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India
By Zainab Morbiwala
For those earning revenues in dollars, the weakening of the rupee is a reason to cheer. One of those groups is diamond exporters whose goods are tied to dollar pricing. But otherwise, the entire domestic economy is negatively impacted each time the dollar strengthens. Oil prices rise, the stock market slides and the entire economy gets a bit shaky. Rupee-based prices — for consumer goods and manufacturing supplies — rise and spending falls back. In addition, for the diamond industry, the rupee decline — it hit an all-time low of around 60 rupees to the dollar in July — can result in diamond traders defaulting on payments. “A weakening rupee against the dollar has resulted in diamond traders already beginning to default on payments, giving sleepless nights to diamond manufacturers,” said The Times of India.
The newspaper noted that within recent days, two diamond traders in Mumbai’s Panchratna diamond trading center defaulted on a total payment of approximately $1.85 million and disappeared from the market, leaving dozens of diamond manufacturers in a lurch. In 2012, the industry had faced a similar situation when the rupee touched an exchange rate of 57 to the dollar and dealers defaulted on payments on rough and polished diamonds worth as much as $74 million. Much to the frustration of the industry, the prices of rough fell by 4 percent to 5 percent in July but the benefits couldn’t be passed onto consumers because of the rupee currency decline. In a development that could boost the Indian diamond industry, the government of India has agreed to exempt certain stones from duty taxes if they were in India to begin with and only exported so that they could receive certification. This applies to small-size cut and polished diamonds weighing a minimum of .10 carats up to a maximum of .25 carats. Previously, the exemption was allowed only for diamonds .25 carats and larger. Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), said that this exemption would help the diamond traders satisfy the needs of certain international players, including those from the watch and clock industry, who use a large volume of small certified diamonds.
August 8 to 12 is the 30th edition of the India International Jewellery Show (IIJS) being held in Mumbai. Show organizers are expecting visitors from 875 cities within India and from 85 countries. To promote international participation, the council held road shows in Singapore, Jeddah, Riyadh, Korea and China. At press time, there was some concern about how the combined drop in gold prices and the drop in the rupee value will affect sales and pricing at the show. Sunil Kumar Gupta, senior manager of marketing and strategy at J.B. & Brothers Pvt. Ltd., said, “We have been witnessing a sluggish demand in the market, both nationally as well as internationally, and are eagerly looking forward to the show. We are confident that the demand will pick up and generally August marks the beginning of the wedding season and festive season as well.”
Shah is of the opinion that GJEPC has been doing a great job in connecting the Indian gems and jewelry industry to various countries across the globe but more effort needs to be given to unexplored countries like Germany and remote cities and towns within China. “There is a lot of opportunity in smaller cities and towns in countries like China,” he said, “and I think GJEPC should make an effort to reach out to these places.” Agreeing was L. S. Shah, regional business manager, Vishal Diamonds. Like Gupta, Shah’s company has been looking forward to the IIJS. “From August, demand starts picking up from the domestic market. Usually, June and July are dull considering it is the reopening of schools and colleges so the priorities for spending money obviously tilt toward meeting those needs. After IIJS, I think we will see a positive movement in the market.”Article from the Rapaport Magazine - August 2013. To subscribe click here.
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