India’s Gems & Jewellery exports: Navigating through troubled waters

India’s gems and jewellery exports have experienced remarkable growth over the years, becoming a key driver of the Indian economy and establishing the country as a prominent player in the international market. However, recent figures for the first quarter paint a concerning picture.

Several factors, such as the ongoing socio-economic crisis in the US and China, have contributed to this downturn, posing significant challenges for the industry. In this context, it becomes crucial to explore the underlying reasons behind the decline and identify potential strategies to revitalize India’s gems and jewellery exports.

Gems and Jewellery exports

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The Gems and Jewellery industry plays a pivotal role in India’s thriving economy. It contributes over 7% of the country’s total GDP and 15.71% of India’s total merchandise exports, accounting for the third-largest commodity share. It brings a huge amount of foreign exchange and offers employment opportunities to over 4.46 million workers in both organised and unorganised sectors.

India is a major contributer to the exports of cut & polished diamonds, lab-grown synthetic diamonds, coloured gemstones, and synthetic stones, plain and studded gold jewellery, silver and platinum jewellery as well as articles of gold and silver. When it comes to states, Gujarat, having more than 450 organized jewellery manufacturers, importers and exporters, contributed nearly 77% of the total exports in 2021-22.

But, the latest figures depict a steep fall in India’s gems and jewellery exports in the second quarter of 2023. IBT looks at the data and factors that are leading to a decline in value.

According to Gems and Jewellery Export Promotion Council (GJEPC), India has witnessed a YoY decline by 28.08% in overall gross exports of gems and jewellery to reach US$ 7.22 billion (Rs 60,222.10 crores) during April to June 2023. The overall gross exports of Cut and Polished diamonds stood at US$ 4,426.02 million from April to June 2023, recording a YoY decline by 29.37%.

Similarly, other articles including Rough diamonds (-12.58%), Polished Lab-Grown Diamonds (-29.78%), Gold Jewellery (-14.86%), Plain Gold Jewellery (-2.87%), Studded Gold Jewellery (-23.47%), and Silver Jewellery (-74.80%) recorded a significant drop in exports.

India exports gems and jewellery majorly to the USA, China, Hong Kong, UAE, Belgium, Israel, Thailand, Singapore, UK etc. The US is the largest importer of Indian Gems & Jewellery accounting for a share of 33.2% in FY23, with exports of US$ 12.45 billion (decline by 14.8% YoY). A number of top destinations including Hong Kong (-6.4%); Israel (-13.8%); Thailand (-8.4%) and UK (-11.1%) witnessed decline in the previous financial year.

However, Switzerland (+69.92%); Netherlands (+176.7%); Singapore (+63.6%) and Belgium (+25.6%) have seen strong growth in demand last year.

Factors leading to decline in demand

The Ministry of Commerce and Industry has given a target of US$ 42 billion for gems and jewellery exports in 2023-24, but the recent figures have created a concerning situation. Factors leading to the decline include:

  1. Demand has been impacted in the US due to inflation, while China’s economy faces continued challenges since the onset of the Covid-19 pandemic. These circumstances are significant for India, as both the US and China are major importers of Indian-made gems and jewellery.
  2. Lab-grown diamonds hold 55% share of India’s gems and jewellery. However, there is skepticism among European countries and the US about purchasing diamonds made in India due to socio-economic concerns, as India mostly imports rough diamonds from war-stricken Russia.
  3. The rising popularity of Lab-Grown Diamonds (LGDs), which are more affordable compared to naturally mined diamonds, has resulted in several countries choosing LGDs over traditional diamonds. As a result, there has been a decline in the value of diamond exports.

Sharing insights with IBT on the current downfall in exports, Vipul Shah, Chairman – GJEPC said:

“Exports from India have experienced a decline due to various economic challenges in key markets. The US and China, being major importers of India-made gems and jewelry, have been impacted by factors like inflation in the US, the Russia-Ukraine war, and an extended lockdown in China lasting almost six months. These circumstances have contributed to the decrease in India’s export levels.”

Gems and Jewellery Exports (April – June 2023 )

Commodity Apr-June 2023 (in US$ Million) YoY % growth
Cut & Polished Diamonds 4,426.02 -29.37
Polished LGDs 333.81 -29.78
Coloured Gemstones 120.90 21.58
Polished Synthetic Stones 0.97 -48.76
Pearls – Worked 1.25 129.94
Plain Gold Jewellery 896.65 -2.87
Studded Gold Jewellery 983.27 -23.47
TOTAL GOLD JEWELLERY 1,879.92 -14.86
Silver Jewellery 204.76 -74.80
Platinum Jewellery 28.81 255.93
Imitation Jewellery 13.64 6.84
Articles of Gold, Silver & Others 11.08 8.53
Gold Medallions and Coin 0.46 103.25
SUB TOTAL 7,021.61 -29.05
Rough Diamonds 174.98 44.73
Rough LGDs 15.29 36.68
Rough Coloured Gemstones 2.62 16.99
Gold Bar 0.00 655.31
Others 7.81 -34.25
GROSS EXPORTS 7,222.31 -28.08

Source: GJEPC

What is needed in the current scenario?

The government has also undertaken various measures to promote the exports from the country. It has taken the decision to decrease customs duty on cut and polished diamonds to 5% and on coloured gemstones to NIL, from the previous rate of 7.5%. The import duty on Gold and Silver has been lowered from 12.5% to 7.5%. For Platinum and Palladium, it has been reduced from 12.5% to 10%. These measures were implemented to reduce the prices of these metals in the local market. Other than, key areas of focus for the industry include:

  • Product Quality Enhancement: Focus on improving the quality and design of Indian gems and jewellery to meet international standards. This includes investing in skilled artisans and using advanced technology in the manufacturing process.
  • Market Research and Diversification: Conduct extensive market research to identify emerging trends and demands in different countries and identify focus markets. Diversify the product range to cater to various preferences and cultures.
  • Branding and Promotion: Create a strong and recognizable brand identity for Indian gems and jewellery. Invest in marketing and promotion activities both domestically and internationally to increase awareness and attract potential buyers.
  • Trade Shows and Exhibitions: Enhance participation in prominent international trade shows and exhibitions to showcase the diversity and uniqueness of Indian jewellery, attracting foreign buyers and distributors.

India’s gems and jewellery export industry holds significant potential for growth and global recognition. By focusing on product quality enhancement, market diversification, branding, and promotional efforts, the industry can expand its reach to new international markets.  UAE is a particular market to watch out for. Although the exports have just increased by just 1.45% during FY 2022-23, industry is positive that the FTA will lead to increase in exports over the coming months. While these proposed measures may not shift the needle by much in the short term, they can help make exports relatively more resilient to possible volatility in incumbent markets.

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