Despite short term setback, Indian gems poised to glitter

The slow demand revival process in the US and Europe might slow down the export growth prospects of gems and jewellery from India in short term, says a study conducted by the Export-Import Bank Of India (EXIM).

The study which describes India as "one of the fastest growing jewellery markets in the world," says the growth in this industry is likely to be driven by growth in jewellery exports to the major markets like the US and Europe as well as demand in the domestic market.

Analysing the trends in the gems and jewellery sector released this week, the EXIM bank has stated that "the demand for this industry which is income-elastic is likely to remain moderate in the near future. The slow demand revival in the US and Europe might slow down the export growth prospects of gems and jewellery from India in short term."

"However, the growth prospects in economies of India, Middle East, Hong Kong and China are expected to help the sector regain its glitter," according to the study projection.

Pointing to the fact that India is the largest consumer of gold in the world and also one of the largest diamond processors in the global market, the EXIM study says, "More than 90 per cent of diamonds in the world in terms of pieces, around 80% in terms of carats and around 55% in terms of volume are processed in the country."

On growth prospects of the industry in the emerging economies referred earlier, the study stresses that "changing lifestyle and urbanisation are also expected to stimulate the sales growth in the gems and jewellery industry, mainly in the branded jewellery. The consumer awareness generated through the vigilant measures adopted by various national governments, are expected to drive the demand for branded and hallmarked jewellery."

While the spike in gold and silver prices might change the consumer preferences, the growing consumer sophistication,
decline in investment-driven (jewellery) demand, and competition from other luxury goods are also likely to impact the demand pattern of the industry, the study says. 

"A major advantage of Indian gems and jewellery industry is the low cost of labour. India has one of the best skilled manpower to design and make volumes of exquisite jewellery at a relatively low labour cost, it notes.

The Indian gems industry has been increasingly building its ability to produce "full range of sizes and qualities of stones," utilising not only the low cost and abundant workforce but also advanced technologies.

"The industry has been seeking further growth through processing of larger size stones and manufacture of diamond
jewellery," the EXIM study says.

It however, underlines the need to strengthen the position of India in the global market through a "concerted strategy", addressing the challenges of raw material sourcing technological infusion at processing stage, adopting of dynamism in design and product development and a "sustainable market entry approach."

"Both the government and gems and jewellery industry have recognized the use of IT in diamond clusters in order to enable seamless flow of information between the functional areas-right from job contractors to small/midsized firms, to large integrated units. The IT interface would also provide the necessary platform for firms to scale up their operations," the study points out.

Notwithstanding possible short term setback, the study has projected as "positive" the long term outlook for Indian gems and jewellery industry, saying, "India's competitive advantage is likely to be centred around its skilled labour, combined with a ready adoption of leading technology."

India, the largest gold consumer in the world (over 700 tonnes in 2008), accounts for 24 pc of global consumption, majority of it going into jewellery production.