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India
By Zainab Morbiwala
The gems and jewelry industry in March was slow and sentiment was low. The reasons: the lack of special exemptions and incentives for gems and jewelry in the Union Budget for 2015, the impact of dampening demand on morale in the diamond market and widespread disappointment in the much-anticipated Hong Kong show.
“At present, the market confidence is very low. It is almost in a shattered state,” Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), told Rapaport Magazine. “Demand is slack and people have lost confidence because sales are not picking up. We need to ensure that there is a correction across the chain. Either the demand has to grow or we need to curtail the sale of rough diamonds. Inventory management has to be disciplined. But in a way, this is a good sign that people are becoming cautious and paying attention to the bottom line. Demand has to come back for the industry to get back its confidence.” In commenting on the Hong Kong show, Shah minced no words in saying that the show was not as great as expected, noting that the diamond section at the show was “disappointing.” This year, more than 170 Indian manufacturers and retailers exhibited. Another industry player, commenting on condition of anonymity, was equally downbeat. “I am not comfortable accepting it, but the situation is not good at all. I was optimistic about the Hong Kong show, but after meeting with a lukewarm response there, I foresee tough times ahead for the industry. GJEPC is taking a lot of initiatives to boost the morale of the Indian gems and jewelry industry but with negligible demand from the end consumers, it is going to be a bumpy ride ahead.” He added that although there is stable demand from the U.S., the European market is slow, which is the case within India as well. “There is a growing trend of Indians traveling to the Middle East to shop for their wedding jewelry and in the long run, this will have an adverse effect on the Indian jewelry industry,” he said.
Another development that could further dampen the demand and sale of jewelry in India is the recent implementation by the government of a PAN (Permanent Account Number) card requirement on any jewelry transaction over approximately $1,600. PAN cards are government-issued identification cards. PAN cards are mandatory for conducting a wide range of business and financial transactions in India, including opening bank accounts, trading securities and buying real estate. They are designed to increase transparency in such dealings and, in turn, act as a deterrent to tax evasion and money-laundering activities. The news that PAN cards will be extended to jewelry transactions caused a stir in the industry, with such bodies as the All India Gems and Jewellery Trade Federation (GJF) requesting the government to do away with this restriction. According to industry experts, this will “discriminate against 70 percent of rural buyers because they do not have PAN cards,” Shah said. “Moves likes this further restrict consumers from buying jewelry. This will only shrink the market further.” “We will be facing problems in encouraging buyers to visit our showrooms with the new restriction,” said Ashok Minawala, director of GJF. “It is a negative step for the industry. There have been an estimated 140 million PAN cards issued in India” but the majority of the population has yet to register for the cards. Minawala asked whether it is reasonable to ask for a PAN card when the majority of the population do not possess one.
A joint delegation of the Surat Diamond Association (SDA) and GJEPC had a closed-door meeting with Nirmala Sitharaman, Indian minister of state for commerce and industry, in Surat on March 10. The meeting, held to discuss issues related to the development of the Surat industry specifically, was a follow-up to assurances of support for the diamond industry made by Prime Minister Narendra Modi during the World Diamond Conference held in Delhi in 2014. The core agenda was to ask the minister to speed up the implementation of the proposal for Special Notified Zones (SNZ) for trading of rough diamonds. The delegation also asked that these specially designated zones be located in the key trading and manufacturing areas of Mumbai and Surat. Zone implementation would make it easier for small and medium enterprises to have direct access to rough.Article from the Rapaport Magazine - April 2015. To subscribe click here.
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