Rapaport Magazine


By Zainab Morbiwala
Sluggish Demand, Tax Raids Mar Mood

Marring the mood of the upcoming Diwali season, the Indian gems and jewelry industry was shocked and trading was interrupted by recent reports of income tax raids conducted in about ten diamond companies and courier firms that serve them in the diamond centers of the country. The raids were conducted by federal income tax officials in Surat and Mumbai in October. They were reportedly looking for fake documents related to diamond imports and exports.
   “This isn’t a good thing and the culprits responsible should keep in mind that it damages the entire industry because the overall industry is labeled as indulging in unethical activities,” said an industry player who asked to remain anonymous. He noted that since the raids, “things have slowed down a bit and people are cautious.”
   Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), joined in condemning the alleged illegal activity. Speaking exclusively to Rapaport Magazine, he said, “I would like to state that we as an industry should not be dealing in such activities, which are against the laws of the country. We haven’t as yet received any letter or communication from the Income Tax office regarding this and so I cannot share more details on the names of the companies or the nature of the raids.”

Looking Ahead
   Despite sluggish demand and volatile market dynamics, GJEPC continues to launch industry promotions. The latest is the first edition of the India Gems and Jewellery Machinery Expo (IGJME). The event is being organized in Surat in association with the Surat Diamond Association (SDA) and is scheduled to take place December 13 to 15, 2013.
   On the choice of venue, Shah said, “Surat is the manufacturing hub for diamonds and it is only natural that we hold the exhibition at Surat. We are trying to have leading international and national manufacturers and suppliers of machinery, packaging, IT solution providers, etc., be a part of the event.”
   It should be noted that the flagship event of GJEPC — the India International Jewellery Show (IIJS) — does have a section dedicated to machinery, equipment and allied services. But with growing competition in the field and ongoing technological advancements in the field of gems and jewelry, this expo will provide a second show opportunity for industry players to view the latest in machines, packaging, hardware and software.
   Shah also noted that the council is working on the seventh edition of IIJS – Signature, to be held February 21 to 24, 2014. People from around the globe are being invited to ensure that the reach and scale of the show are bigger and better than in 2013.

Upcoming Holiday Season
   In spite of the political clouds over the U.S. economy and federal government, the Indian industry is upbeat about the coming holiday season. Shah feels that this year the industry can expect growth of possibly 20 percent to 25 percent in the demand for gems and jewelry and that there is absolutely no reason to fear the recent government shutdown in the U.S.
   “To my knowledge, I haven’t seen any impact from the shutdown,” Shah said. “Perhaps, things shall become clearer in the next weeks but I am optimistic that there will be good demand from the U.S. for this holiday season. I would also like to point out that the manufacturers in India are doing a good job of producing affordable jewelry at affordable prices to suit the current needs of consumers.”

Market Dynamics
   “We are still witnessing the prices of rough being on the higher side and there is a complete mismatch between those prices and the prices of polished,” said Shah. “The way ahead would be either to bring down the price of rough or increase the selling price of polished but the current market sentiments do not allow for an increase in the price of polished. The only way left is to bring down the price of rough. This correction is long overdue and as an industry we need to come forward and resolve the issue of rough supply and its pricing at the earliest opportunity.”
   An issue that is constantly on the minds of industry players is synthetic diamonds. Shah assured the industry that very soon there will be a report available detailing ways to deal with synthetic diamonds. GJEPC, along with the Natural Monitoring Diamond Committee, is working day and night to gather all relevant information related to synthetic diamonds for the report.

Article from the Rapaport Magazine - November 2013. To subscribe click here.

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