Journey to the centre of the heart

The upcoming festive season with some favourable developments is expected to provide the much needed boost to the Gems & Jewellery sector in India.

Circa February 2011: It seemed as if the branded jewellery buyers’ sponsored honeymoon was over. After doing away with 2% excise duty on branded jewellery in 2009-10, Finance Minister Pranab Mukherjee, in the Budget 2011-12, had proposed to again levy a 1% excise duty on the same. Although 1% seems not too high for an excise duty rate, if one were to consider the same with the burgeoning gold and silver prices (while gold prices appreciated by around 30% in 2010, silver increased by a mind-boggling 80%), the multiplier effect was bound to burn a hole in the buyers’ wallets, and in turn the sellers’ pockets, with an imminent slowdown in sales. Even worse: the timing. While the sector was poised to grow at a CAGR of 40% to touch the Rs.100 billion mark by the end of 2011, the announcement was considered a major roadblock for the sector. Did all this hit the sector growth?

It’s been over six months since then and the sector seems to have weathered it all quite well. In fact, a 15.1% y-o-y growth in total exports of gems and jewellery from India during April-June 2011 shows that there’s not much bothering the sector, which accounts for 16.7% of India’s total merchandise exports (as on March 31, 2011). The January-June 2011 export figure for the segment was $25 billion; last year, during the same period, the figure was only $18 billion – in other words, the first six months of this year have seen a growth of 34.17% in exports. The Hong Kong jewellery fair, held every year from September 19 to September 25, is considered to be Asia’s largest gems and jewellery expositiong. 3,300 and above exhibitors from 46 countries, 50,000 plus buyers from 135 countries – and you know this is the grand slam of all events for this sector. This year, India has the largest contingent in this event compared to all participating countries. –

But still, for the players in this industry, the most critical market is the domestic one. While the global jewellery market is close to $145 billion in size, US, Hong Kong, China, and India, make up the top consumers of this industry. But recently, the domestic prices of diamonds have gone down by more than 10% – this is because during the fortnight before Dussehra, almost no purchases are made of gold and jewellery as this pre-Dussehra period is considered an inauspicious period to buy jewellery. Also, with gold prices at unimaginable highs (Rs. 27000 per 10 gms), and inflation playing truant with the savings of the Indian consumer, it is true that even the most auspicious of Indian consumers are thinking twice about investing in gold and jewellery – players like Gitanjali Gems have already commented that their sales could get hit by almost 10% this year.

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Source : IIPM Editorial, 2011.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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