The month of March began with the Union Budget 2016-17 being a damp squib as many areas in the gem & jewellery sector have not been addressed, including the 1% excise duty levy on jewellery. The Indian gem & jewellery industry was unhappy as many key issues that were put before the government was completely ignored. Some of the positives was the Inclusion of Separate HS Code (Harmonised Systems Code) for Lab grown diamonds and a separate one for the Natural Diamonds; Special Notified Zone (SNZ); proposal to reduce the rate of Corporate Tax from 30% to 25% and others were welcomed by the industry.
Trading in the diamond market was rather slow during the month, with overseas demand not showing much promise. The demand from the Indian domestic market was also slow as the jewelers strike continued across the country. While there was steady demand from US, demand from Far East and Europe continued to be slow. Indian cutting & polishing centres improved their manufacturing levels, which indicated the increase in rough imports last month. Jewellery demand was also slow from overseas markets.
Media reports mentioned that Indian diamond market has witnessed certain categories of polished diamond prices increase 4-5 per cent, amid shortage of goods. While demand from the US market is quite strong, exports of polished goods from India is expected to increase in the coming months. Though China slowdown has affected demand from the country, the Chinese market has also opened on a strong note after the New Year’s holiday. The Far East is gradually showing a renewed interest in diamonds as well, so on the whole it is expected that 2016 will be a comparatively better year for diamond companies. However, some section of the industry feel it is too early to say that the Indian diamond is picking up, as it is just improving a little on the manufacturing front.
A sense of relief came over the industry from the February statistics that was announced by the Gem & Jewellery Export Promotion Council of India (GJEPC) which indicated that after registering many months of declining exports, India’s cut & polished diamond exports for February 2016 amounted to $2.33 bn as against $2.29 bn in Feb ’15, a rise of 2 percent. The Indian diamond industry, which has been severely hit for many months due to the global slowdown in the consuming markets, is slowly showing signs of revival. Rough imports recorded an increase of 37 percent to $1.54 bn for Feb ’16 as against $1.12 bn in Feb ’15. Rough exports showed an increase of 49 percent, registering $130.79 mn for Feb ‘16 as against $87.78 mn for Feb ‘15. For the month of Feb ’16, cut & polished diamonds imported declined by 45.2 percent, recording about $222.1 mn as against $405.3 mn in Feb ’15.
During the month, the only celebration was GJEPC presented the ‘India Gem & Jewellery Awards (IGJA)’ 2015 in Jaipur’s Exhibition & Convention Centre. A total of 32 nomination awards and 5 felicitation awards were given away at GJEPC-IGJA 2015. A number of prominent industry leaders were present at a glittering event, including officials from the Government of Rajasthan and GJEPC's top representatives.
In its attempt to strengthen the industry, GJEPC is constantly making attempts to bring the global diamond leaders including mining companies to work together for mutual benefit. A delegation from De Beers led by CEO Phillipe Mellier had detailed discussions with a team of senior GJEPC functionaries led by Chairman Praveenshankar Pandya when the former visited the offices of the GJEPC at the Bharat Diamond Bourse complex on 2 March. Besides offering GJEPC’s support, other issues discussed by Pandya were related to pricing of rough diamonds and the need to control rough supplies; the need to ensure fixed supply on regular basis to the SMEs by selling in smaller lots; interaction with the banks to promote financing of the industry and the need to conduct generic promotions. In another move, GJEPC and BDB hosted a delegation from the Korean Diamond Exchange (KDE) on 5 Mar, and discussed steps to boost bilateral ties.
The Indian cutting & polishing centres are known to be tech-friendly, in the sense that they are ready to absorb the newest technologies with great interest. Not surprising then that STPL, one of India’s leading diamond processing technology providers based in Surat, has been awarded the prestigious India Design Mark (i-Mark) award for its flagship product Lazer Nxt - a widely acclaimed machine for diamond processing. The Awards were distributed at a gala function held at J. N. Tata Auditorium, Bengaluru, on 4th March, 2016. This is STPL’s second consecutive i-Mark award.
Mining industry too has seen renewed interest in India in recent times. Vedanta Limited, a global diversified natural resource company, won the nation’s first-ever gold mining lease auctioned by the Chhattisgarh government. The gold mine at Baghmara, about 140 km north-east of Raipur, is one of the oldest explored deposit of the precious metal in Central India. An estimated reserve found during the initial prospecting for gold in the region, that spreads over 607 hectares, is 2700 kg. In another mining news, the erstwhile closed Bharat Gold Mines Ltd (BGML) will soon be acquired by the State government in Karnataka (Southern India) from the Central government of India. Karnataka will acquire the BGML assets through its own mining company, Hutti Gold Mines. A joint venture will then be formed with a private company called JMJ Minerals, comprising former BGML workers, which will provide the administrative, financial and technological support required to take up shallow mining at KGF. The Centre has also agreed to waive about $255 mn liabilities that BGML is facing. The Rio Tinto diamond mining project in India, as of now, remains in limbo.
The recent terrorist attack in Brussels had the Indian diamond industry shaken, as many innocent lives were lost and several people injured. While GJEPC expressed its solidarity with the Belgium citizens especially diamond industry of Belgium, Prime Minister Modi met with the huge diaspora of Indian diamond fraternity which is settled in Belgium and operates out of their offices based there.
The Indian Government’s Gold Monetisation Scheme (GMS), which was launch on November 5 last year, has still not seen much progress. The Indian Bullion and Jewellers Association (IBJA), has also proposed a scheme where jewellers can act as a collection and purity testing centers; and mobilise idle gold which can be used productively. IBJA had proposed to open 1000 such centers across country. But, the outcome of this will be known in the coming months.
The ‘strike’ of the Indian jewellers against imposition of excise duty on jewellery in the recent Union Budget was just chaotic, with confusion galore. But Arun Jaitley, Finance minister, Government of India (GOI) has offered to walk the extra mile to ensure that small traders were not harassed, but made it clear that luxury items cannot go untaxed.
However, the strike by gold traders over the imposition of 1% excise has actually helped the government as imports of the metal are expected to be cut sharply in March from a year earlier, keeping the current account deficit (CAD) under control. The strike has also brought down the premium on gold. India’s CAD is likely to narrow to 0.7% of GDP in the current financial year from 1.3% in FY15 owing to lower commodity prices.
Another step taken by the government, empowers it to make hallmarking of gold and silver mandatory and provides for jail up to two years and fine up to 10 times of the goods' value in case of violation related to misuse of standards. The Parliament, on 8 Mar, passed a bill to replace the 30 year- old Bureau of Indian Standards (BIS) Act.
For some, life goes on… strike or no strike. The Indian jewellery chain, Kalyan Jewellers announced its foray into Qatar. Kalyan has been steadily expanding its presence in the GCC region since it launched its international operations. In two years the company has opened over 40 showrooms in India and the GCC region. Kalyan Jewellers is also slated to achieve a milestone of 100 showrooms by the first half of the year. The online jeweller Bluestone is set to raise $30mn to fund an expansion plan but will not go in for brick n mortar stores. The company feels that giving customers the option of trying out the jewellery at home rather than open stores is better. With Gross Merchandise Value (GMV) at $ 45.10 million, the jewellery portal is now getting ready to raise US $30 million from its existing and new investors.
Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished
