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RAPAPORT... With India's rupee continuing to slide against the dollar, many in the trade are surprised that a weaker currency hasn't caused widespread havoc. In the past week, $1 bought between INR 63.8 to INR 64.2, up from INR 59.2 one year ago. Vipul Shah, the chairman of the Gem & Jewellery Export Promotion Council (GJEPC), said, “There is no panic that I see in the industry, even with the dollar rate touching INR 64, as things are well under control. I think the Reserve Bank of India's (RBI) governor, Raghuram Rajan, is doing a good job in controlling the volatility. I am sure it shall stabilize soon.” In support of that assessment, Dinesh Navadia, the president of the Surat Diamond Association (SDA), said, “Since the last two to three years, the business transactions are carried forward using dollars where rough in being purchased in dollars and polished is also sold in dollars. The pinch is not felt in circumstances when there is just a minor fluctuation. Only if it is a fluctuation where there is a difference of 5 to 6 percent in the rates, then probably it shall affect the industry as such.” On June 4, the Indian rupee lost 10 paise against the dollar (reaching the INR 64.26 mark), which was a 20-month low. Sanjay Shah, the director of Gold Star Diamond Pvt. Ltd., shared his views. “It is important that we have stable rupee for our business. Any fluctuation is not good. When the rupee gets strong, it does impact the purchasing of rough and this invariably impacts the cost of goods being sold in the domestic market where the dealing is done in Indian currency. It is difficult for the manufacturer to pass this escalation to the consumers who are not willing to shell out more for the jewelry they buy. This impacts the margin of the rough manufacturer eventually.” Sharing his views on the matter, Manish Jain, the chairman of the All India Gems and Jewellery Trade Federation (GJF), said, “High import duty continues to affect the gem and jewelry industry. Since the rise in import duty, there has been a steady development of a parallel economy, created by way of gold smuggling into the country. The demand for jewelry and jewelry products continues to rise, unabated, and the series of measures to curb gold imports introduced by the government, while may have had the desired effect on the current account deficit, in reality, added to the industry’s burden. Gold supplied through illegal means, when paid for by unscrupulous businesses, would result in loss of revenue and circulation of wealth in the mainstream economy. This would only result in pushing the value of rupee further lower against the dollar, if such a phenomenon is allowed to flourish.”
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