The Indian gem and jewelry industry is treating 2023 as a panorama of seamless opportunities. Technology and trends enrolled precious color gemstones into the Gen-Z fashion sense in 2021 and 2022. Lab-grown diamonds, treated to be an onslaught on the global natural diamonds business, is now making its presence known to a fairly informed customer cohort, who inclines to LGDs for pleasure, and natural diamonds for long-lasting investment value. Therefore, all eyes are on February 1 for the Union Budget 2023-24, as jewelers across the country expect clarity and SOPs to better serve the end-consumer.
The Gem and Jewellery Export Promotion Council (GJEPC), have tabled a slew of demands for the government. They want complete allowance of rough diamonds sale in special notified zones through ‘Safe Harbour rule’. They also predict a stable market for LGDs, and demand its manufacturing in India to go free of import duty. In order to enhance exports, the council also asks for relaxation in blockage of working capital. On the precious metal front, GJEPC has put forward a demand for import duty reduction to 4 percent for better transparency.
“Keeping in view India’s inherent skill in making handmade jewelry, we believe that India will outperform in jewelry repair sector as well. With this policy, India has the possibility of taking 10-20 percent of the world market share, which will bring in billions of dollars of business with high employment potential,” Vipul Shah, Chairman, GJEPC, said.
Re-enforcing Diamond Imprest License
Since cut and polished diamonds fall under the ambit of import duty, the council also proposes a reintroduction of the Diamond Imprest Licence, which will allow import of at least 5-10 percent of the average CPD inventory of Indian exporters in the past three years. This move will redirect investment from overseas miners back to India, and increase employment opportunities in the spaces of diamond assorting and processing.
Making India a Global Repair Hub
Another important ambition is to make India the jewelry repair hub of the world, for which GJEPC demands a repair policy to tap into $ 5.75 billion market opportunity. This is because India doesn’t yet have a repair policy for jewelry. This gives advantages to countries such as Turkey, UAE, and Hong Kong with their simple policies enabling jewelry re-import, repair, and global shipping.
Call to Reduce Gold Price Disparity between Regular, Grey Markets
The budgetary norms are expected to be populist in nature. They should work towards ensuring a steady growth of the industry across all verticals including infrastructure. Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers shares a strong concern in the widening price difference of gold between price points of regular and grey markets. This market phenomenon, if left unchecked, will significantly hamper organised retail, because buyers will tend to look for cheaper alternatives when the purity of the metal stays the same.
“There has been constant conversation between trade bodies and the Government of India with respect to the pricing difference, leading to huge disparity and increase in smuggling of gold. This is primarily due to high import duty rates. Gold is at over Rs. 54000 at the moment and the disparity in pricing is close to Rs. 4000 rupees for 10 gms in the grey market. For this, we hope that the Government will cut duties on gold imports, rationalize the prices and thereby help create a level-playing field between regular and the grey markets,” he maintained.
Fair Practices, Transparency to Help the Trade Immensely
The jewelry industry in India has the potential to become a global trade center and a major driver of economic growth with the right policies and support from the government, believes Ramesh Kalyanaraman, Executive Director, Kalyan Jewellers. The sector benefits from a large and vibrant market driven by strong domestic consumption as well as seasonal demand from the visiting Indian diaspora. Supplementing such a market scenario is the nationwide acceptance of fair trade practices such as BIS hallmarking, which has eventually empowered consumers across markets.
“With major infrastructural investments such as the launch of a new jewelry park in Navi Mumbai and expansion of manufacturing facilities in Surat, we are driven towards improving efficiency and bringing in innovation across the sector, through various pioneering initiatives. The formulation of an effective regulatory framework can further boost digitization in the sector that will eventually increase transparency and accountability,” maintained Kalyanaraman.
Make Gold Jewellery Affordable for the Middle-class
Retailers also believe that a 2-5 percent reduction in customs duty has long been overdue. The solution is simple, as N Anantha Padmanabhan, Chairman & Managing Director, NAC Jewellers, states that a reduced customs duty will regularize prices and in turn, boost customer demand. Rising price impacts buyer’s psyche in two ways. Although it makes gold more lucrative for investment, it reduces the purchasing power significantly. A relaxation in import duty will help the industry in more ways than one. It will also encourage buyers to invest in gold bond schemes with banks, and utilize gold jewelry lying in lockers.
“We request the finance ministry to reduce gold rates by 5 percent. This will, in turn, reduce retail price by as much as Rs. 250, helping middle-class buyers. Banks should allow blanket deposit of up to 500 grams of gold from every individual without asking for KYC. Every woman gets gold from their parents upon marriage, and such a measure will bring gold lying idle in lockers back to the economy,” he added.
Encourage Regional Investment, Promote Indian Art Globally
Thanks to a favorable wedding and festive season, the overall market sentiment is positive. Shrey Mehta, Director, Pooja Diamonds (Mumbai & Gujarat) believes that the current market health will entice retailers to be more innovative and creative with their upcoming product designs. “We hope that there are initiatives to support and promote Indian artistry locally and globally,” he maintained.
Other than tax SOPs, Vaibhav Saraf, Director, Aisshpra Gems & Jewels (Uttar Pradesh) stresses on simplification of the GST tariff structure, which will clear all ambiguity and help the industry organize itself much faster. “I also ask for higher spending on regional development. This will improve jobs, reduce immigration to bigger cities, and support growth of smaller-town economies,” Saraf said.
Budget Should Combat Recession
The apprehensions of a global recession are bothering Indian retailers, now that a Bloomsberg 2022 survey has signaled a 70 percent chance of recession in the US in 2023. Aditya Pethe, Director, WHP Jewellers (Maharashtra, MP, GOA) feels that the foremost objective of the budget was to explore all opportunities to protect the Indian economy and the gems and jewelry industry from any adverse impact of the recession.
“The country, along with the jewelry industry, is optimistically looking forward to the Union Budget 2023 with the onset of the global recession. Though the experts say India will have less to no impact from the recession, the budget will give an action plan to protect the economy from geopolitical scenarios globally,” Pethe said.