems was allowed. In the Union Budget for the year 2007-08, import duty on cut and polished diamonds was abolished, import duty on un-worked corals and rough synthetic stones was

reduced and all industrial undertakings in the gems and jewelry sector were exempted from obtaining industrial license for manufacture.

Market Size and Structure

The sector is highly-fragmented and unorganized, and is characterized by family-owned operations. Around 96% of the gems and jewelry players have family-owned businesses, but, over the last few years, more organized players have been entering the sector. The products in the sector can be categorized as gemstones, jewelry and pearls, which can be further segmented into diamonds, coloured stones (precious, semi-precious and synthetic), studded jewelry, costume jewelry, gold and silver.

However, diamond and gold are the two most important segments of the Indian gems and jewelry sector. Diamond processing in the form of cutting and polishing is a major industry in India. However, a majority of these processed diamonds are exported either in polished form or as diamond jewelry globally. On the other hand, the gold jewelry is mostly meant for domestic consumption as India is the largest consumer of gold.

The Gems & Jewelry sector occupies a prominent place in the Indian economy in terms of its export earnings, employment generation, and growth. According to the estimates of Assocham, in CY 2008, the total market size of the sector was US$ 23.44 bn, out of which exports garnered the largest share of 90.45% at US$ 21.20 bn and the domestic market accounted for 9.55% at US$ 2.24 bn. According to the Economic Survey 2006-07, India had a market share of just around 3% in the global gems and jewelry sector, which was worth around US$ 80 bn annually.

International Brand Jewelry Catalogues

Jewelry plays an essential role of beauty and wealth. Now-a-days it is considered as the commonly used accessory for the personality of the wearer. Jewelry is manifest as rings, necklaces, earrings, bangles, chains and many more. Jewelry is also appreciated because of its materials, patterns, designs. Now due to development in the technology jewelry are also made from gemstones, metals, shells, beads, pearls. Due to wide popularity of jewelry brands have been vogue. Jewelry is not only the fashionable accessory but also the ideal gifts for every woman. Jewelry is always the best gifts to present a woman. Brands have always captured the industry even in jewelry we have various brands which are well established and are very well known to customer.

A brand always brings a loyalty and trust for customer and when we talk of jewelry now it has also been a brand oriented. There are various brands associated to jewelry. As the brand their catalogs are also universal which gives your varieties to choose, deeply loved by the fashion, antique and elegance. The jewelry brands provide people a great deal of opportunities to carefully choose their favorite ones.

The 20 jewelry brands that were considered were Asprey, Blue Nile, Boucheron, Buccellati, Bulgari, Carrera y Carrera, Cartier, Chanel, Chopard, David Yurman, DeBeers, Dior, FRED, Graff, Gucci, Harry Winston, Ivanka Trump, Mikimoto, Piaget, Tiffany, Van Cleef and Arpels.

1. Bourcheron,2. Buccellati,3. Bulgari,4. Cartier,5. Chopard,

6. Graff Diamonds,7. H stern,8. Harry Winston,9. Tiffany,10.Van cleef and arpels.

Branded Jewelry to Grow 40% a Year

Industry players have pegged good hope for the branded jewelry market in India, which accounts for around less than 10 percent of the entire domestic jewelry market pie according to Credit Analysis & Research Limited (CARE). According to a report by McKinsey, the same is likely to witness a growth rate of 40% per annum to touch Rs.10,000 crore this year . The report predicts sales of non-branded jewelry products to grow at around 12%. CARE pegs the domestic jewelry market at US$ 16billion.

The branded jewelry segment offers around 50 brands today from 30 players six years ago. Many players are reporting close to 80% growth rate. With the name like Tanishq, Nakshatra, Gili, Cygnus, Sangini, Asmi, D’damas, & more, the domestic market has also seen some penetration of international luxury brands like Tiffany, Dolce Vita, Bvlgari, Chopard, Cartier, Harry Winston, Damiani, Di Modolo, Pranda Jewelry & Christian Dior are expected to wenture into Indian domestic jewelry market.