AN ANALYSIS

OF INDIA’S
GEMS AND JEWELLERY
SECTOR
_________________________________________________________________________________________________________

A report submitted towards the partial fulfilment of the

requirements of B.Com(Hons.) from Shri Ram College Of
Commerce, Delhi University.

Mrs. Renu Aggarwal Dr. V.K Singhania

(Head Of Department) (Project Mentor)

Submitted By : Atishay Jain

B.Com(Hons.) part III
Section - F
Roll No. - 16

CERTIFICATE
This is to certify that the project work done on ‘An analysis of the gems and
jewellery 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 and
guidance.

Dr. V.K. Singhania

 STUDENT’S DECLARATION

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

Atishay Jain
 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 indian
Gems 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
 Project Outline

 Introduction to the Gems and Jewellery Sector

 Structure
o Presence of traditional pockets of jewellery manufacture
o Industry Composition
 Market Potential
 Importance to the Economy
 Exports
 Gold
 Diamond
 Key issues facing the players
 Growth Drivers and Opportunities
 Government support
 SWOT Analysis of Indian Gems & Jewellery Industry
 Recommendations
o To the Industry
o To the government
 Future outlook
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 buyer
preferences, properties, varieties, unit values, application, etc. The GJ sector may be
further categorized into the following sub-sectors based on characteristics, processing
techniques, preciousness in terms of price range and marketability.

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

The Indian gems and jewellery industry is competitive in the world market due to its low
cost 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 the
world's cumulative mine production of around 153,000 tonnes. India is typically also the
largest purchaser of coins and bars for investment.
Traditionally the focus of the gems and jewellery manufacturers has been on the large
global markets. Indeed for years, these international markets have given large and
growing business to the Indian exporters and have contributed in creation of significant
jobs in the country. The Indian players, duly supported by the Government of India are
placed highly competitively in the market. In the last few years, on the other hand, the
Indian domestic market has shown very promising signs.

STRUCTURE

The market is fragmented across the value chain with a large number of domestic
private 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:

Presence of traditional pockets of jewellery manufacture
Jewellery crafting by traditional goldsmiths is confined to a few regions in India. These
pockets are widely separated and involve craftsmen whose skills have been handed
downover generations. 
The centre of India's GJ industry is Mumbai. Most imports of gold and rough diamond
arrives in Mumbai. However, most of the processing of diamonds takes place in the
neighboring state of Gujarat, mostly in Surat,Bhavnagar,Ahmedabad,Bhuj, and
Navasari. Gujarat accounts for an estimated 80% of the diamonds processed
in India. Of this, 90% are processed by around 10,000 diamond units located in and
around Surat alone. Mumbai itself has an increasing number of modern semi-automatic
factories and laser-cutting units. Indian diamond merchants have good international
reach having offices in Antwerp, New York, Los Angeles, etc. There are also diamond
processing 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 accounting
for the dispatch of 93% of diamond exports
Market Potential
Gems & Jewellery exports are the back-bone of the sector and also of our overall
exports 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 of
US $ 58 billion by 2015 from the current US $ 25 billion. The government has taken
significant steps for the Gems & Jewellery exports in terms of duties and taxes,
infrastructure (SEZ, EPZ’s etc) and policy (EXIM Policy for 2002-07) but this is not the
time to get complacent for the government or the industry as the recent global economic
crisis 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 by
2015. 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 market
India presents a very large potential market. More importantly there is a significant
opportunity to create additional value through higher margins possible through
differentiation and branding
.
The industry has also lagged behind relatively to attract the capital; professionals and
process/technology know-how to scale up the operations and take the industry into a
different orbit. Traditional jewellery retail is essentially characterized by commoditized
selling 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 fragmented
industry with a very traditional and sometimes change –resistant mindset. The good part
is that India is now beginning to move towards branded jewellery and the consumers
have accepted the modern retail formats. However I strongly believe that the traditional
players 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
The GJ industry has an important role in the Indian economy. While a predominant
portion of gold jewellery manufactured in India is for domestic consumption, a
predominant portion of rough, uncut diamonds processed in the form of either polished
diamonds 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 its
historical religious significance, gold is valued as an important savings and investment
vehicle. The GJ industry also contributes around 15% of India's exports.

The bulk of the Indian GJ exports comprises import of rough diamonds, cutting and
polishing in India, and reexport. As per data released by the Gems & Jewellery Export
Promotion Council (GJEPC), cut & polished diamonds (CPDs) accounted for 71.1% of
India's GJ exports, followed by gold jewellery (23.2%), rough diamonds (3.4%), and
others (2.3%).Thus, two items-CPDs and gold jewellery-account for around 95% of
India'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 almost
entirely dependent on imported raw materials. Imports of pearls, precious & semi-
precious stones account for 11.2% of India's non-bulk imports, and 6.4% of total
imports.

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 and
employs an estimated 2 million workers serving over 0.45 million goldsmiths, and
around 0.1 million diamond processing units. The majority of India's diamond workforce
is employed by small units, that process diamonds on a job-lot basis. The number of
gold jewellery manufacturing units is put at 0.1 million. Also, a large number of skilled
goldsmiths/gold merchants from India are engaged in gold trade and industry in almost
all the oil-rich Middle Eastern countries.

Exports

During April 2009-January 2010, the total exports for gems and jewellery
stood at US$ 22.54 billion as compared to US$ 20.98 billion during April
2008-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:
  Gold Jewellery Exports 

 Cut and Polished Diamonds: 

 Coloured Gemstones

Net Exports of Gems and Jewellery

ITEMS April'09 -January'10 April '08-January'09 % Growth / decline over

previous Year
(Provisional) (Same ports as current
year)
Rs. In US $ in Rs. In US $ in Rs. US $
Crores Million Crores Million
Cut & Pol 65693.04 13789.99 55453.91 12458.65 18.46 10.69
Diamonds
*
(Quantity 460.19 384.16 19.79
in Lakh
Carats)

Gold 7958.04 1668.83 7919.18 1812.35 0.49 -7.92

Jewellery-
D.T.A
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

Coloured 1159.82 243.31 1012.16 225.18 14.59 8.05

Gemstones
Others 1305.19 274.81 972.28 215.66 34.24 27.43
Net 104628.86 21954.59 90981.12 20308.68 15.00 8.10
Exports

Exports of 2789.66 584.21 2998.12 673.17 -6.95 -13.22

Rough
Diamonds
(Quantity 182.99   269.99   -32.22  
in Lakh
Carats)
Total 107418.52 22538.80 93979.24 20981.85 14.30 7.42
Exports

Gold
Gold usually only occurs in a metallic state. It is commonly associated with sulphide
minerals such as pyrite,but it does not form a separate sulphide mineral. Gold jewellery
is usually manufactured using casting and moulding techniques. Gold is found in a
variety of environments globally, but generally requires grades in excess of 1
gram/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 as
concentrations caused by favourable chemical and structural environments. Weathering
of these primary ores can produce secondary gold concentrations, often as alluvial gold
occurrences (often called `placer' gold).Economic gold extraction can be achieved from
ore grades as little as 0.5 gms/tonne (referred to as 0.5 parts per million or ppm) on
average 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 or
hard 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 of
lower 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 the
Witwatersrand Basin in South Africa. Some of Savuka's miners are working at a depth
of almost 4 kms, mining an ore grade which contains almost 20 cubic centimetres of
gold in every cubic metre of rock, or 20 ppm. Production costs for gold mining vary
widely, 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 Jewellery

From historic times, gold has played a pivotal role in the Indian social fabric. Even in
present times, gold remains the Indian bride's `Streedhan', the wealth she takes with
her when she marries and which remains hers. Gold jewellery is the preferred jewellery
worn by women in India irrespective of their religious beliefs. In marriages, gold
jewellery is the gift preferred by the near relatives of the bride and the groom. Gold
jewellery is very popular among farmers, with an upsurge in gold sales after a good
agricultural season. Buying of gold is an important part of every stage of an Indian
citizen'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 the
second preferred investment behind bank deposits.
Apart from its historical religious significance, gold circulates within the system and
roughly 30% of gold jewellery fabrication is from recycled pieces. In India (also in the
Middle East and South East Asia), jewellery is traditionally 22 carat. The most widely
used alloys for jewellery in Europe are 18 and 14 carat. While 14 carat gold jewellery
dominates in the US, 9 carat is popular in Britain. In China, Hong Kong and some other
parts of Asia, `chukkam' or pure gold jewellery of 990 fineness (almost 24 carat) is
popular.

Diamonds
Diamond is carbon in its most concentrated form. Except for trace impurities like boron
and nitrogen, diamond is composed solely of carbon, the chemical element that is
fundamental to all life. Diamond is the hardest substance known. Hardness is the
measure of a substance's resistance to being scratched, and only a diamond
can scratch another diamond. Diamonds are crystals made up entirely of carbon atoms
that are arranged in an isometric, or cubic, matrix. However, most diamond crystals
encounter varying heat or pressure, other elements, or even other diamond
crystals during their growth, and this can alter their form somewhat. The resulting form
and characteristics of the crystal, once it emerges from the earth, help to determine
what shape, color and clarity the polished gemwill have. The first known source of
diamonds was India, but presently Australia, Botswana, Congo, Russia, Canada, and
South 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 a
depth 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 in
an 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 diamond
content 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, and
Russia. The average grade of the richest diamond kimberlite pipes in
Africa is about 1 part diamond in 40 million parts ore. Production costs for kimberlites
and lamproites can be as low as US$15 per tonne for large and easy-to-access
diamond mines operating in good climatic conditions and are up to about US$40-45 per
tonne for small mines located in remote areas and operating under harsh climatic
conditions. A newly mined rough diamond looks somewhat like a piece of glass washed
up on the beach than like the polished gems sold in jewelry stores. Bringing out their
beauty 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 for
some diamonds, most of the work is still performed by hand using exacting and
meticulous techniques. Four characteristics, known informally as the four Cs, are now
commonly used as the basic descriptors of diamonds: these are carat, clarity, color, and
cut. Most gem diamonds are traded on the wholesale market based on single values for
each of the four Cs. Other characteristics not described by the four Cs can
influence the value or appearance of a gem diamond. These include physical
characteristics such as the presence of fluorescence, data on a diamond's history
including its source, and which gemological institute performed evaluation services on
the diamond. The carat weight measures the mass of a diamond. One carat is defined
as exactly 200 milligrams (about 0.007ounce). The point unit-equal to one 0.01 carat or
2mg-is commonly used for diamonds of less than one carat. Individually, rough
diamonds can range in size from micro-sized to stones weighing in excess of 1000
carat. A significant measure of a mine's production is the average size of its rough
diamonds. Depending on the mine, the average size of rough diamonds recovered can
vary from 0.01 carat (about 1 mm. in size) to more than 0.7 carat. Many mines in the
world average about 0.4-0.5 carat per stone.

KEY ISSUES FACING THE PLAYERS

Large Presence of Unorganized Sector

The bulk of the GJ industry in India is concentrated in the unorganized sector and
employs around 2 million workers serving over 0.1 million gold jewellers and over 8,000
diamond jewellers. The majority of India's diamond workforce is employed by small
units, that process diamonds on a job-lot basis. At the low-end, family
units process diamonds/make jewellery. However, the share of the unorganized sector
in the Indian GJ business is declining. For example, according to a survey
commissioned by GJEPC, the share of the organized sector in diamond processing
increased from 9% in 1995 to 45% in 1998. This was because of the shift in processing
towards higher stones, implementation of advanced cutting techniques, and preference
of 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 jewellery
buying is still rooted in tradition, and jewellery is sold in traditional designs. Gold
jewellery is fabricated mainly in 22-carat gold and, lower caratage is not favoured as the
Indian mindset does not accept low purity gold jewellery.
Gold jewellery is primarily bought as an investment in gold as a store of value, and
buyers do not prefer to invest in a low purity product. Designer jewellery is generally not
very popular and may not pick up significantly, because the investment is made for the
gold content in the jewellery. The bargaining power of the buyer is typically limited to the
fabrication 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 loyal
clientele. 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 the
predominance of local tastes. In the present system of selling gold jewellery, the purity
may or may not be as marked, and the buyer can lose. The original labour component is
also a loss when gold is sold in the market. Cheating on caratage (and purity) is
widespread. Thus, in 2000, the GoI introduced voluntary hallmarking of
gold jewellery through the Bureau of Indian Standards (BIS). The system of hallmarking
is expected to increase the buyer's confidence in the jewellery's purity. However, the
progress on hallmarking has been slow. Presently, the BIS grants hallmarks for
jewellers from one of its 34 facilities, but only as demanded as this is voluntary. BIS also
expects to expand its facilities to cater more for gold jewellers in rural areas and small
towns as populations from these make up 70% of the gold demand in the whole
country. 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 from
January 1, 2008. This is expected to eliminate cheating on caratage (and purity), which
is 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 district
headquarters. 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

Although India currently enjoys dominance in the world's cut and polished diamonds
market, China may emerge as a viable rival, if not in the near term, certainly in the
longer term. An increasing number of diamond processors from Israel and Belgium, and
even India, are setting up facilities in China, for a variety of reasons: (a) the labour
force, 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-income
segment 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 an
overwhelming advantage over China. China processes an estimated 3 million carats of
diamonds annually, as compared with 180-200 million carats in India. China has about
0.03 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 manufacturing
centre, when measured in manpower terms. Technology is another area where the
Indian industry faces a long-term threat from China. Until now, a combination of manual
skill and semi-automatic machines have helped the Indian industry to maintain a
leadership position. However, China with its modern and automatic factories is today in
a similar position to manufacture jewellery at competitive prices. Increased competition
will force the Indian industry to focus on higher-end products, with the concommitant
requirement of increased investment in modern technology.

Threat from Polishing in Producing Nations

Over the last few years, there has been increased political pressure by major diamond
producing countries in Africa-Botswana, Angola, Namibia and South Africa-to gain
further economic benefits from diamond production through jobs creation in a domestic
cutting and polishing industry. Most of these countries have no history of diamond
polishing but the skills can be taught as has been seen by the recent rapid growth of
jobs in other non-traditional centres such as the Far East and Armenia. The pressure
towards polishing in the producing countries is growing and increasingly it is a part of
the overall agreement permitting mining, or of not imposing high taxes. As a result, De
Beers has recently announced restructuring of their sorting and sales operations to
support the CPD industry in South Africa, Botswana and Namibia. The Indian diamond
industry has thrived because for economic reasons, most smaller stones cannot be
profitably 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 of
the stone, and higher cost polishing can be economically feasible.

Upgradation /Modernization
The industry needs to modernize itself. It is highly fragmented with minimal benefits of
economies 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 Indian
industry can perhaps learn significantly from Turkey where the industralization of the
jewlery segment has transformed it into the one representing the modern flexible
production techniques, supreme craftsmenship, excellent quality and immense variety.
Growth Drivers and Opportunities

Availability of factor conditions

Availability of skilled manpower is a key strength that has enabled growth in India’s gem
and jewellery sector. India has a large pool of skilled artisans with vast traditional
knowledge and expertise in jewellery making. It also has the largest resource pool in
diamond cutting and processing. India has also a good blend of technically trained
designers.

Growing Spending Power

Many socio-economic factors influence the high demand for gems and jewellery in
India. The main driver of demand in India is still the investment factor – gold and gold
jewellery is regarded as investment, as they can be easily converted to cash either
through sale or for guarantying loans. Despite recent slowdown, the move from a
“Pyramid” to a “Diamond” shaped structure of the Indian consumer segments is well and
truly underway. India’s affluent & rich will number more than the adult populations of
many large countries. The new Indian consumers demand greater transparency, better
service and a more compelling value proposition driven by brand and fashion. At the
same time they are also willing to pay justified premium for the right proposition and
design. The key here would be to position jewellery as a lifestyle product.

Organized Players Acting as Catalyst

We anticipate that large investments of about US $ 1 billion in the coming years would
be made by large retailers/brands which would catalyze the growth of the industry, set
higher standards and create value across the value chain. As is evident from the Exhibit
2 below, that retailing of gems and jewellery could be financially very lucrative. The
leading 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 tier
cities and state capitals, their strategy is to concentrate on their existing base and
extend 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. Reliance
Jewels has announced plans to add 85 more stores to its existing 15 in the next 3
years. Another heartening fact is that in the past leading brands have been able to grow
the market through wider range, new designs and through innovative marketing
concepts. Newer ways of segmentation and usage has attracted new set of consumers
and created new occasions. It is thus very important to gain the momentum in this
direction.

Real Estate and Other Costs Under Manageable Limits

The last year slowdown has pushed the real estate prices southwards with substantial
drop in the rental values with far better terms. This is a good sign for the jewellery
retailers looking for expansion opportunities. Similarly the other costs such as
manpower have shown stability, which would favorably impact the industry.
Export Facilitation Measures by the Ministry of Commerce & Industry during the
Year 2009

 MSTC Limited and STCL Limited have now been added under the list of
nominated agencies notified under para 4 A.4 of Foreign Trade Policy for the
purpose of import of precious metals.

 Surat in Gujarat, which is home to thousands of diamond units with lakhs of

diamond workers, has been recognized as "Town of Export Excellence".

 The authorized persons of gems and jewellery units in Export Oriented Units
shall be allowed personal carriage of gold in primary form up to 10 kg in a
financial year subject to Reserve Bank of India and customs guidelines.

Foreign Trade Policy (2009-2014) Initiatives

Shri Anand Sharma, Hon’ble Union Minister of Commerce and Industry have
announced the following measures for gems and jewellery sector in the new Foreign
Trade Policy (2009 – 14)on 27th August, 2009:

1. Import of gold of 8k and above is allowed under replenishment scheme subject to

import being accompanied by an Assay Certificate specifying purity, weight and
alloy content.
2. Duty Free Import Entitlement [based on Free On Board (FOB) value of exports
during 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- export
by the authorized offices/agencies of Gemological Institute of America (GIA) in
India 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 of
export promotion tours.

5. Extension in number of days for re-import of unsold items in case of participation

in an exhibition in USA increased to 90 days.

6. In an endeavour to make India an international trading hub for diamond, it is

planned to establish "Diamond Bourse (s)".
 SWOT Analysis of Indian Gems & Jewellery Industry

 Strengths
 About one million craftsmen are associated with this industry. Their skills can be utilized for
designing and making modern Jewellery.
 Availability of abundance of cheap and skilled labor in India.
 Presence of excellent marketing network spread across the world.
 Supportive government industrial/ EXIM policy.

 Weaknesses
 Small firms lacking technological/ export information expertise.
 Low productivity compared to labor in china, Thailand and Sri Lanka.
 As the major raw material requirements need to be imported, companies normally stock huge
quantities of inventory resulting high inventory carrying costs.


 Opportunities
 New markets in Europe & Latin America
 Growing demand in South Asian & Far East countries.
 Rupee value depreciating resulting in a windfall increase in the profitability.
 Industry moving from a phase of consolidation

Threats
 China, Sri Lanka and Thailand's entry in small diamond segment
 Infrastructure bottlenecks, absence of latest technology
 Unusual increase in the prices of gold and rough diamond
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 fully
explored. The consumers have evolved rapidly and the traditional ways of segmentation
& usage have failed to provide any meaningful results to the brands and retailers. There
is dire need for the industry to first understand the various segments of the consumers
and their purchasing and shopping needs. The proposition, design and brands can be
created around these needs.

2. Invest in Retailing and Brands

The organized retail and brands can provide impetus to the sector. Appropriate
investments can potentially put the category on a higher priority in the consumer basket
and 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 is
to 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 People

The Gems & Jewellery industry needs to systematically and collectively invest in
upgradation of the skill sets of its workforce through increased training and manpower
development programs. A joint effort by the Industry to invest in the development of
vocational training institutes could be a way forward with Industry captains showing the
way forward by leading efforts to underwrite recruitment of graduates and participate in
syllabus design & development. There is also a need to present the case and
opportunities that the industry offers to the corporate talent management students

4. Enhance Product Design & Manufacturing Quality Standards

A National Institute of Jewellery Design & Development would go a long way in
providing the platform for development of a pipeline of innovative high quality designers
that 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 marquee
design brands in the country in Apparel and improved product design and
manufacturing quality. Indian Institute of Gems & Jewelry (IIGJ) is a step in the right
direction 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 expanding
existing ones, efforts can be made to lobby to obtain Government support and create
national “centres of excellence” like NIFT with multiple campuses and courses.

5. Promote Adoption of Industry Wide Standards for Gaining Consumer Trust

Enhancement of product quality standards and incentives for increasing adoption of the
standards will go a long way in enhancement of consumer trust and enable the industry
to gain share of wallet of the consumer in the long run. Eventually it will also help in the
spread of e-selling in India which in recent years has been the most exciting
development in western markets.

6. Co-operative Use of Resources

To 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 by
co-operatives when foraying into international markets.

To the Government

Government and Apex bodies could act as facilitators in broadening the outlook of the
exporters /players and help them in familiarizing with the changing scenario both in the
domestic and international fronts, where moving up the value chain and adoption of
modern practices has become compelling imperatives.
1. Provide Industry Status to Gems & Jewellery Sector
Special cell to look into specific needs of Industry- 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 & Jewellery
Retail sector could benefit tremendously from Industry status.

2. Creating Technology Upgradation Fund

For facilitating the modernization of the manufacturing and design facilities. These funds
have been successfully created and implemented in other labor intensive industries like
Textiles.

3. Creation of Design Centers /Studios, Holding Fairs

The importance of design has been highlighted by us in this report. This can help
significantly 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 Leverage

Banks as a practice do not mortgage jewellery from individuals as collateral for lending
although some companies in the private sector do so. If banks also start lending by
using 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 attractive
for their investment value. Perhaps RBI can think and act on this suggestion which can
potentially unlock significant value

5. Regulatory Laws & Taxation

There are some regulations which are restricting the growth of the industry such as
search & seizure laws. Perhaps there is case of rationalizing /removing these restrictive
laws. At the same time there is dire need to standardization in the industry, which can
restore the credibility of the industry. In terms of taxation there should be a continuation
and further enhancements of tax benefits. Notably Deduction under section 10A / 10B /
10AA of Income tax Act should be modified to have a longer period of benefit both for
future as well as retrospective effects. Removal of Octroi from Mumbai will also go a
long way in supporting the large presence of the sector in that city.

6. Modernize Labor Laws

This will enable Indian manufacturers to improve efficiencies, serve Indian consumers
better and also grow exports from India by allowing manufacturers to adopt more
flexible labor practices.

7. Increase the Setting up of Export Focused SEZs

This would help to meet and the growing needs of exporters and create the
infrastructure for even faster export growth. The policy could also help to promote the
spread of industry across India from besides the current pockets in western & southern
India.

8. Gold Exchange
A physical or internet based exchange to trade precious metals could involve the
promote the Indian population to rediscover their age old investment preference for the
precious metals which have time and again proved to be safe instrument with good
returns.
FUTURE OUTLOOK

Future growth in gold jewellery business is likely to driven by increased exports to US

and other markets, and domestic consumption. Historically, Indian gold jewellery
designs 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 designing
competitions among the Indian artisans to create greater awareness about Indian
artisans in the global market and also to expose Indian artisans to global design
developments. There has also been an initiative by Gems and Jewellery Export
Promotion 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 of Indian gold and GJ jewellery
exports 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 to
pick-up in demand in major markets like the US, Belgium, Israel, and Hong Kong. The
Indian GJ industry has been built on polishing lower size and quality stones. Looking
forward, since India already enjoys domination in the world cut and polished diamond
market in general, and for smaller-sized diamonds in particular, the scope for significant
increase in market share and growth in the traditional small size diamond exports is
limited. Industry leaders are now seeking further growth through processing of larger
size stones, and manufacture of diamond jewellery. Indian industry can now
increasingly process the full range of sizes and qualities of stones utilising not only a
cheap 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 Indian
diamond studded jewellery, because of its affordability. Significant domestic and export
opportunities for Indian industry could also arise because of a major promotional
programme launched by DTC for leading Indian diamond and Jewellery
manufacturers and exporters to boost the marketing of their products in India and
abroad. Under this programme, which is known as supplier of choice, the DTC takes
marketing initiative, targeted at creating incremental demand for diamonds and jewellery
through direct partnerships with sight holders and retailers.

The long-term outlook for the Indian diamond and jewellery industry continues to be
positive. 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 vertical
integration. 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 industry
shall continue to generate large amounts of foreign exchange and employment to the
Indian socioeconomic fabric.