The month saw some fairly active trading in the Diamond district here in Mumbai, with optimism returning to the diamond industry but caution still rules. With overall rough price reduction, polished prices have firmed resulting in a market correction long overdue.
After facing a sharp decline in 2015, the polished diamond prices in India had been slowly recovering before the beginning of the New Year, bringing back good cheer to the Indian market. The certified polished diamond prices in various category rose by 0.50% to 4.7%. The price increase was recorded for the first time now, after the polished diamond prices witnessed a continuous decline in 2015, when polished diamond prices in various categories decreased between 5.8% and 14.5% last year.
Market analysts attribute this to market sentiment that improved in December; and the current shortage of goods in the market due to closure of factories in Nov/Dec 2015. Inventories of polished diamonds presently is lower than normal in Indian market. Also, initial reports about US holiday season jewellery sales are positive with general retail sales up about 8% and online mobile sales witnessing an increase up to 50-60%.
Meanwhile, the export and import figures according to provisional data announced by the Gem & Jewellery Export Promotion Council (GJEPC) of India for the previous month is anything but encouraging. India’s cut and polished exports for December ’15 declined by 17 percent recording $1.2 billion as against $1.45 billion in Dec. ’14. This is a straight downslide in the Indian industry’s export performance for the last 9 months, due to the global slowdown in consuming markets worldwide. In volume terms, exports recorded as 1.88 m cts were exported in Dec ’15 in comparison to 1.98 m cts in Dec. ’14. Rough imports recorded a slight increase of 2.5 percent to $1.46 billion for Dec. ’15 as against $1.4 billion in Dec.’14. In volume terms too, 15 m cts of rough was imported in Dec ’15 compared to 14 m cts for the same month in the previous year.
Rough exports showed a decline of 7.3 percent, registering $99.64 million for Dec. ’15 as against $ 107.45 million for Dec.’14. In volume terms too, rough worth 2.27 m cts were exported in Dec. ’15 compared to 2.22 m cts for the same month in the previous year. About $239 million worth of polished diamond was imported in Dec. ‘15 as against $441.56 million in Dec ‘14, showing a decrease of 46 percent. The decrease is attributed to the government’s curbs on polished imports in order to support the local diamond cutting& polishing centres in the country.
Market watchers, however, predict a better 2016, which they feel has the potential to be a great year for the diamond industry as profitability and responsibility returns to the diamond supply chain.
But, not one to be complacent, a GJEPC’s delegation comprising of Praveenshankar Pandya, Chairman, and other industry representatives met with Arun Jaitley, Hon’ble Minister of Finance, Government of India recently, to discuss some of the critical issues facing the gems and jewellery industry in India. The delegation requested for the introduction of Special Turnover Tax regime for the diamond industry with 0.75% tax on sales turnover. This would be along the lines of the tax regimes prevalent in other diamond trading nations like Belgium and Israel. The GJEPC chairman also urged the government to permit the sale of rough diamonds at the SNZ in Mumbai by implementing a 0.25% tax on sales turnover achieved at SNZ by foreign mining companies.
Earlier in the month, India’s Minister of Commerce & Industry, Nirmala Sitharaman warned that the devaluation of the Chinese currency is a “worrying” development, which will make Indian exports expensive and widen the trade deficit with China at USD 49 billion. She said her ministry is in favour of relaxing restrictions on gold import duty in order to boost the industry. It has “at least in the last one year maintained that in order that gems and jewellery sector does not get adversely affected, there should be some easing of gold import (norms).”
In GIA -TCS fiasco which shook the diamond industry recently is taking it seriously; and with six more people being arrested totaling to eight till date Market analyst are hopeful that GIA will solve this case effectively.
To move to more pleasant scenario, the Indian gem & jewellery industry has been working overtime during the month, preparing for the IIJS Signature – a show where the best of India’s designs is showcased for the world. The 9th edition of Signature and the 3rd edition of India Gem & Jewellery Machinery Expo (IGJME 2016), an initiative of The Gem & Jewellery Export Promotion Council (GJEPC) were simultaneously held this year in Mumbai.
If the study made by the industry body the Associated Chambers of Commerce and Industry of India (ASSOCHAM) is true, the Indian market for luxury goods is expected to grow from its current level of $14.7 billion to $18.3 billion by end 2016. This translates into a compound annual growth rate (CAGR) of about 25%. The study said that the categories with high growth rates in 2015 such as luxury jewellery and personal care, electronics, SUV cars and fine dining are expected to grow by 30-35 per cent over the next three years. This augurs well for the gem & jewellery industry, which can utilize the opportunities that arise in this sector.
The Indian domestic jewellery sector is growing fast and the Government of India is using all initiatives to focus on its betterment. For mobilising gold under the ‘gold monetisation scheme’, the government announced a 2.5 per cent commission for banks, and depositors will be permitted premature withdrawal of the deposited metal. The government expects that the above modifications will make the scheme more attractive for potential depositors. To make the scheme more attractive, Bureau of Indian Standards (BIS) has modified the licensing condition for refiners from the existing three years of refining experience to one year. "BIS has published an Expression of Interest (EOI) on its website inviting applications from the more than 13,000 licensed jewellers to act as a CPTC in the scheme, provided they have tie-up with BIS licensed refiners," the statement added. Also, to wean investors away from holding physical gold. The government’s gold bond scheme is aimed at reducing the demand for gold in physical form by encouraging people to buy gold in demat or paper form. The Gold Bond scheme will have an annual cap of 500 grams per person.
In addition, the Reserve Bank of India (RBI) has allowed banks to sell gold coins manufactured by MMTC Ltd through bank branches, as the gold procured for making the coins are from the domestic market, according to media reports. Till now India gold coins were allowed to be sold only through MMTC centers which are hardly 25 in number in the country. Therefore, this relaxation allowing banks to sell gold coin is a significant step taken by the government.
During the month of January, the domestic jewellery sector was up in arms, even resorting to an organizing a protest across the country, seeking special turnover tax regime for diamond industry, interest subvention to boost exports and PAN card (Permanent Account Number) requirement for transactions of above $7415 instead of currently $2966 in its submitted to the Finance Ministry.
As evidence that the domestic market is picking up, India’s TATA group company, Titan Company limited announced its working results revealing that its Q3 revenue went up 17% mainly due to the jewellery sales going up by 20%. The company reported a revenue increase of 17 per cent year on year to US $504.6 million in the third quarter that ended December 31. The strong result was mainly because of 20-percent growth in jewelry sales to US $415.3 million from a year ago. Watch sales increased 8.2 per cent to US $70.5 million. Profit after tax during the quarter jumped 18 per cent to US $33.2 million. During the nine months to December 31, total revenue declined 6.4 per cent to $1.3 billion as jewelry sales fell 9.6 per cent to US $1.01 billion. Profit after tax dropped 14 per cent to US $76.8 million.
Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough&Polished
