Time to Grant Industry Status to India’s G&J Sector

India’s Gem & Jewellery Export Promotion Council (GJEPC) recently announced export figures for financial year April 2015 to March 2016 which indicate dismal export performance of the G&J sector. Accordingly, exports of gems and jewellery have dropped 3.46% in FY16 to USD 38,599.18 million as compared to USD 39,980.63 million in FY15. Gross exports of cut and polished diamonds in FY2016 have dropped 13.66% to USD 19,996.06 million as compared to USD 23,160.18 million in FY15.

Exports of gold jewellery in FY16 have dropped 13.07% to USD 8,609.25 million as compared to USD 9,903.61 million in FY15. Exports of Colored Gemstones have dropped 4.43% in FY16 to USD 433.18 million as compared to USD 453.25 million in FY15. Other exports (such as pearls, synthetic stones, costume and fashion jewellery, etc.) increased by 49.66% in FY16.

This is the fifth successive year wherein gross gems & jewellery exports have fallen and the first time in last six years that the exports of cut & polished diamonds have fallen to below USD 20,000 million levels.

Time and again, the GJEPC has made many representations to the government requesting it to declare measures to boost India’s dwindling G&J exports. This time its Associated Chambers of Commerce and Industry of India (Assocham) that has suggested the Indian government to extend some incentives to the G&J sector to improve its exports as well as domestic performance.

In a paper titled ‘2015-16: A Year of Dismal Export Performance for India’, Assocham has appealed the government to extend incentives like interest subvention, Merchandise Exports from India Scheme (MEIS) and others to promote G&J exports which have been badly affected by global slowdown thereby putting at risk livelihood of over 3 million people employed by this sector across India.

“Though market share of the USA and Hong Kong in diamond and precious stones’ exports has expanded to 29% and 36% respectively over the last few years, market share of the UAE has come down steadily from one-fifth a few years ago to less than one-tenth of the total exports,” notes the paper prepared by the Assocham Economic Research Bureau (AERB).

India’s Gold Monetization Scheme (GMS) may help reduce reliance on import of gold to meet domestic demand and may have some positive impact during the course of the year, the paper observes.

Assocham has once again repeated its appeal to the government for granting ‘industry status,’ to the G&J sector to give a boost to investments and bring down costs of operation as it would also help build trust and faith in Indian brands in global markets and in achieving goals of Make in India.

Besides, amendments in labour laws, creating more export-oriented economic zones, establishment of a gold board, ensuring access to better financing, relaxation of certain taxation laws, segregation of investment and consumption demand, setting up a gold tourism circuit are some of the important areas of focus which can help in reviving the G&J sector of the country.

Assocham has also recommended implementing long-pending Goods and Services Tax (GST) to reduce the burden of un-refunded state level taxes to make India’s exports competitive. Besides, the paper has asked the government to set up a high-level committee to look into costs of inter-state barriers to trade and suggest a time-framed roadmap to address the same as it would not only provide much-needed relief to the export sector but weld India into a single market much bigger than EU in terms of population.

Posted by Suresh Chotai