RAPAPORT... The shortage of rough and the price rise in polished are definitely taking a toll on the diamond players in India and dampening their determination to greet 2011 with a positive attitude. The other not-so-good news comes in the form of a 1 percent excise tax on branded jewelry being levied by the government in its most recent Union Budget.
The industry as a whole was very disappointed by the budget announcement that the finance minister had asked for the tax. The first concern is the term “branded.” The industry is not too sure what it signifies and whether it would apply to the “house marks” that Indian retailers put on the jewelry they sell in order to facilitate easy recognition and valuation in case a piece is returned for repair or a buy-back.
Unpleasant surprise
It should be noted that a similar tax was in existence previously but, on request from diamantaires, was abolished two years ago. The fact that it is being reinstated has surprised everyone. Also surprising was the fact that none of the requests made by the diamond industry as a whole in the hearings leading up to the Union Budget were granted. Among these requests was the adoption of a presumptive tax in place of the current assessed income tax and a five-year tax exemption for the recently inaugurated Bharat Diamond Bourse.
Commenting on the tax, Vinod Hayagriv, chairman, All India Gems and Jewellery Trade Federation (GJF), said in a statement, “We do not understand the rationale behind this step. If this continues, there is a possibility that the country shall move to unmarked, unprotected and consumer-unfriendly jewelry and this shall invariably stall the professionalizing of our market sector.”
Success in Hong Kong
Overall, Indian participants were pleased with the response they received at the Hong Kong show. Sanjay Shah from Gold Star Diamond Pvt Ltd. said he had primarily Indian visitors. But Anil Shah from Venus Jewel said, “The show had a pretty good flow of customers from around the world, especially from countries like China, Malaysia and the Philippines, as well as India. There was a healthy mix from around the globe and that remained true throughout the show.”
“The show this year proved to be a perfect place for buyers and sellers to meet on an equal platform,” said Kalpesh Vaghani, partner, Kapu Gems. “Keeping in mind the current market situation, we met plenty of prospective customers who accepted our business model and seemed interested in doing business with us. Our aim in being part of the show was to create awareness about our manufacturing expertise with large-size, high-end diamonds in sizes from .50 carats to 7.00 carats and also about the services we offer to wholesalers, as well as retailers. In these areas, we achieved our aim.”
Internationally, in VVS, all collection goods are moving well in D to F colors. In VS to SI, the rise in prices is not going down well with the buyers. Domestically, in G to I color, VVS to VS clarity is moving well; in size, 1 carat to 2.99 carats are showing good movement and in shapes, demand is good for rounds and princesses, and emeralds are generating interest as well.
Waiting Game
The embargo of Zimbabwe goods took a toll on the industry at large and diamantaires feared it would create an unbearable shortage of rough in the market and even lead to illegal smuggling of goods, which would have its own negative repercussions. Industry players in Surat even lobbied the central Indian government to intervene and help clear the way for the certification of the Marange diamonds. The March 19 announcement by the Kimberley Process (KP) that it had certified the goods for export — even though the certification was immediately challenged — gave the Indian industry hope that they might soon see their orders arriving.
The first career fair organized by the Gemological Institute of America (GIA) for India was tremendously successful, with more than 250 individual registrations and 54 participating firms, including a mix of diamond and jewelry manufacturers, who attended to recruit new talent for their organizations. The event, held March 14 in Mumbai, was supported by the Gem & Jewellery Export Promotion Council (GJEPC), which is trying hard to give global recognition to the young jewelry designers from the diamond industry in India.
The Marketplace
• The polished and rough markets remain very hot.
• Stars and -2 sieves are the hottest categories.
• Prices are scaling new peaks every week, particularly in smaller goods.
• Severe shortages are seen in most categories.
• Asking prices in the aftermath of the Hong Kong show continue to show an upward movement.
• Many buyers are concerned about frequent increases in prices.
Article from the Rapaport Magazine - April 2011. To subscribe click here.