RAPAPORT... The Union Budget 2009 presented by the newly elected government managed to bring some smiles to the gems and jewelry industry in India. The best news came in three provisions: the removal of the excise duty on branded jewelry, the elimination of all duty on coral imports and the extension of the 2 percent subvention on export credits to March 31, 2010. With its government support in place, the industry is looking forward to the India International Jewellery Show (IIJS) to be held in August 2009, in which the Israeli diamond industry will be participating for the second time.
Industry ReactionCiting the interest break on educational loans contained in the new budget, Tehmasp Printer, managing director, International Gemological Institute (IGI)-India, said the provision should make it easier to get educational loans for vocational courses on gemology, grading and sorting and also for jewelry designing.
But the budget proposal also contained some disappointments for the diamond industry. Vaijayanti Pandit, director of the Western Regional Council of the Federation of Indian Chambers of Commerce and Industry (FICCI), commented that FICCI’s gem and jewelry committee was displeased at the doubling of certain customs import duties. Gold bars went to $4 per 10 grams, other forms of gold, excluding gold jewelry, went to $10 per 10 grams and silver went to $20 per kilogram.
Pandit recommended that the government provide additional support for the industry by putting the interest rate on gold loans — currently at 6 percent in India — on a par with the current international rate of 2.5 percent. He also recommended a broadening of the category of agencies allowed to import gold to include all jewelry exporters.
Sharing comments as an industry expert, Mehul Choksi, chairman, Gitanjali Group said, “For Gitanjali Gems Ltd., the biggest positive in the budget is the abolition of the excise duty on branded jewelry. This will definitely lead to an improvement in the margins for branded jewelry sales. For the jewelry industry, the extension of the tax exemption on export profits by one year is very welcome relief because it will allow the industry to cope with the current downtrend and its fallout. The extension of credit interest subvention by six months is also going to have a favorable impact on the industry. In summary, the budget will — through direct and cascading measures — have a positive impact on consumption and drive demand, which will accrue to the bottom line directly.”
Market DynamicsCommenting on market dynamics, an official from Kiran Gems Pvt. Ltd. said, “Considering the global economic downturn, we have seen a substantial quantum of demand coming from the Far East and from the Middle East. As of today, the U.S. and the Eurozone are still showing staggering fluctuations in export orders.”
In regard to the ongoing Zimbabwean conflict diamond controversy, the Kiran Gems official admitted that “We have received reports of these goods entering the Indian markets with the intention of interfering with the balance of prices in polished goods. Until the final quarter of the financial year 2008-09, we observed a moderate amount of these goods being circulated but we believe that has now ended. We thank the industry manufacturers and the prime mining companies for educating us and spreading the awareness of the hazards involved in such practices.”
Rupesh Shah, partner in Diamondstar, is of the opinion that “The issue of conflict diamonds is a global issue and yes, we are facing it in India as well. My message to the industry is to stand up unanimously as one voice and only support the trade involving nonconflict diamonds.”
In discussing his company’s precautions against conflict diamond trade, the Kiran Gems official said, “The issue of Zimbabwe conflict diamonds in our minds is on a par with the global issue of terrorism that not only devastates the lives of civilians in various regions, but also inflicts heavy damage on the industry on the whole. As a DTC [Diamond Trading Company] sightholder, we defend the integrity of our industry by maintaining the highest level of transparency and by applying best practice principles and ethical norms. These initiatives are observed and implemented by stringent regulations that assure the entire value chain of the industry, confirming that every stone coming from our company is a conflict-free diamond.”
The Marketplace- -2 and -6 1⁄2 stars: Movement has been slowest in the segments between $200 and $300. Demand has been good below $200 in India and over $300 — particularly in $325 to $375 —globally.
- + 6 ½ to 11 melee: In the melee goods price segment of less than $200, demand has been good in India. Demand has been moderate in price points of $200 to $300 and very good for goods priced above $300. There appear to be shortages in most of the price range. Most of the moving goods have been distributed aggressively in the major markets of the Far East, Middle East and India.
- 11- to 50-pointers: Demand has been excellent in goods of VVS-VS clarity across the board in these sizes, resulting in some supply shortages, particularly in G-I color.
- 50-pointers to 1.50 carats: Very good demand for VVS-VS, good demand for SI, moderate demand for SI2, good demand for I1 and excellent demand for I2 and lower.
Article from the Rapaport Magazine - August 2009. To subscribe click here.