Gems and Jewellery Sector: Problems, Possibilities and Potential

Mrs. Rupa Dutta, former Economic Adviser, Department of Commerce, Ministry of Commerce & Industry, Government of India, shares her perspective on the gem and jewellery sector.

The Gems and Jewellery sector contributes to 7% of India’s GDP and forms around 12% of our exports. The export of gems and jewellery has witnessed a decline of -11.04% during financial year 2019-20 (US$ 35.81 billion), as compared to the previous fiscal (US$40.25 billion). Exports, particularly that of cut and polished diamonds, were having a tough time in FY-2020 due to the outbreak of Covid-19 pandemic, and the global lockdown has only aggravated the situation. In April-June 2020, the total exports were only around US$2.64 billion, signifying a decline of about 70%. Thankfully, reopening of markets in the US, Europe and China, fuels hopes of recovery and increased exports in the near future.

The pandemic had resulted in widespread disruption of global supply chains and caused significant slowdown in international demand and the gem and jewellery sector, by virtue of being in the luxury goods category, may take a longer period to revive to pre-Covid levels.

This sector, while contributing a major portion to India’s export basket also plays a critical role in terms of employment generation. With around 5 million people working in this sector, embodying a huge pool of skilled manpower, the sector is a major driver of the Indian economy. However, there exists a huge potential for higher growth in terms of increased output, higher value addition and possibility of moving up the value chain.

We attempt to analyse some of the factors afflicting the industry today and the need for critical policy drivers for unlocking the true potential. The industry in its present form is fragmented and unorganised, resulting in lack of data on workers and units. A major focus area should thus be initiation of reforms for better organisation of the industry.

Due to the highly unorganised market, workers who are the core of the Indian gem and jewellery sector cannot be given due focus in terms of providing essential living facilities; and migration of such workers can be fatal for the industry when the situation normalises. Lack of social sector schemes for such fringe workers is making the situation worse and will dissuade people from continuing or fresh ones from joining the sector.

Another priority area is to improve productivity of the small and medium manufacturers and quality of finished goods manufactured by them by providing them access to technological advancement. To facilitate this, a scheme for setting up of Common Facility Centres (CFCs) for the gems and jewellery sector is being implemented by the Government of India through the Gem & Jewellery Export Promotion Council (GJEPC). Four operational CFCs have already been set up at Visnagar, Palanpur, Amreli and Junagadh for the diamond sector. New CFCs are also being built at Coimbatore, Kolkata, Delhi, Jaipur, Hyderabad and Rajkot.

Irasva
Kalajee Jewellery

These CFCs are pooling resources and providing an opportunity to MSME manufacturers to use state-of-art technology/equipment at optimum cost. A one-time grant of around Rs.3-5 crore is provided by the Government of India for setting up a CFC with requisite infrastructure. The self-sustainable centres are operated and maintained by the local diamond/jewellery associations.

Based on the response that the CFCs are attracting, steps are being taken for establishing Mega CFCs in Mumbai and Delhi. These Mega CFCs are being envisaged as an advanced model of the existing CFCs, to address futuristic needs of the gems and jewellery sector. The Mega CFCs would provide end-to-end solutions for producing gems and jewellery items with technological advancement and facilitate large-scale production at par with international standards, by making use of high-tech machines, thus saving exporter’s time and costs. Mega CFCs will make the Indian gem and jewellery industry self-sustainable in terms of technology, by providing best possible support and make India the global leader in the field of innovations and ideas, along with R&D.

Thus, progressive efforts are being taken to make the industry organised and improve quality of manufacturing by:

  • Creating CFCs in identified clusters
  • Developing Mega CFCs in major export clusters
  • Creating Jewellery Parks at major manufacturing hubs in the country
  • Mapping units, productivity and number of workers in each of these clusters
  • Working out specific welfare schemes for health, education and housing of the workers in these clusters

Further, the prospects offered by cross border e-commerce are huge and could become an effective tool to overcome adverse effects of the pandemic on the gems and jewellery sector. Today, distribution of products through e-commerce is driving businesses across the globe by creating a 24X7 shop for consumers across different geographies and gaining popularity amongst millennials due to its inherent benefit of being convenient and cost effective, due to reduction in the number of intermediaries between manufacturer and consumer. In the post-Covid scenario, in wake of the new health protocols, e-commerce is further expected to rise globally.

Presently, Indian exports of gems and jewellery are mainly done through B2B trade. If gems and jewellery exports are promoted through e-commerce and aimed directly at the end users i.e., B2C, it would result in higher value addition and become cost- effective for the exporters. In this context, it is pertinent to highlight that the USA, which is one of the major markets for Indian jewellery, levies zero Customs duty on consignment valued below USD$800. Thus, e-commerce exports present new opportunities to the gems and jewellery industry.

Countries like China having huge manufacturing setups for all kinds of products, including gems and jewellery, have well understood the benefit of using e-commerce as a medium to connect with consumers globally and have been a pioneer in utilising e-commerce platforms to provide market access to its industries. Chinese sellers selling on sites of Chinese origin like Alibaba.com and others like eBay, Amazon, Etsy, etc., have encashed on this opportunity and expanded their businesses globally, by directly reaching out to their consumers.

The Indian gems and jewellery industry has not yet been able to take advantage of this e-commerce boom, due to various policy-related hurdles hindering its usage. Government intervention is required to facilitate ease of doing business and reducing cost of operations, etc. This will provide a conducive environment for promoting B2C exports of gems and jewellery through e-commerce and will also encourage exporters to adopt this medium.

While the Government is looking at framing of an overall e-commerce policy, there is a need for bringing various Government bodies along with the gems and jewellery  Industry and e-commerce companies on the same platform. Devising detailed SOPs, ensuring complete end-to-end tracking, especially of returned goods, and creating an enabling environment is the need of the hour. A phased and well-thought implementation strategy can be immensely beneficial in promoting exports and in carving a new direction in the current scenario. This can give impetus to the industry, reeling under the Covid impact.

There are two more critical areas which need highlighting: moving up the value chain and need for establishing credibility. The industry should produce products which cater to meeting the demands of the millennials, tie up with renowned international retail brands, look at developing segments like exports of silver and imitation jewellery and coloured gemstones. The industry should also ensure that all transactions are traceable, with end-to-end tracking and work towards restoring credibility in the system. It also needs to work on restoring faith amongst all stakeholders, including the banks financing their transactions, insurance companies giving coverage and customers across the world, expressing their satisfaction for Indian products and reaffirming their faith in our talented crafts persons.

No Comments Yet

Comments are closed