India's gems & jewellery exports witnessed 30.6 per cent year-on-year (Y-o-Y) contraction in October to $2.17 million, amid the imposition of a steep 50 per cent tariff by the United States (US) on several Indian products.
Exporters of gems and jewellery have said the free-trade agreement (FTA) has brought relief to their sector because this opens up the world's second-largest market and brings them on a par with China and Thailand, which face zero tariffs on shipments to Europe.
The US retaliatory tariffs are a major setback for the Indian gems and jewellery exports, apex industry body GJEPC said on Thursday as it urged the government to take steps to secure the long-term interest of the sector. The US has announced 27 per cent reciprocal tariffs on India saying New Delhi imposes high import duties on American goods, as the Donald Trump administration aims to reduce US' trade deficit and boost manufacturing.
The Gems and Jewellery Export Promotion Council (GJEPC) has urged the Centre to provide immediate relief measures as the tariffs imposed by the United States have started hitting the industry. US tariffs of 50 per cent on Indian goods came into effect on August 27.
'We will be able to anticipate the full picture of the impact after August, which is also the time when demand for a year begins to peak ahead of the December holidays and Valentine's Day.'
On August 7, the US president announced doubling tariffs on Indian goods to 50 percent for India's purchases of Russian crude oil, but gave a 21-day window to negotiate an agreement.
The USA's steep 50 per cent tariffs on Indian goods entering America will severely impact exports and job creation in labour-intensive export sectors such as shrimp, apparel, leather and gems and jewellery. Exporters said that the imposition of a 25 per cent penalty on India over and above the 25 per cent tariffs move will disrupt the flow of Indian goods to its largest export market.
Gem and Jewellery Export Promotion Council says step will balance trade deficit with the US.
'That combination of a rising economy, a growing middle class, and a deepening love of diamonds and jewellery is what we see really doubling the market for diamonds over the next five years.'
Exporters on Thursday sought a fund of Rs 750 crore for three years to tap USD 25 billion export potential in the US, aiming to seize potential opportunities that may arise as the US President-elect, Donald Trump, has threatened to impose high tariffs on Chinese goods. In its pre-Budget meeting with the finance ministry, Federation of Indian Export Organisations (FIEO) President Ashwani Kumar has also demanded extension of the five per cent Interest Equalisation Scheme (IES).
Gold, a safe-haven bet, is likely to continue its record-smashing journey in the New Year, rising to Rs 85,000 per 10 grams and even Rs 90,000 level in domestic markets if geopolitical tensions and global economic uncertainties continue.
Gems and Jewellery Export Promotion Council (GJEPC) has urged the government to reduce import duty on gold to 4 per cent from 7.5 per cent and a special package for the sector in the forthcoming Budget to boost shipments. As part of its pre-Budget recommendations, the council has also suggested a reduction in the import duty on cut and polished diamonds; cut and polished precious and semi-precious gemstones from 7.5 per cent to 2.5 per cent. "If (gold) imported at 4 per cent duty rate....working capital amounting to Rs 225 crore would be blocked instead of Rs 500 crore," the council said in a statement.
Exports of cut and polished diamonds during April-May witnessed a 77.42 per cent decline, gold jewellery exports declined 92 per cent and shipments of coloured gemstones also dipped 92.90 per cent.
The labour-intensive sector contributes about 15 per cent of the country's overall exports.
After China imposed a national security law on Hong Kong earlier this month, the United States on July 14 withdrew the special status granted to Hong Kong, and the United Kingdom, Australia, and Canada followed suit.
So far, rough diamonds mined from the Panna mines in Madhya Pradesh were auctioned online but displayed only at Panna.
Two entities under the Union ministry of commerce report differing figures for import of cut and polished diamonds for the first eight months of the financial year.
Though exports to Hong Kong, a major destination for India's polished diamonds, have resumed, the industry is currently sitting on an inventory worth around $2.3 billion.
Blocked working capital worth Rs 1,500 crore, in the almost-defunct job work diamond polishing units, is expected to be released even as diamantaires will issue fresh orders to such units following the GST relief.
Round-tipping creates the opportunity for exporters to source funds at a much cheaper cost, which they divert to some other business.
Demand is weak in traditional markets like US and EU.
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.
Prime Minister Narendra Modi had asked exporters to prepare a strategy for the next five years and start working in that direction.
In august last year, the government had raised import duty on gold and silver to 10 per cent to curb the surging imports and burgeoning CAD.
The industry body has issued two advisories in an attempt to restore jewellers credibility in the wake of the Rs 12,000-crore PNB-Nirav Modi scam, and recent defaults by two domestic jewellers - Goodwin and Rasiklal.
Three-four big gem and jewellery firms are showing financial weaknesses and might find it tough to withstand shocks
The US is the largest consumer of gems and jewellery in the world contributing nearly 40 per cent of global production. If India can tap the opportunity, its overall exports to the US could jump by 10 per cent to $ 11 billion this year.
The sector employs around 1 million skilled and unskilled workers directly and indirectly and decline in exports is a major worry for participants in the value chain.
The Gem and Jewellery Export Promotion Council has engaged UK-based Trend Forecasting for trend analysis focussing on the global market. \n\n
The decline in gold imports has helped in narrowing the country's trade deficit to $106.84 billion during the eight-month period under review as against $133.74 billion in the year-ago months.
Soon after Unlock 1, the industry - which is estimated to polish nine of 10 rough diamonds in the world - resumed operations, but a surge in cases at diamond polishing cluster, especially in Katargam and Varachha, forced units to go into a voluntary lockdown, which continued until recently.
The group has called for a retaliatory tariff action against India, if New Delhi does not roll back the 'unilateral and discriminatory' equalisation levy or Google Tax.
The first of its kind, a gem bourse to cater to the needs of the gemstone industry of the Pink City where all the business could be transacted under one roof, would soon become a reality.
All stakeholders in the diamond industry chain from mines to retailers have to follow a system of warranty under which they have to individually declare in the invoices they issue that what they have sold are not conflict diamonds.
These exports stood at $3.3 billion in the same period last fiscal, according to the data provided by the Gems and Jewellery Export Promotion Council.
Diamond industry expects revenues to drop by 20-25% in the current financial year.
It may touch Rs 19,800 crore.
The fall in exports of gems and jewellery exports is mainly because of shortage of raw-material for jewellery manufacturing.
The show will commence on July 31.
The Gems & Jewellery Export Promotion Council (GJEPC), the apex body set up by the Union ministry of commerce to monitor the jewellery business overseas, says it might call for pulling out of the diamond cutting and polishing business in China.
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