Gems & jewellery export dips on low Japan, Europe demand

The year has seen a sharp decline in orders from Japan and Europe for India’s gems and jewellery (G&J) export.

Data compiled by the Gems and Jewellery Export Promotion Council (GJEPC) says G&J net export declined 7.4 per cent to $16.8 billion in April-September, first six months of this financial year from $18.2 bn in the comparable period last year. The decline in rupee terms was 10.9 per cent, to ~1.08 lakh crore.

The segment contributes nearly 13 per cent of India’s overall merchandise export.

Exporters attribute the decline to a slowdown in production ahead of the goods and services tax (GST) implementation from July 1 and frequent changes in the government's gold policy, which hit bullion import, affecting its availability for exporters.

“As of now, overseas orders for the ensuing season of Christmas, New Year and Mother’s Day are also lower. For exports to remain stable for the entire year, G&J shipment has to recover fully in the second half. We are hopeful the industry would be able to recover it,” said Praveen Shankar Pandya, chairman, GJEPC.

After a record $43.4 bn in 2010-11, India’s G&J export declined to $32.6 bn in 2015-16, before recovering to $35.5 bn for 2016-17.

Production activity at manufacturing units had halted nearly two weeks ahead of GST implementation. The government also levied 0.25 per cent GST on rough diamonds, upsetting exporter plans; these stones are fully imported. Then, G&J export was also hit with a five per cent import duty by the government of the United Arab Emirates (UAE) early this year. Most Indian jewellery exporters have offices in the UAE for re-routing of ornaments to the European Union, West Asia and Africa, after mere value addition or re-packing there.

A big worry, say industry experts, is that profitability in diamond processing and jewellery export has gone down over recent years, due to a sharp increase in interest rates on working capital. That apart, GST has caused blockage of a significant quantity of working capital, even on the receivables which come after 90180 days.

“We are working with the ministries concerned to enable policies to make this industry profitable. We hope they'd resolve exporters’ difficulties one by one, to bring G&J export back on growth,” said Pandya.