There was a massive 24% decline in India's gems and jewelry exports to $2,321 million for September 2018 as against $3,053.38 million in the same period last year.
Dilip Kumar Jha reports.
India's 23-spot jump on the World Bank's ease-of-doing business list has failed to make matters any better for the scam-rattled diamond jewellery industry, which continues to face a tough time because of the delay in goods and services tax refund, lack of bank finances, and a fall in dollar availability following the rupee depreciation.
Banks decide credit facilities for them in rupee terms, which imply lesser dollars when the Indian currency is falling.
The World Bank released its list on ease-of-doing-business in which India advanced by 23 places to 77 on the list of 190 countries thanks to the Centre's quick decision-making and fast implementation of proposals.
But the Rs 115-billion Nirav Modi-Punjab National Bank scam early this year has made banks cautious about lending to the diamond jewellery sector.
Apart from asking for additional collateral for funding against inventory, they have tightened the scrutiny of borrowers.
Apex industry organisation Gems and Jewellery Export Promotion Council has been striving to streamline the process, but it is far from achieving a satisfactory result.
GJEPC representatives met Union Minister of Commerce and Industry Suresh Prabhu to discuss the problems faced by diamond processors, and its possible consequences on India's gems and jewellery (G&J) exports in future.
G&J contributes around 13 per cent to India's merchandised exports.
"The government has been very supportive to this labour-intensive sector which employs around 5 million people directly and indirectly. The sector is currently facing a series of challenges across all business verticals, and these have adversely affected the business. Import duty increase and rupee depreciation have aggravated the situation," says Pramod Agrawal, Chairman, GJEPC.
To reduce the import bill, the government, in September, raised the import duty on certain precious metals, jewellery and stones.
While the import duty on cut and polished diamonds was raised to 7.5 per cent of the value from the existing 5 per cent, the same on gold jewellery was hiked to 20 per cent from the existing 15 per cent.
"Export-oriented jewellers face a proportionate squeeze in their dollar loan-limit because of a sharp depreciation in the rupee against the dollar, and delay in the GST credits out of procedural hurdles. All these have blocked a large part of their working capital," says Colin Shah, GJEPC vice-chairman.
As a consequence, there was a massive 24 per cent decline in India's G&J exports to $2,321 million for September 2018, as against $3,053.38 million in the same period last year.
The rupee depreciation has caused India's G&J exports to contract by 15 per cent to Rs 167.61 billion in September this year versus the same period last year.
Fortunately, however, diamond jewellery manufacturers have moved towards certification of polished diamond, colour gemstones, other precious stones and studded-jewellery from globally trusted organisations such as the International Gemological Institute and the Gemological Institute of America.
"Eleven of every 13 stones mined globally are processed in India. Our cut and polished diamond is far better than that from Belgium," says Tehmasp Printer, managing director, IGI.