India’s Gem & Jewellery industry went through troubled times during 2016, especially after the Government withdrew currency notes of INR 500 and 1000 from circulation in first week of November. Already experiencing effects of down-turn in the global economy, the industry got another jolt of demonetization which created cash crunch and steep downfall in sales right on the eve of wedding season.
Many retailers say that their sales went down as low as 70% but at the same time they are hopeful about positive outcome of the Government’s step of demonetization in future. Mr. Vijay Jain, CEO and Director of ORRA says, “With the government’s decision of demonetization, sales were expected to be slow, not only in the jewellery segment, but in the retail industry as a whole. While this means tremendous change for the unorganized players in the jewellery industry, for brands like ORRA, it spells as bright future in the years to come. The current slowdown however is due to the transition taking place in the market however, we expect sales to get back on track soon.”
Many other leaders like Mr. Jain feel that the step will prove to be a boon for India’s G&J industry in long run. In fact, the industry has shown some signs of revival during second half of 2016. India’s exports of gems and jewellery grew by about 10% to $ 23.5 billion between April and November, driven largely by rising demand in India’s major export markets like the US and Europe. In April-November period of 2015, exports from the sector reached $ 21.5 billion, according to the data provided by Gem and Jewellery Export Promotion Council (GJEPC).
The jewellery demand in India typically climbs during the winter’s wedding season. But during year 2016, sales plunged as nearly two-thirds of jewellery is usually purchased with cash, which is in short-supply.
Mr. Praveenshankar Pandya, Chairman of India’s Gem & Jewellery Export Promotion Council (GJEPC) says, “During the cash crunch, diamonds are one of the last things people want to buy. At least for the next six months demand will remain weak.”
India’s Shipments of gold jewellery, however, contracted by 10.35% to $2.23 billion during the period under review, from $ 2.5 billion a year ago. Exports of gold medallion and coins too dipped by 5.37% to $ 3.48 billion. Further, according to GJEPC data, imports of rough diamonds grew by 30.5% to $ 11.3 billion in April-November 2016. Imports of gold bars too grew by 32% to $3.1 billion.
GLOBAL:
India’s is an undisputed global leader as far as the diamond industry is concerned. So obviously, India’s cash crunch created by the demonetization has hit hard the global G&J industry also. The biggest effect was seen on De Beers’ sales of last cycle-2016. The Company’s revenue from rough diamonds declined sequentially to $418 million in the final sales cycle of the year as tighter liquidity in India hit demand for lower-priced stones.
The crisis hit at a time when there were plenty of stones in the retail pipeline or were being processed. Sales fell 12% at December 2016 sight from $476 million in November. They were 69% higher than the $248 million recorded a year ago, when demand in the rough market had slumped. Apart from De Beers, smaller Canadian producers such as Stornoway Diamond and Dominion Diamond are also experiencing weaker demand and prices for cheaper stones used in lower-priced jewellery.
In trading hubs like Hong Kong, many retailers are stuck holding diamonds they bought three years back at higher prices expecting robust demand from China that didn’t materialize.
The demand is unlikely to revive any time soon as India struggles to dispense enough new notes, industry officials say. So there is no doubt that the year 2016 was an eventful year, perhaps more so than any other in recent memory!
Posted by Suresh Chotai
