A Fruitful 2014 for India’s G&J Sector

India’s Gem & Jewellery (G&J) sector may have witnessed rather tough beginning of 2014 but in the end the year proved to be fruitful and good one for it.

The sector was reeling under strict gold import curbs which the earlier government had introduced to control the country’s ever escalating Current Account Deficit (CAD). Imports and exports were down and a rather gloomy atmosphere was prevailing over the sector. Even the budgetary provisions proposed by the then-finance minister Mr. P. Chidambaram grossly ignored India’s G&J sector.

The industry leaders were greatly disturbed with the so called ‘callous’ and ‘unsupportive’ approach of the government but had no option but to wait patiently till the new government under the leadership of Mr. Narendra Modi was formed in May, 2014.

A sense of stability was re-instated with the coronation of the stable government which was also necessary to increase GDP growth and attract foreign investment. Volatility in gold prices also acquired some stability. As an immediate impact, India’s gold jewellery sales during the month of June went up by 40% year-on-year, due to the fall in gold prices. The sales increased by 20-25% in comparison with May. However, smuggling of the yellow metal continued to be a major concern during 2014.

The controversial 80:20 scheme introduced by the earlier government to curb the gold imports was also scrapped, however after sustained requests by the industry organizations in December 2014; as a result the market was flooded with new supply of gold which gave a new lease of life to the country’s ailing jewellery industry.

December 2014 saw two major incidents within a span of two days. Firstly, on 10th December, many of De Beers’ Indian sightholders rejected at least 25% of rough offered to them in Gaborone by the Company and secondly on the very next day i.e. on 11th December, 12 Indian diamond companies signed a contract worth USD 2.1 billion with the Russian mining giant Alrosa for direct rough supply for a period of 3 years beginning from 2015.

The contract was signed during the World Diamond Conference India (WDCI) organized by India’s Gem & Jewellery Export Promotion Council (GJEPC) and the World Diamond Mark (WDM) with the support of India’s Commerce Ministry in New Delhi from between 11th & 12th December, 2014. Both these developments will bear long-lasting impact on the global, especially India’s diamond industry.

As a bitter note of the industry, bank defaults have increased post 2008 melt-down with as big as Rs. 6000 crore by a leading diamond firm. This has badly shaken the trust and faith of banking sector in India’s gem & jewellery industry. As a result, banks here have become quite cautious in their dealing with the industry and have frequently raised suspicion towards its style of functioning.

GJEPC is highly concerned about such occurrences which harm the overall interest of the industry to a great extent. With intent to prevent further damages to the industry, the GJEPC had recently organized a Banking Summit in Mumbai wherein the industry leaders tried to narrow the gap of increasing rift between the bankers and genuine traders of the industry.

GJEPC has also requested the Indian government to consider sanctioning of credit guarantee under the export credit insurance scheme for banks to sanction incremental limits by banks. The apex body of the industry has also asked to extend the interest subvention of 3% for the entire sector.

Lastly, after reigning supremacy over manufacturing front, India is now headed for becoming the world trading hub with the government sanctioning a Special Notified Zone in Surat.

Overall, it was a fruitful and consolidating 2014 for India’s G&J sector which is now hopeful to see more such years in future.

Posted by Suresh Chotai