The Indian gem and jewelry market was abuzz in June with
speculations on the impact of the goods and services tax (GST), which went into
effect throughout the country on July 1. Whereas the textile market was the
hardest-hit, with many manufacturing units observing a bandh (temporary
shutdown) in Surat for over a week, the diamond industry revolted with just a
one-day bandh on June 18. That closure led to a loss of $108.7 million (INR 7
billion).
The industry remains divided in its opinion regarding the
effect the GST will have on the industry. While parties such as the Surat
traders have opposed the 3% tax on polished diamonds, 5% labor tax and 0.25%
levy on rough diamonds, other key players have come forward in full support of
the recently implemented tax regime.
“The local market is showing an excellent performance, and
we have witnessed the Indian market picking up in sales and demand [after] the
demonetization phase and implementation of GST,” said Kiran Gems director
Dinesh Lakhani. “The organized jewelry businesses have received a strong boost
from the aforementioned moves by the government of India.” He described the
market sentiments as being neutral to positive.
Prism Jewellery CEO Nirav Bhansali, too, noted the upturn in
market conditions, saying they had “improved considerably since demonetization”
and that retailers had shown “very good sales” since GST went into effect. “It
is surprising, but both demonetization and GST have had little impact, and
things turned positive pretty soon,” he remarked.
He minced no words in stating that the new taxation rates
would in fact prove favorable for the trade. “We will now be eligible to get
input tax credit,” he said. “This has had a positive impact on the local
industry. It will take a few months to comply fully with the new GST regime,
but overall, the sentiments are positive.”
Since Praveenshankar Pandya came on board as chairman of the
Gem and Jewellery Export Promotion Council (GJEPC), he has been vocal about the
need for the entire industry to come together and conceptualize a campaign
promoting diamonds and diamond jewelry. This is the only way to increase the
consumption of diamonds, according to Pandya, given that the sparkling stones
have a lot of competition from other luxury sectors, such as vacation and
travel. Storytelling is a powerful way to generate an interest in diamonds.
“Storytelling is definitely a good marketing tool,” says
Bhansali. “It helps more in the B2C than in the B2B segment, and the diamond
company needs to have two separate campaigns to target each segment
individually. It is important to keep in mind that the story woven [must be]
supported by fundamentals, as the customer today is extremely smart, and you
cannot make a story that cannot be justified.”
Article from the Rapaport Magazine - August 2017. To subscribe click here.