India is the world's largest manufacturing centre for gems and jewellery and the Industry contributes over 12% to the total export earnings of the country and employs highly skilled 1.5 million workers. This industry was hit hard by the lull demand due to global economic slow down in FY 09.
The gems and jewellery industry is a major exchange exchequer as major portion (around 80%) of its turn over was contributed by exports. This classified into five main segments: cut and polished diamonds, gemstones, gold and jewellery, pearl and synthetic stones, and others, including precious metal jewellery (other than gold), synthetic stones and costume fashion jewellery.
Diamonds contribute to nearly 80% of the entire turnover and of this industry and hence many times the terms 'gems and jewellery industry' and 'diamond industry' are used as synonyms.
According to Gems and Jewellery Export Promotion council (GJEPC) export of cut and polished diamonds have declined by 8% in value terms to $13024.53 million in FY 09 as against $14194.13 million in the corresponding previous year. In the volume terms, the Quantity of cut and polished diamonds have fell by 7% to 402.05 lakh carats in fiscal ended March 09.
More over, the industry has been hit hard with the lull demand from the export oriented countries on the back of global economic melt down and free fall in prices of cut and polished diamonds in FY09. The Industry represented by its apex body has solicited for relief measures from the government to improve its lost competitiveness.
The Industry looked at the immediate necessary to increase liquidity into the industry by continuing existing credit limits to exporters with good track record, and improving credit facilities.
Introduction of Presumptive Tax/Turnover Tax - as a permanent solution for the peculiar nature of the industry characterized by the daily price fluctuation which causes disputes on taxation.
Industry seeks for rationalization of interest rate at par or below the international interest rates. It also urges RBI to make dollar finance available at LIBOR + 1% to the banks financing the gem & jewellery industry up to 31st December 2011; as against LIBOR + 3.5% and extra charges of handling and commissioning.
Adding to this, the industry requested export income to be made tax free for two years.
It seeks income from export to be made tax free by declaring 2 years tax holiday for export earnings from all types of direct and Indirect taxes including income tax. It also asked for proper and prompt refunds to be made against the Indirect Taxes paid by exporters on account of service tax, VAT and other local taxes like octroi, etc.
The industry has asked for introduction of Duty Drawback Scheme on gold at Rs 100 per 10 gm so as to curtail the hindrances gold gem & jewellery exporters during the procurement of precious metals form the nominated agencies.
Finally, the Labor Intensive Industry, seeks introduction of new scheme National Skilled Manufacturing Employment Guarantee Scheme (NSMEGS) for the Gem & Jewellery Industry in lines with the National Rural Employment Guarantee Scheme; with main objective to enhance livelihood security in skilled manufacturing sector by providing at least 100 days of guaranteed wage employment in a financial year to gem & jewellery artisan in a manufacturing unit.
Companies to Watch
Gitanjali Gems, Rajesh Exports
The labor Intensive Gem and jewellery Industry is amidst adverse market conditions, forcing some of the players in the polished diamonds to close down. There has been massive rise in unemployment from the export intensive sectors, including gems and jewellery.
The players are also plagued with increased piles of stock due to slow down in demand of cut and polished stones, in FY09. Extending credit facilities and Introduction of Presumptive Tax/Turnover Tax will benefit industry for a better performance.