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Gold Jewelry Booming in India

India's gold jewelry and gems industry is second only to textiles in earning foreign exchange...

INDIA'S GEM & GOLD JEWELRY industry has been second only to textiles in earning foreign exchange for the country, recording exports of US$17.1 billion in 2006-07.

   Exports of diamond merchandise alone touched US$9.77 billion last year, according to the Gem and Jewelry Export Promotion Council (GJEPC), based in Mumbai – the apex of the trade.

   According to Tehmasp Printer, MD of the fast-growing India branch of the International Gemological Institute – the Antwerp-based diamond certification authority – no country can match India in the cutting of gemstones and crafting of fine jewelry.

   And according to the World Gold Council (WGC), India’s gold consumption this year could in fact cross the 1,000-tonne mark for the first time. The booming domestic market, along with new export advantages – plus the government's decision to allow foreign direct investment of up to 51% in single brand retail stores – has attracted a large number of players to the sector.

   Swarovski, the global crystal goods manufacturer and marketer, is on an expansion spree in India and hopes to achieve 5 to 10% of its global turnover from the country in the next 10 years. The company plans to set up 30 stores by 2009 versus the current 13.

   Damas India, part of one of the largest jewelry retail outlets in the world, is adding 16 new stores to its present dozen stores in India. And foreign investment banks Morgan Stanley, Citigroup and Goldman Sachs – as well as BSMA Ltd. – collectively purchased a 7% stake in Gitanjali Gems for around US$27.8 million.

   Goldman Sachs and UBS Securities have acquired 6.28% in Shrenuj & Co at around US$2.07 million and $2m, respectively, while, Gemology Headquarters International (GHI) – a US-based gemological grading and research laboratory – has opened its first Indian branch at Opera House, Mumbai.

   The gold-hungry domestic market is also being targeted by Reliance Retail, now planning an aggressive entry into the jewelry retail market through its about 400 to 500 jewelry retail outlets across the country.

Gold in India: Government Initiatives

   In the New Annual Supplement to Foreign Trade Policy (2004-2009) announced on 19th April 2007, the government has extended the following facilities to the gold, jewelry and gem sector:

  • Service Taxes related to exports have been exempted;
  • The re-importation of diamonds & jewelry (either in complete or partial lot) previously exported has been allowed;
  • In light of the soaring precious metals and Gold Price, the duty-free entitlement on exports of rhodium-plated silver jewelry has been increased to 3%;
  • To cut transaction costs in the diamond sector, the testing facility at International Diamond Laboratory (IDL), Dubai, has been incorporated in the list of laboratory/certifying agencies;
  • A new duty-free import entitlement has been granted on tools, machinery & equipment for the sector. For metals other than gold and platinum it will be 2%. For gold and platinum, it will be 1% of the value of exports during the previous financial year.

   The categorization of exporters has also been rationalized, and from 1st January 2008, gold hallmarking has become mandatory.

   The Indian government has also made the import of polished diamonds completely duty free, and special economic zones dedicated to gems and jewelry – including gold – are to be established in Surat, Kolkata, Goregaon, Dhulia and Hyderabad.

   The government is also set to unveil a new mining policy to make it easier for foreign and domestic firms to invest in the exploration and mining of diamonds, gold and other metals. Currently, India produces only 0.4% of its gold consumption, despite having 9% of global gold reserves below ground.

Gold in India: Looking Ahead

   The booming Indian economy, along with the rapid increase in income levels, is forecast to further accelerate the growth of this industry.

   According to a KPMG study, India’s growing importance in the global jewelry market – even aside from its prominence as a consumer of physical Gold Bullion – is set to increase in the future, with total estimated jewelry sales of US$21 billion by 2010 and US$37 billion by 2015. Diamond jewellery consumption in India is also estimated to jump by 78% over the next two years.

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