India Market Report

RAPAPORT... With the festive holiday season just around the corner, demand for jewelry in India is on the rise, despite the fact that the price of 10 grams of gold is touching the $330 mark. Good news is coming in for the diamond industry as well, with the Gem and Jewellery Export Promotion Council (GJEPC) launching initiatives to boost the sector.

Market Dynamics
There is cheer to be seen also in the media reports highlighting the upswing in sales of diamond and diamond jewelry this holiday season. But Anil D. Shah, partner, Venus Jewel, cautioned that things may not be as bright as they seem. “No doubt, there is healthy demand from India, China and Hong Kong,” he admitted, “but this does not make up for the lack in demand from America and Europe. I will not add a burden by increasing my inventory and stocking more in anticipation of good sales.” Shah’s comments reflect the indisputable fact that demand from the U.S. still has not picked up.

According to news reports appearing in The Times of India, demand for diamond jewelry in the country is expected to reach $6.26 billion in 2010-2011, almost a 50 percent increase from the current $4.2 billion in annual diamond jewelry sales.

GJEPC Initiatives
The new foreign trade policy announced by the central Indian government for the five-year period beginning in 2009 has received a warm welcome from diamond industry leaders. According to GJEPC, the policy will definitely aid in providing much-needed backup to the Indian gems and jewelry industry, which is facing a tough time during the global economic slowdown. As part of the new policy, Indian Minister of Commerce and Industry Anand Sharma announced plans to develop India as an international diamond trading hub. This initiative, which will involve the establishment of new diamond bourses in key areas of the country, according to GJEPC, will significantly benefit the Indian diamond trade by allowing diamantaries to buy and sell rough and polished stocks in India without having to visit Antwerp, Hong Kong, China and Dubai.

The new policy will relieve organizations like the Indian Diamond Institute (IDI) as well, because it will allow the import on a consignment basis of cut and polished diamonds for the purpose of grading and certification. In addition to these benefits, the new policy’s inclusion of duty drawback on exports of gold jewelry will relieve the tax burden and particularly benefit the small and medium exporters based in nonmetropolitan and remote areas.

Export and Import Data
GJEPC released provisional figures that place total cut and polished diamond exports for the month of August 2009 at $1 billion, compared with $1.4 billion in 2008, a decline of approximately 28 percent. In gold jewelry exports, there was a remarkable growth of 40 percent in August 2008. The total gold jewelry exports for August stand at $545 million, compared with $388 million in the corresponding month in 2008. There was a 15 percent fall in the export of colored gemstones for the month and overall exports declined by almost 9 percent.

In other totals for the month of August 2009, rough diamond imports were $431 million, compared with $664 million in August 2008, a decline of 35 percent. Cut and polished diamond imports for August totaled $597 million, compared with $598 million in August 2008, a decline of less than 0.20 percent. Overall imports for August 2009 declined by 19 percent.

News from Surat
According to press reports, diamond traders in Surat are trying to get supplies of rough diamonds directly from mining nations. To promote that effort, a delegation of the Surat Diamond Association (SDA) met with Russian Consul General Alexander Mantytsky to discuss the possibility of initiating direct rough shipments from Russia to Surat.

C.P. Vanani, past president of SDA, said that of the 3,000 diamond cutting and polishing units in Surat that were operational before the Diwali holidays in 2008 and that were subsequently forced to shut down, approximately 2,000 units have now resumed operations. According to Vanani, this resumption of business is because of the approach of the festive seasons of Diwali and Christmas. He further shared that business in Surat has surged by almost 40 percent from the negligible business conducted in the first quarter of 2009.

Despite that positive news, a dark cloud hangs over Surat in terms of manpower shortages. The number of diamond workers currently in the city is only 250,000 to 300,000, compared to the 400,000 to 450,000 workers in 2008.

The Marketplace

• Domestically in India, the strongest demand is for 1.50 carats and above in VVS1-SI1 and G-J colors.
• In Hong Kong, demand is good for VVS-VS and D-H.
• In the U.S., demand is good for VS-I1 in F-I.
• Better-quality goods are in demand overall.

Article from the Rapaport Magazine - October 2009. To subscribe click here.