The Indian diamond industry, which was on its annual Diwali vacation during the month of November, was almost on a slow track as far as trading in the market was concerned. Buyers, too, kept away, fully aware that the industry would have shut shop for the festival. Production was at its minimal in the cutting centres, especially Surat which is slowly limping back to normalcy now. Diamond companies in Varachha and Mahidharpura in Surat closed their units for more than a fortnight for Diwali to resume operations in December. There are over 4,000 diamond manufacturing units in the city.
Severely hit by the slowdown in the consuming markets, the Indian industry is striving to return to its former self after the Diwali holidays. With huge inventories of unsold polished goods in India as well as at representative offices overseas, the industry struggles to strike a balance. Cutting down import of roughs, manufacturing units closed for longer periods for Diwali vacation is the norm at present.
As it is the market forces that are at work, the industry is just waiting it out, till economies in consuming countries improve and business begins to pick up speed. Meanwhile, the domestic market is the sustenance for the traders, who are pushing to download goods to local buyers at reasonably low prices, given the current difficult situation in the industry.
The Indian government on its part is doing all that it can to support the industry, which is a large foreign earner for the country. Establishment of Special Notified Zones (SNZ) for sale of rough diamonds by mining companies; reduction of net profit rates under Benign Assessment Procedure (BAP) for diamond industry from 6 per cent to 2.5 per cent; reductions in import duty on gold from 10 per cent to 2 per cent, for silver from 10 per cent to 2 per cent, for cut and polished coloured gemstones from 2.5 per cent to 0 per cent, and for processed pearls from 10 per cent to 2.5 per cent; and comprehensive gold policy which includes mining gold metal loans and recycling are some of the incentives offered for the gem and jewellery industry. Medium term initiatives for the period of three years would include provisions for imports of capital goods and consumables; exploring the possibility of e-commerce and movement of jewellery seamlessly across the country through tax reforms (paving way for the special GST); and the provision of conducive financing environment to boost the growth of jewellery manufacturing industry.
A few days of excitement was seen when a group of Bollywood celebrities and businesspeople felt an agitation will help bring the Koh-i-Noor diamond, one of the world’s most famous gemstones, back to India. As it always happens in such cases, the excitement fizzled out and nothing has been heard of it since then.
The Associated Chambers of Commerce and Industry of India (Assocham) has chipped in to urge the Indian government to grant an industry status to the gems and jewellery sector and proposed a seven-pronged strategy for arresting the continuous fall in gems and jewellery exports.
The Union commerce ministry has also requested the finance ministry to cut import duty from 10 per cent to two per cent. Aided by comfortable CAD situation, the commerce ministry is very keen on a duty cut for gold to help local jewellery makers source cheaper supplies.
However, the diamond industry’s export performance over the past few months have been dismal as the problem is less or no demand from overseas buyers. The downslide continued with India recording its exports of cut and polished diamonds for Oct ’15, showing a decline of 17.10 percent, registering $ 1839 million as against $ 2218.81 million in Oct. ’14, according to the provisional figures announced by the Gem & Jewellery Export Promotion Council (GJEPC) of India. Rough imports recorded $ 1072.73 million for Oct. ’15 as against $ 935 million in Oct.’14, registering an increase of 14.61 percent, as production cut was exercised by the Indian manufacturers, which led to restrain in rough buying.
But, nothing stops the Indian diamond industry to go ahead with its programs. Rio Tinto’s diamonds completed its inaugural rough diamond viewing at the India Diamond Trading Centre in Mumbai’s Bharat Diamond Bourse. A selection of Argyle and Diavik rough diamonds were viewed in Mumbai from 23 November to 25 November, prior to returning to Antwerp for auction.
Also, the Gemological Institute of America (GIA) invalidated grading reports for 1042 diamonds after discovering that colour and clarity of these stones were fraudulently altered. Subsequently, they had published the list of clients who submitted these stones; and their accounts had also been suspended.
On Nov.5, Prime Minister Modi launched three incentives to monetize gold that is lying idle and make it part of the banking system. Indians have gold worth over $800 billion, in family lockers and in temples.
The Gem and Jewellery Export Promotion Council (GJEPC) has decided to launch a promotional campaign for diamonds in its key diamond export markets such as China, Latin America and the Middle East, which was announced by Praveenshakar Pandya, GJEPC's Chairman.
The marketing initiative to be launched soon by the Diamond Producers Association (DPA) is expected to bring back the sparkle to Surat’s cutting and polishing sector by at least next year. DPA, a consortium of world's leading diamond mining companies, is set to launch a $6 million global marketing blitzkrieg to boost the sale of diamonds.
The GJEPC is keeping the industry flag flying by organizing companies to participate in all the Fairs & shows across the globe. It was at the Jewellery Arabia 2015 from 24 to 28 November 2015 at the Bahrain International Exhibition and Convention Centre. Represented by 57 leading names from the Indian gems and jewellery industry, GJEPC had a new look for the Indian Pavilion in Jewellery Arabia 2015.
When the Indian government rolled out its gold monetization schemes on Nov 5, many were skeptical, and rightly so, as the GMS began on a slow start, whereas the Gold Bond Scheme has received very good response. As it is early days, so the gold industry waits awareness to spread to people before the Schemes picks up.
Indian jewellery companies spread their wings globally… PC Jeweller Limited, which is one of the large jewellery companies in India, entered into an agreement with California-based watch maker Martian Watches recently to make ‘smart jewelry’ products. The company will be the first Indian firm to manufacture ‘smart jewelry’ in India. PNG Jewellers, the Indian Jewellery brand was awarded as the most promising brand of India in Jewellery and Lifestyle sector by WCRC (World Consulting and Research Corporation). Despite the damp season in Bangalore because of heavy rains, Titan’s jewellery and watch sales increased by 15 to 20 per cent since mid-October. The increased sales were seen not just in gold jewellery, but diamond jewellery also grew well during the Navratri-Diwali period. The KGK group has now opened another one recently - a silver jewellery manufacturing unit in Bangkok, under the name ‘Trinity Creations Co. Ltd.
As expected, the domestic sector did pretty well during the festival season, with jewellery recording high sales across the country. The sector received a fabulous response during the much awaited Diwali Season this year. The industry witnessed a good 15-20 percent rise in jewellery sales, compared to last year. The prevalent low gold prices acted as the perfect catalyst, boosting up the sales majorly in the Western and Northern region; and with moderate growth seen in Eastern and Southern region. Sales of gold on Dhanteras went up by 25 per cent, as compared to the last year.
Some jewelers in Mumbai said that though jewellery sales began on a slow note, it later shaped up very well. The market received major demand for jewellery, unlike the usual rush for bullion. Many retailers witnessed 30 per cent rise in sales compared to last year and hope the trend to continue, due to the wedding season in the next few months.
Sales in the Southern region of India was on a lower phase due to the heavy rains that has ravaged the region. Besides, since the Diwali festival is not a major occasion for jewellery buying in the region, it was evident from the decreased buyer traffic at the jewellery stores.
The appetite for gold among buyers increased this Diwali. Compared to last year there was an increase of 20- 25% in jewellery sales across India. In South, there was moderate rise in sales compared to last year. Dhanteras is a major festival in North, while Akshaya Tritiya is a major gold buying occasion in South.
Gold prices in Mumbai dropped almost 5 per cent since last Dhanteras on October 21, 2014. The Metals and Minerals Trading Corporation (MMTC), a government of India enterprise, did roaring business for gold and silver coins bought as gifts this Dhanteras through the online channel, according to media reports. This festive season had major marketplaces such as Amazon, Snapdeal and Flipkart targeting gold-buyers through new tie-ups and products on their platform. Some marketplaces reported that the number of buyers increased five-times during Dhanteras; and the revenue growth was almost 8 times, indicating that people were buying higher value jewellery. There are also indications that majority of the sales came from existing customer base on the marketplace.
Consumer interest in diamonds is making a mark across India. And unlike last year, the diamond jewellery too saw a rise in sales this Diwali, according to the leading jewellery retailers. According to traders, polished diamonds did reasonably good business this year. As diamond jewellery retailing showed positive response during Dhanteras and Diwali, the Indian diamond industry is working overtime to meet the post-Diwali season demand, which is always the best phase for jewellery sales in India.
Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished
