Indian gems and jewellery sector faces trouble, global meltdown impacts growth momentum

By Songbedna Bauri: India’s gems and jewellery market, which is among one of the world’s most competitive and rapidly growing sectors, is facing the heat of global economic meltdown. The pressure is rising consistently as the sector is mainly dependent on exports to the US and European countries.

The players are witnessing many problems such as inventory build-up and liquidity pressure. Quite a few diamond units in the country have closed their units. Due to the fluctuations in foreign exchange rate and access to finance, it is causing further trouble for the domestic players, those have been struggling to come out of the global recession.

Apart from the global slowdown, the female entrepreneurs in the gems and jewellery are reeling under the growing pressure of different problems.‎ A survey on Women Entrepreneurs in Gems & Jewellery Sector, carried out by FICCI Ladies ‎Organisation (FLO), claimed that among the obstacles which are hindering the growth prospects of female-led operations comprises - difficulty in purchasing raw materials and finding skilled manpower in manufacturing, ‎marketing and retailing aspects of their businesses. Industry experts also feel that the‎ government schemes have not been able to sustain global competition. There is an urgent need to modernise the sector in tune with international standards.

Meanwhile, the Indian gems and jewellery exporters are also facing heat due to Chinese slowdown. The Chinese offtake of Indian diamonds both directly and through Hong kong have slipped in the last three months.

Reports suggest that Hong Kong acts the role of a hub for the gems and jewellery trade in the region and also considered as the second largest importer of Indian gems and jewellery. China is the largest buyer of Indian diamonds via Hong Kong and it buys them both for manufacturing and retailing.

Indian exports to Hong Kong fell by 29% from $868 million in April 2011 to $615 million in April this year. In May, it slipped 12.60% from $923 million to $806 million.

With the primary aim to bring back the glitter of the Gems & Jewellery Industry, this highly unorganised and fragmented sector is hopeful to enhance the presence of the Indian players at the global level. Close to 90% of the players in the unorganised sector are mostly engaged in family-run operations. Even, in the last financial year, the Indian gems and jewellery industry saw a decline in exports during FY 2011-12 due to the fall in trading exports of diamonds.

But, last month this trend was reserved. as per the data provided by the Gems and Jewellery Export Promotion Council (GJEPC), the exports rose 7.5% in June year-on-year to $4.2 billion on the climbing demand from new markets. It is expected that the gems and jewellery exports would reach $ 40 billion in the current fiscal.

Although, it is little difficult to judge the growth momentum of this sector due to the fast changing global scenario, but with the rising acceptance of branded jewellery market will definitely boost the growth momentum.