Export of Gems and Jewelry in India

SFM term paper on
EXPORTS OF GEMS AND JEWELLARY IN INDIA

Submitted By:

Anusha Boddapati (10303) Bhargava R (10307)
Mahesh Kumar Goyal (10324)
Mohammad Rahamathulla (10331)
Sanjana Devarakonda (10342)
C.D. HariPriya (10353)

Tle of Contents ABSTRACT 4 INTRODUCTION 5 GEM SONES 5 JEWELLARY 5 PEARLS 5 GEMS AND JEWELLARY SECTOR 6 Classification: 6 Polished Diamonds 6 Gem Stones 7 Gold and Jewellery 7 Synthetic Stones 7 GLOBAL TRADE 7 OBJECTIVES OF THE STUDY 8 Diamond trading hub 8 High-end jewellery 8 SIZE 8 OUTLOOK 9 SHARE OF INDIAN MARKET 9 SWOT ANALYSIS OF INDIAN GEMS & JEWELLERY INDUSTRY: 10 Strengths: 10 Weaknesses: 10 Opportunities: 10 Threats: 10 KEY INDIAN MARKETS 11 ONE OF THE INDUSTRY IN INDIA 12 SU-RAJ GROUP 12 Manufacturing process 13 Diamonds: 13 Jewellery: 13 Awards 13 INDIA 'S EXPORTS OF GEMS & JEWELERS TREND ANALYSIS (2000-03 TO 2006-07) (IN US$ MILLION) 15 TREND ANALYSIS OF CUT AND POLISHED DIAMOND 15 TREND ANALYSIS OF COLORED GEM STONE 16 TREND ANALYSIS OF GOLD JEWELLERY 17 TREND ANALYSIS OF PEARLS 18 TREND ANALYSIS OF NON GOLD JEWELLARY 19 TREND ANALYSIS OF SYNTHETIC STONES 20 TREND ANALYSIS OF COSTUME/FASHION JEWELLARY 21 TREND ANALYSIS OF SALES TO FOREIGN TOURIST 22 GOVERNMENT POLICIES 23 Major measures undertaken by the government for Gems and Jewellery sector (in 2007) 23 Include: 23 Export facilitation measures by the Ministry Of Commerce and Industry ( as on 26th February 2009) 23 CONCLUSION 24 BIBLIOGRAPHY 25

ABSTRACT

The Gems and Jewellary Sector is the second largest earner of foreign exchange only next to Textile Industry. It consists of Indian Gems and Jewellary Sector and device a strategy for exports. The Gems and Jewelry market in India has a very strong potential due to low production cost and highly skilled labor. Here gold dominates the market accounting for highest demand though in recent years platinum and diamonds are the top fashion symbols. Stones have also taken a place among a different group of people who believe in spiritualism; still this segment is on the development stage. In terms of regional classification, each region accounts for a special type of jewelry or follow a traditional style of jewelry making, like Karnataka is famous for temple jewellary.

INTRODUCTION

India is a leading player in the global gems and jewellary market. The gems and jewellary industry occupies an important position in the Indian economy. It is a leading foreign exchange earner, as well as one of the fastest growing industries in the country.
The GJ sector may be further categorized into the following sub-sectors based on characteristics, processing techniques, preciousness in terms of price range and marketability.
GEM SONES * DIAMONDS * COLORED STONES-PRECIOUS, SEMI-PRECIOUS, synthetic

JEWELLARY * PLAIN GOLD JEWELLARY * STUDDED JEWELLARY * SILVER JEWELLARY * COSTUME JEWELLARY

PEARLS

While a predominant portion of gold jewellary manufactures is for domestic consumption, a predominant portion of rough, uncut diamond processed in India in the form of either polishes diamonds or finished diamond jewellary is exported. Gold’s jewellary forms around 80% of the Indian jewellary market of RS.490 Billion with the balance compromising fabricated studded jewellary that includes diamonds studded as well as gem stone studded jewellary. Preference for gold dominates the domestic jewellary demand which is estimated to be RS.390 Billion in 2005.

The Indian gems and jewellary industry is competitive in the world market due to its low cost of production and the availability of skilled labor. In addition, the industry has set up a worldwide distribution network, of more than 3000 offices for the promotion and marketing of Indian diamonds.

GEMS AND JEWELLARY SECTOR
Diamonds, gems and Jewellery have been a part of the Indian civilization since its recorded history, the significance of the gems and Jewellery industry in the Indian economic scenario is a development of the last three or four decades. In 1966-67, the export turnover of the Gems & Jewellery industry was just Rs 220 m representing a 3 per cent of total merchandise exports. However, it has now grown to become one of the leading export oriented industries in India recording an export turnover of around Rs 91617.53 Crore during 2008-09, making it a significant foreign exchange earner for the country.
The gems and jewellery sector, which has seen a substantial fall in exports since 2007 due to the withdrawal of a 6 per cent duty concession under the Generalized System of Preferences on jewellery exports to the US, has been severely affected by the economic meltdown.
As a result, India’s share of gems and jewellery exports to the US has come down from 36 per cent in 2006 to 20 per cent in 2009.
The UAE was the largest importer of gems and jewellery from India in 2008-09, with a share of 31 per cent. This was followed by Hong Kong with a 25 per cent and the US with 20 per cent. The gems and jewellery sector accounted for 13 per cent of India’s total merchandise exports.
Classification:

Polished Diamonds: India is one of the best markets in the world in the polished diamonds for its world-class quality of diamonds as well as exquisite cutting skills. Over 83 per cent of India 's Gems & Jewellery cut and polished diamonds account for exports. Jaipur and Surat are famous as world class polishing and designing centers.
Gem Stones: This category refers to the stones other than diamonds, these stones comes under two basic categories that are precious stones and Semi precious stones. There is a huge demand for these gemstones especially of Sapphire, Emerald and Ruby. India 's exports of gems have crossed 5000000 carats this year.
Gold and Jewellery: This category represents the gold and Jewellery, which is used in the manufacturing of various ornaments. Indian is the country that is the largest consumer of gold in the world, In the year 2007 gold consumption in India was 850 tons 33% up from the last year.
Synthetic Stones: Synthetic diamond is diamond produced through chemical or physical processes in a laboratory. Like naturally occurring diamond it is composed of a three-dimensional carbon crystal. Synthetic diamonds are also called cultured diamonds. Synthetic diamond is not the same as diamond imitation, which can be made of other material. This is an upcoming market in India.

GLOBAL TRADE
The gems produced here gave birth to a fabulous industry and global trade.
Indian Gems and Jewellery Industry have achieved a premier position in the International market. Today India has been recognized as a significant manufacturing exporting center apart from its traditional strengths in handmade jewellery, the country has niche for itself in machine made commercial jewellery arena. The export industry has come of age and is now entering a new phase of development. Gearing up to achieve further growth, the industry has already captured a 55% share of world market by the turn of this century.
India is a primary source of imports for the developed countries, mainly because of abundant availability of skilled and cheap labor, but now this no longer remains the competitive edge for India as heavy competition is faced by various countries like China, Thailand and Sri Lanka. But at the same time, India has managed to keep its position healthy and have brighter prospects ahead.
OBJECTIVES OF THE STUDY * To review the present status of the Indian Gems and Jewellery Sector & to Analyze its contribution to the economy. * To critically evaluate the export performance of Indian Gems And Jewellery sector over the years and its share in the global trade in Gems And Jewellery. * To understand the importance and effectiveness of export in present market situation.
Diamond trading hub
After making its mark in the world diamond processing industry, the industry fraternity has taken up the motto to make ‘India the diamond trading hub’.
High-end jewellery
As the gem and jewellery companies are based out of Mumbai, the city is home to various types of jewellery from the traditional to the high-end designer fashion jewellery. It is one of the largest producers and exporters of jewellery, which is estimated to be over $13 billion. Prominently, it accounts for over 15 per cent of the world jewellery fabrication pie.
Not only this, India is one of the fastest growing markets for jewellery, growing at the rate of 10.20 per cent per annum over the last five years. Today, the Indian consumer market for jewellery is said to be $13.1 billion, an increase of close to 8 per cent over the previous year.
SIZE
* Large market for Gems & Jewellery with domestic sales of over $10 billion * 4% of the global Gems and Jewellery market * Exports of over US $15.5 billion; over 18% of India’s exports. According to recent statistics of the Gems & Jewellery Export Promotion Council (GJEPC), India 's exports of gems & jewellery (GJ) aggregated Rs. 15787.09 Crores (US$3958.64million) during the month April-May- 08. * India is the largest consumer of gold jewellery in the world * Accounts for about 20% of world consumption * India is the largest diamond cutting and polishing centre in the world, i.e., 60% value share, 85% volume share and 92% share of the world market by number of pieces * The Indian domestic diamond jewellery market was estimated at around Rs. 76 billion during 2005. * China ranks sixth in the world in terms of diamond jewellery retail value, ahead of India which is in seventh place. India ranks third in terms of diamond value, while China holds the seventh position. * Indian diamond jewellery industry is the third largest consumer of polished diamonds after USA and Japan
OUTLOOK
* India is the fastest-growing jewellery market in the world * Branded jewellery likely to be the fastest-growing segment in domestic sales * The sector is expected to grow at 40% p.a. to $2.2 billion by 2010 * Exports expected to grow from $15.5 billion in 2005 to over $25 billion by 2010 * India is the most technologically advanced diamond cutting centre in the world and has the opportunity to address one of the world’s largest and fastest-growing Gems and Jewellery markets * Indian industry has been gaining prominence as an international sourcing destination for high quality designer jewellery * Wal-Mart, JC Penney etc. are increasingly procuring jewellery from India

SHARE OF INDIAN MARKET * India 's share in this sector is about 80 per cent of the world market. * India also accounts for 90 per cent of the volume of diamonds processed in the world. * India employs over 90 per cent of the global diamond industry workforce. * 'Diamond jewellery consumption is likely to jump to nearly 80 percent in 2010 and over 95 per cent between 2010 and 2015, ' according to Assoc ham.

SWOT ANALYSIS OF INDIAN GEMS & JEWELLERY INDUSTRY:
Strengths:
* About one million craftsmen are associated with this industry. Their skills can be utilized for designing and making modern Jewellery * Availability of abundance of cheap and skilled labor in India. * Presence of excellent marketing network spread across the world. * Supportive government industrial/ EXIM policy.
Weaknesses:
* Small firms lacking technological/ export information expertise. * Low productivity compared to labor in china, Thailand and Sri Lanka. * As the major raw material requirements need to be imported, companies normally stock huge quantities of inventory resulting high inventory carrying costs.
Opportunities:
* New markets in Europe & Latin America * Growing demand in South Asian & Far East countries. * Rupee value depreciating resulting in a windfall increase in the profitability. * Industry moving from a phase of consolidation
Threats:
* China, Sri Lanka and Thailand 's entry in small diamond segment * Infrastructure bottlenecks, absence of latest technology * Unusual increase in the prices of gold and rough diamonds.

KEY INDIAN MARKETS

ONE OF THE INDUSTRY IN INDIA
SU-RAJ GROUP

Su-Raj Group was formed in 1965 and converted in to a corporate entity in 1980’s. The group exposed with a public issue in 1986 as the first Indian Diamond Industry - Issue Size was Rs.4.7 Crores and it’s Turnover Crossed Rs.100 Crores in 1989-90. The Diversification into jeweler business has been done in a major path and the modifications of the name in 2001-02. 29th Net Foreign Exchange Earner of the Country in 2002-03.
TURNOVER OF THE INDUSTRY YEAR | AMOUNT (IN CRORES) | 2004-05 | 1000 Above | 2005-06 | 1220 | 2006-07 | 1500 Above | 2007-08 | 2140 | 2008-09 | 2420 | 2009-10 | 3000 Above |

Manufacturing process
Diamonds:
The Cutting and Polishing of diamonds is a highly labor intensive process, which demands a significant level of skill and attention in detail on the part of the worker. Each small diamond has to be processed individually and due to the small size and high cost of raw material being processed “rough diamonds” or “roughs” – a great deal of accuracy is required. Constant supervision to ensure minimum wastage and constant vigilance to prevent any pilferage is essential. A successful diamond processing operation demands highly skilled labor operation within a closely supervised and efficiently structured manufacturing environment with excellent management information system to ensure adequate controls and a high quality product.
Jewellery:
The company employs the latest technology available in the world to manufacture Gold Jewellery. The manufacturing facility can be compared with any Jewellery manufacturing company in Europe and USA. The process employed is called the ‘Lost Wax Process’ of art metal casting for manufacturing diamonds and colored stones in-laid alloy gold jewellery. 1985: Diamontaire of the year.
Awards
YEARS | AWARDS | 1985 | Diamontaire of the year award. | 1885-1986 | Certificate of Merit for highest growth in exports (DTC category). | 1987-88 | Certificate of Merit for developing exports to non-traditional markets (DTC category). | 1987-88 | Award for Outstanding Export Performance from Gems and Jewelers export promotion council. | 1988-89 | Award for Outstanding Export Performance from Gems and Jewelers export promotion council. | 1989-90 | Certificate of Merit for Outstanding Export Performance (DTC Category). | 1992-93 | Certificate of Merit for Outstanding Export Performance (DTC Category). | 1992-93 | Award for Outstanding Export Performance from Gems and Jewelers Export Promotion Council | 1993-94 | Certificate of Merit for Outstanding Export Performance (DTC Category). | 1994-95 | Certificate of Merit for Outstanding Export Performance (DTC Category). | 1994-95 | Fourth largest Net Foreign Exchange earner in India. | 1994-95 | Largest Exporter and Processor of Cut & Polished Diamonds. | 1995-96 | Certificate of Merit for Outstanding Export Performance (DTC Category). | 2002-03 | 29th Gross Foreign Exchange Earner of the Country. | 2002-03 | 55th Net Foreign Exchange Earner of the Country. | 2006-07 | Awards for outstanding export performance for the years 2006-07 from Export Promotion Council for EOUs & SEZs, Ministry of Commerce & Industry, Government of India |

For best EOU in India (SSI category) – Bangalore Unit
For best SEZ in India (SSI category) – Cochin Unit
For best SEZ (SSI Category: Gem & Jeweler) – Kolkata Unit

INDIA 'S EXPORTS OF GEMS & JEWELERS TREND ANALYSIS (2000-03 TO 2006-07)
(IN US$ MILLION) TREND ANALYSIS OF CUT AND POLISHED DIAMOND | YEAR | Y | (Year-(2006-2007)) X | XY | X^2 | TREND | | | | | | Yc | 2005 | 6187 | -2 | -12374 | 4 | 528.6 | 2006 | 5972 | -1 | -5972 | 1 | 6551.3 | 2007 | 7111 | 0 | 0 | 0 | 7815.8 | 2008 | 8627 | 1 | 8627 | 1 | 9080.3 | 2009 | 11182 | 2 | 22364 | 4 | 10345 | TOTAL | ∑Y=39079 | | ∑XY=12645 | ∑X^2=10 | | | The Trend Equation is Yc=a+bx | | | | a=∑Y/N = 39079/5 = 7815.8 | | | | b=∑XY/∑X^2 = 12645/10= 1264.5 | | | | The Trend Equation is Yc=7815.8+1264.5 | | |

TREND ANALYSIS OF COLORED GEM STONE | YEAR | Y | (Year-(2006-2007))X | XY | X^2 | TRENDYc | 2005 | 203 | -2 | -406 | 4 | 199.8 | 2006 | 183 | -1 | -183 | 1 | 194.8 | 2007 | 192 | 0 | 0 | 0 | 189.8 | 2008 | 178 | 1 | 178 | 1 | 184.8 | 2009 | 193 | 2 | 386 | 4 | 179.8 | TOTAL | 949 | | -25 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 949/5 = 189.8 | | | | b=∑XY/∑X^2 = -25/10 = -2.5 | | | | The Trend Equation is Yc=189.-2.5X | | |

TREND ANALYSIS OF GOLD JEWELLERY | YEAR | Y | (Year-(2006-2007))X | XY | X^2 | TRENDYc | 2005 | 1150 | -2 | -2300 | 4 | 696.8 | 2006 | 1167 | -1 | -1167 | 1 | 1139.5 | 2007 | 1513 | 0 | 0 | 0 | 1582.2 | 2008 | 268 | 1 | 268 | 1 | 2024.9 | 2009 | 3813 | 2 | 7626 | 4 | 2467.6 | TOTAL | 7911 | | 4427 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 7911/5 = 1582.2 | | | | b=∑XY/∑X^2 = 4427/10 = 442.7 | | | | The Trend Equation is Yc=1582.2+442.7X | | |

TREND ANALYSIS OF PEARLS | YEAR | Y | (Year-(2006-2007))X | XY | X^2 | TRENDYc | 2005 | 3 | -2 | -6 | 4 | 3.2 | 2006 | 3 | -1 | -3 | 1 | 3.3 | 2007 | 4 | 0 | 0 | 0 | 3.4 | 2008 | 4 | 1 | 4 | 1 | 3.5 | 2009 | 3 | 2 | 6 | 4 | 3.6 | TOTAL | 17 | | 1 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 17/5 = 3.4 | | | | b=∑XY/∑X^2 = 1/10 = 0.1 | | | | The Trend Equation is Yc=3.4+0.1X | | |

TREND ANALYSIS OF NON GOLD JEWELLARY | YEAR | Y | (Year-(2006-2007)) X | XY | X^2 | TRENDYc | 2005 | 56 | -2 | -112 | 4 | 50.4 | 2006 | 64 | -1 | -64 | 1 | 68.5 | 2007 | 85 | 0 | 0 | 0 | 86.6 | 2008 | 99 | 1 | 99 | 1 | 104.7 | 2009 | 129 | 2 | 258 | 4 | 122.8 | TOTAL | 433 | | 181 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 433/5 = 86.6 | | | | b=∑XY/∑X^2 = 181/10 = 18.1 | | | | The Trend Equation is Yc=86.6+18.1X | | |

TREND ANALYSIS OF SYNTHETIC STONES | YEAR | Y | (Year-(2006-2007)) X | XY | X^2 | TRENDYc | 2005 | 2 | -2 | -4 | 4 | 2 | 2006 | 2 | -1 | -2 | 1 | 1.7 | 2007 | 1 | 0 | 0 | 0 | 1.4 | 2008 | 1 | 1 | 1 | 1 | 1.1 | 2009 | 1 | 2 | 2 | 4 | 2.6 | TOTAL | 7 | | -3 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 7/5 = 1.4 | | | | b=∑XY/∑X^2 = -3/10 = -0.3 | | | | The Trend Equation is Yc=1.4-0.3X | | |

TREND ANALYSIS OF COSTUME/FASHION JEWELLARY | YEAR | Y | (Year-(2006-2007)) X | XY | X^2 | TREND Yc | 2005 | 10 | -2 | -20 | 4 | 8.4 | 2006 | 10 | -1 | -10 | 1 | 8.2 | 2007 | 10 | 0 | 0 | 0 | 8 | 2008 | 10 | 1 | 10 | 1 | 7.8 | 2009 | - | 2 | - | 4 | 7.6 | TOTAL | 40 | | -20 | 10 | | | The Trend Equation is Yc=a+bX | | | | a=∑Y/N = 40/5 = 8 | | | | b=∑XY/∑X^2 = -20/10 = -0.2 | | | | The Trend Equation is Yc=8-0.2X | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

TREND ANALYSIS OF SALES TO FOREIGN TOURIST | YEAR | Y | (Year-(2006-2007)) X | XY | X^2 | TREND | | | | | | Yc | 2005 | 12 | -2 | -24 | 4 | 15 | 2006 | 13 | -1 | -13 | 1 | 13.1 | 2007 | 13 | 0 | 0 | 0 | 11.2 | 2008 | 18 | 1 | 18 | 1 | 9.3 | 2009 | - | 2 | - | 4 | 7.4 | TOTAL | ∑Y=56 | | ∑XY=-19 | ∑X^2=10 | | | The Trend Equation is Yc=a+bx | | | | a=∑Y/N = 56/5 = 11.2 | | | | b=∑XY/∑X^2 = -19/10 = -1.9 | | | | The Trend Equation is Yc=11.2-1.9X | | |

GOVERNMENT POLICIES
Major measures undertaken by the government for Gems and Jewellery sector (in 2007)
Include:
* Reducing the value addition norms for gold and silver jewellery exports from 7% to 4.5%. * Allowing 100% in the gems and jewellary sector through the automatic route. * Abolishing duty on polished diamonds in MAY 2007. * Setting up gems and jewellary parks and SEZs to promote sectoral investment.

Export facilitation measures by the Ministry Of Commerce and Industry ( as on 26th February 2009) * Gems and jewellary, diamonds and precious metals have been given a special boost by the Ministy of Commerce and Industry, the Export Promotion Council for Gems and Jewellary and Star Trsding Houses ( in the gems and jewellary sector), besides Diamond india Ltd, MSTC Ltd, STC Ltd have now been added under the list of nominated agencies notified under para 4 A.4 of foreign trade policy for the purpose of import of precious metal. * Surta in Gujarat, which is home to thousands of diamond units with lakhs of diamond workers, has been recognised as “TOWN OF EXPORT EXCELLENCE”. * The authorised persons of Gems and Jewellary units in Export Oriented Units shall be allowed personal carriage of gold in primary form upto 10kg in a financial year subject to RBI and Custom Guidelines.

CONCLUSION

Today India is the largest manufacturer of diamonds in the world. It makes use of the latest automated machines, technology and tools. Government has realized the importance of technology in the diamond trade and has upgraded their facilities to a great extent.
There cannot be a control on the amount of rough coming into our country. The polishing and marketing of diamonds has gained more importance. New markets and centers have started emerging and stones similar to small traditional Indian goods types are being polished in China and even in Thailand and Sri Lanka.
India has 55 percent by value, 80 percent by volume and 90 percent by way of pieces. Though this being the current situation. It will not be difficult for the industry to grow by five to ten percent in terms of value because of our sizes of firms and our labor force. But a share of larger than seventy five percent will be difficult because of competition from other new markets, the mining companies themselves setting up manufacturing and polishing facilities and the rest of the market consists of high quality and colored diamonds.
Though the Indian diamond market has a large share when compared to other markets, they will have to work hard for maintaining this position and will have to make continuous changes and innovations. The government will have to take steps in stopping illegal activities and threat of terrorism. The diamond industry should also look more into fancy and colored diamonds, which is the latest trend. They should also look into the new shaped diamonds that have been discovered.

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BIBLIOGRAPHY
* Google books * A study of gems and jewellary export [Compatibility Mode] * Competitive analysis of Indian Gems and Jewellary sector.

Bibliography: * Google books * A study of gems and jewellary export [Compatibility Mode] * Competitive analysis of Indian Gems and Jewellary sector.