EXPORT-IMPORT BANK OF INDIA

OCCASIONAL PAPER NO. 138

INDIAN GEMS AND JEWELLERY: A SECTOR STUDY

EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authenticity of information and data, EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of such items. © Export-Import Bank of India Published by Quest Publications February 2010

CONTENTS

Page No. List of Tables List of Exhibits List of Boxes Executive Summary 1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. 5. Introduction Raw Material Base: Global scenario International Trade in Precious Metals, Gems and Jewellery Profile of Select Countries Status of Precious Metals, Gems and Jewellery Industry in India Market Analysis Challenges and Strategies World Gold Demand Production of Diamond in the World and in India World Exports and Imports (2007) of Select Precious Metals, Gems and Jewellery India’s Major Export Destinations and Import Source Countries of Precious Metals, Gems and Jewellery (2008-09) Members of Kimberley Process 5 7 9 11 30 32 41 47 61 84 93 108 109 110 113 116

Annexure

Project Team: Mr. S. Prahalathan, General Manager, Research & Planning Group Ms. Renuka Vijay, Manager, Research & Planning Group

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List of Tables
Table No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Title Consumer Demand for Gold in the World Major Producers of Gold in the World Major Producers of Silver in the World Major Producers of Gemstones in the World Major Producers of Platinum in the World Brazil’s Exports of Precious Metals, Gems and Jewellery Brazil’s Major Export Destinations and Import Sources of Precious Metals, Gems and Jewellery China’s Exports of Precious Metals, Gems and Jewellery China’s Major Export Destinations and Import Sources of Precious Metals, Gems and Jewellery Exports and Imports of Diamonds by Israel Israel’s Exports of Precious Metal, Gems and Jewellery Israel’s Major Export Destinations and Import Sources of Precious Metals, Gems and Jewellery Italy’s Exports of Precious Metals, Gems and Jewellery Italy’s Major Export Destinations and Import Sources of Precious Metals, Gems and Jewellery Malaysia’s Exports of Precious Metals, Gems and Jewellery Malaysia’s Major Export Destinations and Import Sources of Precious Metals, Gems and Jewellery Reserves of Gold in India Reserves of Gold in India - State-wise Trends in Foreign Exchange Reserves of India Export and Import of Gold Jewellery by India Exports of Gold Jewellery by SEZ/EPZ Reserves of Diamond in India India’s Exports and Imports of Diamonds Reserves and Resources of Select Precious Stones in India India’s Exports and Imports of Precious Stones India’s Exports and Imports of Platinum Pg. No. 31 33 39 39 40 48 49 50 52 54 54 55 56 57 58 59 64 64 66 68 69 70 73 74 75 77

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Table No. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.

Title India’s Exports and Imports of Pearls India’s Exports and Imports of Silver Market Analysis of Articles of Jewellery (HS 7113) Market Analysis of Articles of Jewellery (HS 711311) Market Analysis of Articles of Jewellery (HS 711319) Market Analysis of Articles of Jewellery (HS 711320) Market Analysis of Articles of Natural and Cultured Pearls, Precious or Semi-precious Stones (HS 7116) Market Analysis of Articles of Natural and Cultured Pearls, Precious or Semi-precious Stones (HS 711610) Market Analysis of Articles of Natural and Cultured Pearls, Precious or Semi-precious Stones (HS 711620) Market Analysis of Imitation Jewellery (HS 7117) Market Analysis of Imitation Jewellery (HS 711711) Export Performance of Indian Gems and Jewellery Industry Analysis of Major Export Destinations of India for Gems and Jewellery

Pg. No. 78 79 85 85 86 87 88 89 90 91 91 94 95 96 97

Financial Performance of Companies (April-September 2009-10) Production Cost/Net Sales Ratio Across Manufacturing Sector

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List of Exhibits
No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Title Price Trends of Gold in Select Currencies Company-wise World Diamond Production, 2007 (in terms of value and volume) World’s Largest Producers of Diamonds, 2007 (In Terms of Volume and Value) Diamond Pipeline Value Chain of the Gems and Jewellery Industry Value Chain of Diamonds and Precious Stones Production of Gold in India India’s Share in World Consumption of Gold Jewellery India’s Gold Consumption Trends in Prices of Gold (January 2005- December 2009) Diamond Production in India India’s Major Export Destinations and Source Countries for Diamonds (2008-09) Prices of Gold and Silver (December 2008-December 2009) in India Prices of Platinum (Jan 2008-Dec 2009) Pg. No. 34 35 36 37 61 62 63 65 66 67 70 72 96 103

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List of Boxes
No. 1. 2. 3. 4. 5. 6. 7. World Diamond Council Responsible Jewellery Council Kimberley Process Diamond Dollar Account Scheme Exim Bank’s Role in Supporting Indian Gems and Jewellery Industry BIS Certification Scheme for Hallmarking of Gold Jewellery Benefits of Becoming a Member of Hallmarking Convention Title Pg. No. 38 44 45 82 83 101 102

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EXECUTIVE SUMMARY

INTRODUCTION
Gems and jewellery are being used by the Indians since ages, for both aesthetic, as well as investment purposes. India has the distinction of being one of the first countries to introduce diamonds to the world. The country was also one of the first countries to mine, cut & polish, and trade in diamonds. The two major segments of the gems and jewellery business in India are gold and diamond jewellery. While a predominant portion of gold jewellery manufactured in India is for domestic consumption, a predominant portion of rough, uncut diamonds processed in India are exported either in the form of polished diamonds or in the form of finished diamond jewellery. The gems and jewellery industry has an important role in the Indian economy. W ith an estimated consumption of 713 tonnes of gold during the year 2008 (including jewellery consumption of 501 tonnes), India is one of the largest consumers of gold in the world.

RAW MATERIAL BASE: GLOBAL SCENARIO Production Gold
The major producer of gold in the world in the year 2008 was China with a production of 295 metric tonnes (growth rate of 7.3% over the previous year); China held a share of 18.9% of the total world production of gold during 2008, followed by South Africa (12.7%), USA (10.7%), Australia (9.9%) and Peru (9.7%). Compared to 2007, during 2008, countries such as Indonesia (-23.7%), Australia (-8.5%), USA (-3.4%), Canada (-1%) and South Africa (-0.8%) witnessed a decline in production, and countries such as China (7.3%), Russia (5.1%) and Peru (2.9%), witnessed an increase in production of gold. During the third quarter of 2009, the demand for gold has shown a decline in almost all the segments. This may be partially owing to global economic slowdown and increase in

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prices, reducing the disposable income with the consumers.

Diamond
During 2007, Botswana was the largest diamond producing country, in terms of value, estimated at US $ 2.96 billion, recording a decline in growth of 7.7% over the year 2006. Botswana constituted a share of 25% in the world production of diamonds. Botswana was followed by Russian Federation (21.7%), Canada (13.7%), South Africa (11.7%) and Angola (10.5%), as the world’s largest producers of diamond. Lesotho (growth of 96.4%), Canada (17.5%) and Sierra Leone (13%) were countries, which showed impressive growth rates in their production of diamonds during 2007. Russia was the largest diamond producer by volume with a production of 38.3 million (23% of world’s diamond production) carats in 2007, followed by Botswana (20%), Congo (17%), Australia (11%) and Canada (10%). In terms of growth in volume of production, Guinea recorded 115% growth in 2007 (over 2006), followed by Canada (28%) and Angola (5.7%).

(19%), Mexico (15.8%), China (13.7%), Chile (10.5%), and Australia (9.5%). There has been an increase in the production compared to the previous year in almost all the major countries, except USA and Australia, which witnessed a decline of (–) 11.1% and (–) 4.3%, respectively. In the case of gemstones (other than diamond), major producers of the world include: Botswana (26.5%), Russia (24.7%), Canada (19.1%), Angola (10.6%) and South Africa (6.5%). Though most of the countries haven’t shown an increase in its production in 2008, over 2007, some countries such as Sierra Leone (66.7%), Guinea (35%), Central African Republic (27%), and Angola (14.9%) have shown tremendous increase in production in the year 2008, over the previous year. Brazil (-33.3%) and Australia (-0.4%) were the few major countries, which showed a decline in production, over the previous year. The largest producer of platinum in the world was South Africa, holding a share of 76.6% of the total world production, followed by Russia (12.5%), Canada (3.6%), Zimbabwe (2.8%) and USA (1.9%). However, major producers such as South Africa (– 7.8%), Russia (– 7.4%) and USA (– 4.1%) have shown a decline in their production in 2008, over the previous year.

Silver, Gemstones and Platinum
Major producers of silver in the world in the year 2008 include Peru

INTERNATIONAL TRADE IN PRECIOUS METALS, GEMS AND JEWELLERY Exports and Imports of Precious Metals and Stones Gold
The largest exporter of gold in the world in the year 2007 was USA with a share of 19.9% in total world exports, followed by Australia (15.9%), Canada (9.3%), Hong Kong (7.3%) and Peru (7.1%). The world’s largest importers of gold include Switzerland (25.7%), UK (19.6%), USA (8.4%), India (7.5%), and South Africa (4.4%).

leading exporters, as well as importers of precious stones (other than diamond) in the world in the year 2007. Hong Kong was the largest exporter of precious stones (other than diamonds) with a share of around 17.1% of the total world exports, and was followed by USA (13.2%), Switzerland (12.7%), Thailand (12.2%), and India (9%). In the case of imports, the leading importers include: USA (26.5%), Hong Kong (14.4%), Switzerland (9.2%), Thailand (7.2%) and India (6.3%).

Pearls
In the case of Pearls, Hong Kong was the largest exporter, with the exports valued US $ 482.92 million constituting a share of 30.2%, in the world exports of pearls in the year 2007. Japan, China, Australia, and French Polynesia were the other major exporters of pearls. Hong Kong was the largest importer with a share of around 33.2%, followed by Japan (18.3%), USA (15.8%), Germany (4.4%), and Australia (4%).

Diamond
Israel (with a share of 19.7%), Belgium (19.6%), India (14.3%), USA (12.8%), and UK (9.1%) were the largest exporters of diamond in the world, in the year 2007. The largest importers of diamonds include: USA (17.7%), Belgium (16.2%), India (13.1%), Israel (13%), and Hong Kong (12.9%). India was an exporter as well as an importer of diamonds, with a respective share of 14.3% and 13.1% in the world. This may be because, India imports rough diamonds, for value addition, and exports as cut and polished diamonds.

Platinum
South Africa, constituting a share of 32.5% was the largest exporter of platinum in the world in the year 2007. UK, USA and Germany were the other major exporters. USA was also a major importer of platinum constituting a share of 24.4% in the world, followed by Japan (19.2%), Germany (12.7%) and UK (8.6%).

Precious Stones
Hong Kong, USA, Switzerland, Thailand and India were among the

Silver
Major exporters of silver in the year 2007 include: China, with a share of 15.9% in the world, followed by Mexico (11.2%), Hong Kong (8.7%) and Germany (8.1%). USA, Hong Kong, UK, Germany and India were the major importers of silver in the world.

Articles of Imitation Jewellery
World exports of articles of imitation jewellery were valued at US $ 4967.03 million in 2007. Major exporters of imitation jewellery include Hong Kong (21.9%), China (17.2%), Austria (8%), France (6.4%), and Italy (5.7%); major importers under this category include USA (19.6%), Germany (7.3%), France (7.3%), UK (6.4%), and Italy (6.2%).

Exports and Imports of Jewellery Articles of Jewellery
World exports of jewellery articles made of precious metals was valued at US $ 42.5 billion in 2007; major exporters include: Italy (14.2%), India (11.9%), USA (10.5%), and Hong Kong (9.9%). Major importers of jewellery include: USA (23.7%), UAE (13.7%), Hong Kong (9.1%), and Switzerland (6.7%).

Profile of Select Countries Brazil
Brazil is known for its diversity and volume of precious stones deposits in its soil such as tourmaline, aquamarine, agate, amethyst, citrine, topaz and quartz; Brazil is the only major source of imperial topaz and paraiba tourmaline in the world. During 2007, Brazil’s exports, under the HS Code 71 catetory, consisted mainly of gold (valued US $ 790.88 million), followed by precious stones (with a value of US $ 111.57 million), and articles of jewellery and parts (with a value of US $ 72.9 million). Major export destinations of gems and jewellery include: USA, Germany, UK, Hong Kong and Mexico, and the major import sources include Peru, South Africa, Germany, Belgium and UK. Gold was largely exported to USA (around 95% of the total exports of

Articles of Natural / Cultured Pearls, Precious Stones
World exports of articles of natural and cultured pearls, or made of precious stones was valued at US $ 1945.99 million in 2007. Major exporters include USA (76.4%), Hong Kong (6.4%), China (5.4%), Switzerland (2%), and Japan (1.3%); major importers under this category include: Hong Kong (15.7%), Switzerland (14.9%), UK (9%), Netherlands Antilles (9%), and Japan (8.6%).

gold by Brazil). India was a major source country for import of diamonds, imitation jewellery and articles of natural and cultured pearls.

China
China is one of the largest consumers of gold, with gold jewellery being the major item of demand. In the year 2008, the total demand for gold in China was 392.7 tonnes, a growth of 19.8%, over the previous year. During the third quarter of 2009, the gold demand in China was 120.2 tonnes, a growth rate of 12% over the corresponding quarter of 2008. After diamond was found in the three provinces of Liaoning, Shandong and Hunan, the diamond industry in China has been growing, since 1980s. The annual production of diamonds in 2008 was US $ 1.3 million (69.4 thousand carats), an increase of 18% in value (13% in carat) since 2006. China is one of the largest producers of silver in the world. In the year 2008, China produced silver worth 2600 tonnes, an increase of 1.6% over the previous year; China, in the year 2008, held a share of 13.7% in the world production of silver. China’s exports of gems and jewellery have grown by 21% per annum since 2005; from US $ 5.5 billion to US $ 8.1 billion in 2007. The

sub-item which was largely exported (according to value) from China, under the HS Code 71 category, was articles of jewellery and parts of precious metals with a share of 30.9% in the total exports of gems and jewellery in the year 2007. However, silver (42%), and articles of natural or cultured pearls and precious and semi precious stones (30.8%) were the items which showed highest CAGR during the period 2005 – 2007. Exports of precious stones showed a decline (-26.4%) over the years, from US $ 29.1 million in 2004 to US $ 15.8 million in 2007. Major destinations for China’s gems and jewellery exports include: Hong Kong, USA, Belgium, Switzerland and UK.

Israel
Diamond jewellery is the main sub segment of Israel’s gems and jewellery industry, followed by gold, silver and imitation jewellery. The artists in Israel make use of most of their skills, innovative technologies and techniques, which enable them to offer their products at very reasonable prices. Exports of diamonds, according to the Central Bureau of Statistics, Government of Israel, showed a decline following the economic recession. During January September 2009 there was a drastic decline in exports ranging above

40%. The economic slowdown was cited as the main reason for this decline in exports. During 2007, the export of precious metals, gems and jewellery by Israel touched US $ 19.1 billion, achieving a CAGR of 7.5%, during 2005-2007; and the imports of Israel were US $ 12.6 billion in 2007. Israel was a major exporter of diamonds, which constituted around 97% of the total gems and jewellery exports, and around 2% was accounted by articles of jewellery. Major export destinations of diamonds from Israel include: USA, constituting a share of 48.5%, followed by Belgium (16.7%), Hong Kong (15%), India (4.8%) and Switzerland (4.7%). Major source countries for imports of diamonds by Israel include: USA (40%), Belgium (24.8%), India (8.5%), Hong Kong (8.2%), and UK (8.1%).

Italy
Italy has a large gems and jewellery industry, mainly located in the regions, namely, Veneto, Toscana, Lombardia, Lazio and Piedmont. These regions have captured more than half of the Italian market of gems and jewellery. There are two major clusters in Italy for gems and jewellery which are located in Vicenza and Arezzo. Constituting a share of 69.5%, articles of jewellery and parts was the major jewellery export item, under the HS Code 71 category, in Italy.

However all the categories of precious metals, gems and jewellery have witnessed an increase in exports from Italy, with platinum and diamonds witnessing the highest CAGR of 69.8% and 52%, respectively, during 2005 to 2007. The exports of platinum increased from US $ 222.71 million to US $ 642.17 million, and that of diamonds increased from US $ 56.83 million to US $ 131.45 million during this period. The total exports of precious metals, gems, and jewellery (HS Code 71) witnessed a CAGR of 17.4%, since 2005, showing an increase from US $ 6.3 billion to US $ 8.7 billion, in value terms. Major export destinations of Italy’s precious metals, gems and jewellery industry include: USA, Switzerland, France, UAE and UK, and the major source countries for import of precious metals, gems and jewellery include: USA, Switzerland, France, Belgium and Hong Kong. Major export destinations of articles of jewellery and parts include: USA (15.4%), UAE (13.6%), Switzerland (10.2%), France (6%) and UK (4.9%), and the major source countries for articles of jewellery and parts include: Switzerland (29.6%), Hong Kong (13.9%), France (8.8%), Poland (7.9%), and Turkey (7.7%).

Malaysia
Malaysia is another major producer and exporter of gems and jewellery,

with the industry having concentration in Penang. According to industry sources, approximately 75-80 percent of the gold and jewellery in Malaysia are manufactured or fabricated in Penang, followed by Johor Bahru and Kuala Lumpur, with activities ranging from manufacturing to import, export, retail and wholesale. During 2007, exports of precious metals, gems and jewellery from Malaysia were valued at US $ 2.1 billion, of which 64% constituted articles of jewellery and parts, followed by gold with 19% share. Other export segments of gems and jewellery, namely, diamonds, precious stones, pearls, and silver constituted marginal share in the total gems and jewellery exports from Malaysia. Major export destinations for gold include: Thailand (27.9%), Australia (13.9%), Hong Kong (13.2%), China (8.9%), and Taiwan (8.2%), whereas the major source countries for gold include: Japan (71.3%), Singapore (19.2%), Indonesia (3.2%), USA (2.9%), and Hong Kong (1%). In the case of articles of jewellery and parts, major export destinations include: UAE (71.2%), Singapore (21.3%), USA (2.6%), China (1.7%), and Hong Kong (1%); and the major source countries include: Singapore (60.1%), China (14%), Hong Kong (7%), USA (4.8%), and Switzerland (4.1%).

STATUS OF PRECIOUS METALS, GEMS AND JEWELLER Y INDUSTRY IN INDIA Gold
The total resources of gold in the country, as on April 2005, were estimated at 390.28 million tonnes. Out of these, 19.25 million tonnes were under the reserve category, and the balance 371.03 million tonnes were under the resources category. Besides, the total resources of gold ore of placer type in the country were estimated at 26.12 million tonnes. Karnataka has the largest known reserves of gold in India followed by Rajasthan and Kerala. Although there have been significant ore resources, India’s gold production has shown a decline over the years. India has been the largest consumer of gold jewellery in recent times, and in the year 2008, the gold consumption in India was estimated to be 501 tonnes, accounting for 23% of world demand. In the third quarter of 2009, the consumption of gold jewellery in India has declined by nearly 37% and the total consumption of gold has declined by around 45% over the same period in the previous year. During the year 2008-09, the export of gold (or jewellery) has witnessed a growth rate of 51.1% over the previous year, from US $ 4.3 billion to US $ 6.5 billion, and the

imports had grown by 24.4%, from US $ 17.1 billion to US $21.2 billion. Major source countries for import of raw gold by India include Switzerland, constituting 44.6% of the total imports of raw gold in the year 2008-09, followed by Australia (19.7%), UAE (19.6%) and South Africa (10.4%) . Main export destinations of gold jewellery include UAE, Singapore and Hong Kong.

Diamond
According to USGS data, diamond production (gem and industrial) in India in the year 2007 was 55 thousand carats and has remained more or less stagnant over the years. As per United Nations Framework Classification (UNFC) system, as on 1.4.2005, India had total resources of around 4.5 million carats, of which 1.2 million carats was reserves. By grades, about 17% of resources are of gem variety, 18% are of industrial variety, while bulk of the resources (65%) is placed under unclassified category. Andhra Pradesh accounts for 40% of diamond resources, followed by Madhya Pradesh (32%), and Chhattisgarh (28%). India imports rough diamonds and process them for value addition and exports. As a result, India is a net exporter under this category in value terms. India exported diamonds valued US $ 14.2 billion during 2007-08, an increase of 34%

over the previous year. During the year 2008-09, the exports of diamonds showed an increase of 10.6%, touching US $ 15.7 billion. Export of crushed industrial diamonds showed a tremendous increase during this period. India imported diamonds valued US $ 7.7 billion in 2007-08; during the year 2008-09, the imports increased by 110% from US $ 7.7 billion to US $ 16.3 billion. In the case of diamond exports, major destinations were: Hong Kong (30.1%), UAE (22.5%), USA (17.6%), Belgium (11.4%), and Israel (5.0%). As regards diamond imports, Hong Kong (27.6%), Belgium (24.4%), UAE (25.6%), UK (6.4%), and USA (4.8%) were the major source countries for India.

Precious stones
Although traditional Indian gemologists have identified around 84 precious and semi-precious stones, nine stones, namely: Ruby, Emerald, Pearl, Diamond, Red coral, Zircon, Blue sapphire, Yellow sapphire, and Cat’s Eye, form the ‘Navratnas’ or nine gems. India was more an exporter of precious stones than an importer of the same, and the difference between these two being minimal. During 2007-08, the exports of precious stones were US $ 280.8 million, an increase of 6.5% over the previous year, and in the year 2008-09, exports of precious stones

witnessed a marginal decline of 0.1%, over the previous year. Import of precious stones has grown marginally in the year 200809, by only 4.6% over the previous year. Major export destinations for precious stones (other than diamonds, which were not worked or graded) include: USA (30.5%), Hong Kong (22.7%) and Thailand (13.9%). The source countries for the same include: Thailand (23.3%), Hong Kong (19.1%), and Zambia (13.9%). In the case of articles of precious stones other than diamonds (natural/ synthetic), the major export destinations were USA (38.8%), Germany (23.9%), and Switzerland (9%), and the source countries for the same include: Hong Kong (27.8%), Sri Lanka (22.2%), and Germany (16.7%).

2008-09, of around 6542% over the previous year. During 2007-08, the imports had grown by 55% over the previous year. UAE was the major export destination for India’s export of raw platinum, constituting 49% of total exports; major source countries for raw platinum imports by India include: UAE (78.7%), South Africa (15.3%), Switzerland (2.7%). UAE and Australia were the major export destinations of platinum jewellery constituting a combined share of 43.8% and the major source countries for imports by India were Thailand and Belgium with 69% and 13% share, respectively.

Pearls
During 2007-08, the exports of pearls had witnessed an impressive performance, with the export of cultured pearls showing a growth of 125%. During the year 2008-09, the imports of pearls declined by 7.8% over the previous year. Major export destinations of pearls include: USA (38.6%), UAE (14.1%), Austria (12.0%), Japan (7.5%), and Hong Kong (10.8%). The source countries for import of pearls by India include Japan (34.5%), China (31.9%) and Hong Kong (21.1%).

Platinum
The total resources of platinum group of metals in India, as on April 2005, was only 14.2 tonnes; the entire known resources are located in Niligiri, Boula-Nuasahi and Sukinda areas in Orissa. The exports of platinum which had witnessed an increase of 175% in value terms, during 2007-08, over the previous year, showed a tremendous increase of 1804% during the year 2008-09, over the previous year. Imports also showed a high increase during the year

Silver
During 2007-08, exports of silver (unwrought and semi-manufactured form) witnessed a negative growth

of 35.5%, and silver jewellery witnessed a growth of 19.5%. However, during the year 2008-09, exports of silver (unwrought and semi-manufactured form) grew by 27.4%, and export of silver jewellery witnessed a growth of 87%. During the year 2008-09, India imported unwrought silver valued around US $ 2 billion, a growth of 79% over the previous year. Import of silver jewellery witnessed a growth of 80.6%. Major export destinations of silver include: USA (21.3%), Switzerland (29.7%), UK (13.8%), Iran (11.5%), and Japan (9.3%), and that of silver jewellery include: USA (38.1%), China (12.6%), UAE (10.4%), Hong Kong (7.1%), and UK (5.8%). The source countries for import of silver by India include: UK (38%), China (15.4%), Russia (11.8%), Switzerland (11.6%) and Hong Kong (3.8%); and that of silver jewellery include: USA (35.2%), Italy (17.6%), Hong Kong (12.3%), UAE (12.4%), and Thailand (6.1%).

the financing requirements of various enterprises. The credit facilities are available for financing at all stages of export cycle of Indian firms. The Bank’s Lines of Credit (LOC), extended to commercial banks, financial institutions, regional development banks, and entities overseas, serve as a market entry mechanism to Indian exporters, and provide a safe mode of non recourse financing option to Indian exporters. Apart from LOC, the Bank offers buyer’s credit and supplier’s credit for exports on deferred payment terms. These facilities help companies, especially the SMEs, to offer competitive credit terms to the buyers and to explore new geographical markets. Exim Bank has extended supplier’s credit, pre shipment credit, post shipment credit, and foreign currency packing credit (FCPC), to the firms engaged in the gems and jewellery sector, among others. Exim Bank has signed an MOU with the Indian Diamond Institute, which envisages development of human resources through professional training, and thereby support the export efforts of the industry. Exim Bank has provided grant to IDI for upgrading LRS (Laser Raman Spectroscopic Machine) equipment in order for the Institute to provide training to carry out in-depth study of all types of gems. The MOU will also enable the institutions to

ROLE OF EXIM BANK IN SUPPORTING INDIAN GEMS AND JEWELLERY INDUSTRY
Exim Bank of India seeks to create an enabling environment to promote two-way transfer of technology, trade and investments and operates a wide range of lending, service and support programmes. The Bank has a variety of loan products to cater to

exchange literature, data, information and research output on the gems and jewellery industry, and also help in exchange of foreign experts between the two institutions, in organizing their respective training programmes.

MARKET ANALYSIS
The product-country analysis shows that USA, EU, Japan and Hong Kong are the leading importers of major gems and jewellery products. These countries have been sourcing their jewellery import requirements mainly from countries such as Hong Kong, China, Italy, USA, Germany and UK, of which USA, UK and Germany are importers as well as exporters. Hong Kong appears to be more of a trading hub in the Asian continent. India served as one of the major source countries for diamonds, as also for articles of jewellery for select countries. In the case of diamonds, India is one of the major importers of rough diamonds, and one of the major exporters of cut/ polished diamonds. India’s exports of cut and polished diamonds have been to all major markets in the world. India is also a major exporter of articles of jewellery and parts, and the exports have been to all the major importers in the world. However, some of the markets are not well-explored by Indian gems and jewellery exporters. For example, India may endeavour to

concentrate on markets like: UK and Switzerland for articles of jewellery of gold and platinum group of minerals (HS code 711319); USA, Germany, UK and Switzerland for articles of jewellery made of silver (HS code 711311); USA, Japan, Switzerland and UAE for articles of natural and cultured pearls (HS code 711610); Switzerland, UK and Japan for articles of semi-precious stones (HS code 711620); and USA, Germany, France, UK and Italy for articles of imitation jewellery (HS code 7117). India may leverage its traditional craft-skills, low-cost labour, and fabrication techniques in some of the jewellery products (such as processing of small-sized diamonds), and replicate such advantages in the production of other products, and thereby become a global player across the gems and jewellery segments.

CHALLENGES AND STRATEGIES Challenges Unorganised Sector
Being an unorganized sector hampers the ability of Indian gems and jewellery Industry to emerge as a world-class supplier. According to a FICCI study, the gold processing industry has around 15,000 players, with only around 80 units having

revenues over US $ 5 million. India is also home to around 4,50,000 goldsmiths, over 100,000 gold jewellers, along with about 6,000 diamond-processing players and 8,000 diamond jewellers.

Impact of Recession
There had been a loss of market for gems and jewellery exports due to recession and global economic slowdown. During 2007-08, there was growth in export of gems and jewellery by 23%, over the previous year. The growth trend continued even in 2008-09 during which the exports showed a growth of 44% over the previous year. However, during the period April- September 2009-10, due to economic slowdown, the demand for gems and jewellery shrank, which resulted in export slowdown for India. Following the economic slowdown, asset price devaluations, job losses and decrease in disposable income have happened, along with escalation in gold prices, which have changed the consumption pattern of gems and jewellery. Further, the economic slowdown has also affected the consumer buying pattern, with growing demand for single-line jewellery, low-carat jewellery, and gems-studded jewellery.

Rise in Prices
As mentioned earlier, the prices of precious metals, especially gold and silver, has been witnessing

steep increase, since the last few years, which has been changing the buying pattern of consumers. During the period December 2008 - December 2009, the price of gold per ten grams, has increased from Rs 13,445 to Rs 16,870, showing an increase of 26%. Even though the price of silver had witnessed a decline after February 2009, it again started rising after April 2009. From Rs 17,847 per kg in December 2008, the silver price increased to Rs 27,430 per kg in December 2009.

Possible Threats from China and from Other Countries Producing Diamonds
Although India currently enjoys dominance in the world’s cut and polished diamond market, China may emerge as a rival in the long- term, mainly because of the availability of cheap labour, growing domestic demand, and also the improvement in the quality of workmanship in the country. It may be added that increasing number of diamond processors are setting up their facilities in China due to these reasons. Also, there has been growing pressure in major diamond producing countries in Africa, like Botswana, Namibia and South Africa, to gain further economic benefits from diamond value chain, seeking investments in cutting and polishing industry. Such developments may affect the prospects of India.

Low Level of Technology Absorption
Utilization of hi-tech, speedy and efficient machinery and software has led to the gradual replacement of traditional / manual methods of polishing, manufacturing and designing of gems and jewellery. Proactive players in the Indian gems and jewellery industry are always on the lookout for better technology for their units. However, such technology absorption is relatively low in Indian gems and jewellery industry, due to the small size, and unorganized nature of majority of the players in this industry. Also, mere absorption of technology may not be helpful, without a proper blend of manual labour with machinery, to provide ethnicity to the end-products. Usage of semi-skilled and unskilled workforce in operation of such highend machines may result in significant under-utilization of the machinery / technology, and may, at times, cause losses in operations. Skill development is therefore very essential for proper reclassification of the workmen in this industry.

quality, reducing wastage, introducing new designs and concepts, and innovation in supply chain management and marketing. The gap between hi-end machines and unskilled labour can also be reduced with innovative R&D solutions.

Strategies Branding of Jewellery
Branding of jewellery plays a very important role in the jewellery market as it assures consumers that the products are of certain quality, durability, and conform to several social, environmental and durability standards. Brand promotion is therefore one of the best modes of market penetration. Though in its nascent stage, branded jewellery in India has been showing encouraging signs, despite tough competition. According to an estimate by the Indian Brand Equity Foundation (IBEF), the market for branded jewellery is expected to reach US $ 2.2 billion by 2010. Some of the jewellery brands in India are DeBeers, D’damas, Tanishq, Oyzterbay, and Gili. In order to gain market share, branded jewellers may have to come up with designs that customers want, and win the trust and confidence of consumers by hallmarking and demonstrating the purity of the gold used by them. To compete with traditional players,

R&D and Product Development
Another major challenge faced by the industry is the low level of R&D intensity, and facilities for undertaking R&D and product development. Proper R&D solutions would help in improving product

branded players may also find some ways to differentiate themselves from others. While the success of a particular brand may depend on differentiation and affordability, quality will be a key element in sustaining a brand. In addition, branded players require focused advertising and astute salesmanship to compete with traditional jewellers.

quality products even in rural areas. India may also consider becoming a member of International Hallmarking Convention, and derive the benefits of such Convention.

Increasing Market Presence of Platinum Jewellery
With the gold prices increasing at record levels, consumers have started showing interest in ornaments made from other metals, like platinum and palladium. The fall in prices of platinum has also triggered the demand for platinum jewellery across the world, including India. During the past one year the prices of platinum have witnessed decline, which is one of the main reasons for the consumers to opt for platinum jewellery. During March 2008, the price of platinum stood at US $ 2005 per troy ounce (31.1 gms), and during November 2008, the price fell down to as low as US $ 844 per troy ounce. As of December 2009, the price of platinum stood at US $ 1448 per troy ounce. As the demand for platinum jewellery is increasing and especially when the consumer preferences are shifting to platinum jewellery, due to rise in price of gold, Indian jewellers need to diversify their product range and concentrate more in the manufacture of platinum-based jewellery. Leading retail jewellers should also add exclusive space for platinum jewellery in their stores. According to industry observers, at

Hallmarking of jewellery
Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in jewellery. Government of India has been protecting the interests of consumers from adulteration, and irregular metal quality, and launched the Hallmarking Scheme through Bureau of Indian Standards. The principal objectives of the Hallmarking Scheme are to protect the consumers against the fraud of adulteration and to oblige the manufacturers to maintain legal standards of fineness. However, it is difficult to make Hallmarking of gold jewellery mandatory across the country due to insufficient number of certification centres. At present, there are over 100 BIS-recognised assaying and hallmarking centres in India, which are centred around Tier – 1 and Tier – 2 cities. It is proposed that India may consider expanding the network of hallmarking infrastructure across the country, and help penetrate

present, facilities for ore beneficiation and extraction of platinum group metals do not exist in the country. Technology also has to be imported for extraction of platinum group of metals, which should be promoted in India

packaging are very important in marketing such products. Focusing on such product lines would enable the players in establishing an edge over their competitors. Players should also have desire for product innovation to catch-up with the change in consumer trends.

Change in Product Portfolio
As the recession is reducing the demand for jewellery products worldwide, it is necessary to diversify the export product portfolio, and concentrate more on lesser-priced jewellery, such as imitation, fashion or costume jewellery. Indian gems and jewellery industry may also diversify the export product portfolios on the lines of the change in perception of the consumers. It may be mentioned that the new-age consumer perceives jewellery as a personal accessory that manifests the wearer’s attitude, personality and lifestyle. Significant opportunities may be available to the players in the Indian jewellery industry, if they leverage and package the products with the blending of tradition and culture in designs that are universal and contemporary in their aesthetic appeal. While the products with such blend would stand out with resemblance of cultural and regional identity, they may not significantly look as ethnic products. In other words, the products should be a new-look piece, but with traditional inspiration. Branding and

Continuous Skill Development
Human resource is one of the critical factors for the gems and jewellery industry, as the industry is labour-centric. Non-availability of skilled workers is often cited as one of the major reasons for the inability of the players in this industry to scale up their operations. Thus, the players need to constantly upgrade the skills of the workmen, through training and retraining strategies, to enhance their productivity. Some of the focus areas for imparting skillupgradation include: technology interface of design and product development, innovation in manufacturing process and reduction of wastage, standardization and quality control, and international networking and marketing. In addition to firm level strategies, the industry also needs to address the challenge of skill development collectively. Supply of craftsmen / artisans that come through generations need to be complemented by fresh talents, trained in a professional manner, to have access to wider talent pool. The industry may establish close linkages with the existing learning

centres, and help them in imparting skills / training that are needs of the hour. At present, there are few institutes which provide training in jewellery design, viz., Indian Institute of Gems and Jewellery, Indian Diamond Institute, and National Institute of Design. Also, the National Skill Development Corporation (NSDC), initiated by the Government of India, is expected to give thrust on skill development of various sectors, including gems and jewellery. It is also important for the players to accomplish greater degree of professionalism and establish appropriate organization structure that would attract and retain best talent in the industry.

feasible under conventional methods. Technology also helps the fabricators to churn-out the newdesign products in a much speedy way.

Establishing Diamond Bourses
At present, one diamond bourse, Bharat Diamond Bourse, has been established in Mumbai. Nevertheless, the traders have to visit Antwerp, Israel, Hong Kong and other locations to buy and sell rough and polished diamonds. Establishment of more diamond bourses will give a major fillip to India to emerge as an international diamond trading hub, and also to make trading in diamonds easier for the players in India. It will be easier to get the rough diamonds through these trading centres and also for getting buyers for the cut and polished diamonds. Government of India has already announced the plan for establishing more diamond bourses to make the country an international trading hub to boost the gems and jewellery exports. These diamond bourses are expected to provide a single platform for traders and it would help in making India a trading centre for diamonds.

Technology Upgradation
Players in this industry need to adopt latest technology, including the ICT interface in all aspects, starting from mining, cutting and polishing, to fabrication and marketing. Technological solutions are available for several of the challenges faced by the gems and jewellery industry; these solutions include: innovations in designs (through CAD/CAM machinery), quality and finish of products (through infrared, photo-typing, etching, wax-casting), cost control in process and reduction of wastage (laser cutting, hollow-tube processing). Imparting of technological solutions may reduce cost and time, which may not be

Increase in Exploration Activities
As per United Nations Framework Classification, total resources (reserves and remaining resources)

of gold ore (primary) in India as on April 1, 2005, were estimated at 390.28 million tonnes, of which only 19.25 million tonnes are placed under reserve category, and the rest, 371.03 million tonnes, under resources category. Besides, it has been estimated that the total resources of gold of placer type in the country would be around 26 million tonnes. However, resource augmentation and gold production have not been significant in India. This may require increase in exploration activities with improvements in technology and know-how. According to a report by the Planning Commission, Government of India, the mining sector also requires improved method of narrow-vein-mining for achieving full economic benefits. Introduction of small-scale mining culture in the gold industry is also another requirement with adoption of modern gold extraction technology. Cluster mining of small gold deposits may also deserve consideration and should be encouraged. The metallurgical technique for extraction of platinum group of elements from low grade ore is also required to be sourced from developed countries, in order for India to become a producer of platinum. Efforts should be made to increase the production of rough diamonds from India to partly meet the requirement of Indian diamond cutting and polishing industry. Exploration activity in different

states is required to be boosted for discovering new economically viable kimberlite / lamporite rocks for indigenous production of diamonds.

Enhancing Visibility through Continuous Participation in International Exhibitions
Continuous participation in international trade shows and jewellery exhibitions is very important for the Indian gems and jewellery industry; such strategy would help in projecting the industry as a player in entire jewellery value chain, from cutting, polishing, fabricating of wide variety of plain and stone-studded jewellery. Participation in international exhibitions would also help establish new business links for the Indian gems and jewellery industry, and would also pave the way for the industry to develop further business links to enhance the level of their innovations in designs and technology. This platform would also help in attracting and mobilizing the major buyers of gems and jewellery internationally, and also provide exhibitors with learning opportunities and exposure to new markets and trends. The recent foreign trade policy has increased the personal jewellery carriage limit to US $ 5 million, from US $ 2 million, and the limit in case of personal carriage, as samples, for export promotion tours, has also

been increased from US $ 0.1 million to US $ 1 million. This would also help the industry promote exports, as the industry will be able to showcase more jewellery in exhibitions abroad.

CONCLUSION
World gems and jewellery industry is on the verge of transformation due to both supply-side and demand-side factors. Some of the recent trends in the global gems and jewellery industry include: fragmentation of rough diamond supply positions; emergence of new mining areas; beneficiation movement in mining countries, and ever-growing raw material prices. At fabrication level, fashion and styles have been changing significantly; the ratio of cost of raw materials to sales has been coming down, squeezing the profit margin of the fabricators. There has been volatility in raw material prices; the global slowdown led to low capacity utilization in this industry bringing down the margins in the jewellery manufacturing. In some countries, including India, some of the processing units have been partially shut down due to slackening demand. As a result, the value chain in the gems and jewellery industry may witness consolidation; only select major players are likely to cope with the trends and sustain the competitive pressures.

It is expected that the spike in gold and silver prices might change the consumer preferences, as also impact their demand pattern. 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 gems and jewellery. Further, the consumer awareness and consciousness, generated through the vigilant measures adopted by various national Governments, are expected to drive the demand for branded and hallmarked jewellery. At national level, India has been adopting various strategies to cope with the global trends in gems and jewellery business. World Gold Council and the Indian gems and jewellery industry have jointly introduced international jewellery designing competitions among the Indian artisans to generate awareness about the skills of Indian artisans in the global market, as also to expose Indian artisans to new design developments emerging around the world. There have been initiatives taken by many designing centers to train Indian jewellers in international manufacturing and designing skills. This is expected to enhance demand as well as sales for the Indian gems and jewellery industry. Indian gems and jewellery industry is increasingly building its ability to produce full range of sizes

and qualities of stones, utilizing 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. Both the Government and the 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 / mid-sized firms, to large, integrated units. The IT

interface would also provide the necessary platform for firms to scale up their operations. While several such measures have been taken, at firm-level, industry-level, and Government-level, there exists still a need to strengthen the position of India in the global market place through a concerted strategy, addressing the challenges of rawmaterial sourcing, technological infusion at processing stage, adoption of dynamism in design and product development, and sustainable market entry approach.

1. INTRODUCTION

Gems and jewellery are being used by the Indians since ages for both its aesthetic as well as investment purposes. India has the distinction of being one of the first countries to introduce diamonds to the world. The country was also one of the first countries to mine, cut & polish, and trade in diamonds. The gems and jewellery sector may be categorized broadly into: Gemstones: Diamonds, coloured stones - precious, semi precious and synthetic stones; Jewellery – plain gold, studded, silver, costume jewelleries; and Pearls. The two major segments of the gems and jewellery business in India are gold and diamond jewellery. While a predominant portion of gold jewellery manufactured in India is for

domestic consumption, a predominant portion of rough, uncut diamonds processed in India is exported either in the form of polished diamonds or in the form of finished diamond jewellery. The gems and jewellery industry has an important role in the Indian economy. W ith an estimated consumption of 713 tonnes of gold during the year 2008 (including jewellery consumption of 501 tonnes), India is the largest consumer in the world. (Table 1). Apart from its historical religious significance, gold is valued as an important savings and investment vehicle. Even in present times, gold remains the bride’s wealth and is the preferred jewellery worn by women in India irrespective of their religious belief. Buying of gold and jewellery is an important part in every stage of the life-cycle of an Indian citizen.

Table 1: CONSUMER DEMAND FOR GOLD IN THE WORLD (in tonnes)
Countries Jewellery 2007 Net Total Jewellery retail investment 217.5 25.6 16.6 9.6 769.2 327.8 274.5 9.6 501.6 326.7 188.1 — 2008 Net retail investment 211.4 65.9 78.9 242.7 Total Jewellery % Change Net retail investment -2.8 157.4 375.3 Total

India China USA Europe excluding CIS Turkey Saudi Arabia Vietnam UAE Russia Egypt Indonesia Italy Other Gulf UK Taiwan Hong Kong Japan Total Above Others

551.7 302.2 257.9 —

713.0 392.6 267.0 242.7

-9.1 8.1 -27.1 —

-7.3 19.8 -2.7

2428.1 2428.1

188.1 117.9 21.4 99.8 85.7 67.8 55.2 59.1 40.0 50.1 14.7 14.2 30.6 1956.4 444.3

61.1 9.0 56.1 7.5 — 0.7 0.3 — 2.9 — 7.4 1.0 -56.3 51.3

249.2 126.9 77.5 107.3 85.7 68.5 55.5 59.1 42.9 50.1 22.1 15.2 -25.7 495.6

153.2 108.9 19.6 100.0 91.4 74.3 55.9 50.3 34.8 37.2 12.2 17.0 28.2 1799.4 386.4 2185.8

57.1 13.5 96.2 9.5 — 2.5 2.9 — 2.9 — 8.7 1.0 -39.4 64.8

210.3 122.4 115.8 109.5 91.4 76.8 58.8 50.3 37.7 37.2 20.9 18.0 -11.2 410.3

-18.6 -7.6 -8.4 0.2 6.7 9.6 1.3 -14.9 -13.0 -25.7 -17.0 19.7 -7.8 -8.0 -13.0 -8.9

-6.5 50.0 71.5 26.7 0.0 257.1 866.7 — — — 17.6 0.0 -30.0 110.0 26.3 99.5

-15.6 -3.5 49.4 2.1 6.7 12.1 5.9 -14.9 -12.1 -25.7 -5.4 18.4 -56.4 10.3 -17.2 5.4

359.0 2315.4

753.8 2553.2

World Total

2400.7

410.3 2811.0

818.6 2963.5

SOURCE: World Gold Council

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2. RAW MATERIAL BASE: GLOBAL SCENARIO

PRODUCTION Gold Gold is produced from mines in every part of the world, except Antarctica, where mining is not permitted. From a level of 25701 metric tonnes in 2001, world gold mine production has declined to 2327 metric tonnes in 2008, mainly because of decline in production in the major gold producing countries, like South Africa, USA and Indonesia.
The major producer of gold in the world during 2008 was China with a production of 295 metric tonnes (growth rate of 7.3% over the previous year); China held a share of 18.9% of the total world production of gold during 2008, followed by South Africa (12.7%), USA (10.7%), Australia (9.9%) and Peru (9.7%). Compared to 2007, during 2008, countries such as Indonesia (-23.7%), Australia (8.5%), USA (-3.4%), Canada (1%) and South Africa (-0.8%), witnessed a decline in production, and only countries such as China (7.3%), Russia (5.1%) and Peru (2.9%) witnessed an increase in production of gold.

Growth in production of gold is expected to remain flat in 2009, as increased production in China, Canada and Peru may not be able to offset decline in production in South Africa, USA, Indonesia and Australia. World gold demand primarily comprises of jewellery fabrication, retail investments, industrial and dental uses and exchange traded funds. In the year 2008, world gold demand in volume terms declined for jewellery consumption and industrial and dental purposes; however, gold demand for investment purposes showed an increase over the previous year (Annexure: 1). However, in value terms (USD), the demand for gold has shown considerable growth in 2008, indicating the significant price increase during this year. During the third quarter of 2009, the demand for gold has shown a decline in almost all the segments. This may be partially owing to global economic slowdown and increase in prices, reducing the disposable income with the consumers.

1

SOURCE: USGS (U.S. Geological Survey)

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Table 2: MAJOR PRODUCERS OF GOLD IN THE WORLD (In metric tonnes) Countries China South Africa USA Australia Peru Russia Canada Indonesia Uzbekistan Ghana Papua New Guinea Chile Mexico Brazil Other countries World total SOURCE: USGS 2007 275 252 238 246 170 157 101 118 85 84 65 42 39 40 471 2383 2008 295 250 230 225 175 165 100 90 85 84 65 42 41 40 440 2327 % Change 7.3 -0.8 -3.4 -8.5 2.9 5.1 -1.0 -23.7 0.0 0.0 0.0 0.0 5.1 0.0 -6.6 -2.3 %Share in 2008 12.7 10.7 9.9 9.7 7.5 7.1 4.3 3.9 3.7 3.6 2.8 1.8 1.8 1.7 18.9 100.0

Gold exchange traded funds have gained popularity with investors across the world and these were floated in the market in 2003. These funds and additional similar funds are now listed in the exchanges across the countries. Holdings of ETFs (Exchange Traded Funds) were estimated to be US $ 8.8 billion in 2008, and US $ 1.3 billion in the third quarter of 2009. Investing in gold in the traditional manner is not accessible and carries higher costs owing to insurance, storage and higher markups. The claimed advantage of the ETF is that the

3 33

investor can purchase gold ETF shares through a stockbroker without being concerned about such problems. World gold prices have shown an upward trend over the years. Gold prices, which stood at US $ 274.5 per ounce on December 31, 2001, increased to US $ 869.8 per ounce on December 31, 2008 showing a CAGR of 15.5%.The price has increased further to US $ 1,192 per ounce on December 1, 2009. Exhibit 1 shows the gold prices in select currencies. Almost all the currencies

3 34

Exhibit 1: PRICE TRENDS OF GOLD IN SELECT CURRENCIES

SOURCE: World Gold Council (based on London pm fix)

have shown an upward trend since the year 2000. In Indian rupees, the price of gold, which stood at Rs. 12,803 per ounce on December 31, 2000, increased to Rs. 42,374 per ounce on December 31, 2008. The price has increased further to Rs. 55,228 per ounce on December 1, 2009. The main reason for the increase in prices of gold was the strong consumer demand, especially with the change in investor behaviour and consideration of gold as safe investment, post financial crisis.

in terms of value, estimated at US $ 2.96 billion, recording a decline in growth of 7.7% over the year 2006. Botswana constituted a share of 25% in the world’s production of diamonds. Botswana was followed by Russian Federation (21.7%), Canada (13.7%), South Africa (11.7%) and Angola (10.5%) as other world’s largest producers of diamond. Lesotho (growth of 96.4%), Canada (17.5%) and Sierra Leone (13%) were countries, which witnessed impressive growth rates in their production of diamonds during 2007. Russia was the largest diamond producer by volume, with a

Diamond
During 2007, Botswana was the largest diamond producing country

production of 38.3 million (23% of world’s diamond production) carats in 2007, followed by Botswana (20%), Congo (17%), Australia (11%) and Canada (10%). In terms of growth in volume of production, Guinea recorded 115% growth in 2007 (over 2006), followed by Canada (28%) and Angola (5.7%) (Annexure: 2). Including its mines in South Africa, Namibia and Canada, De Beers is the world’s largest diamond mining company, constituting 42% of the total production by value and 29% of the total production by volume (Exhibit 2). Other major producers include Rio Tinto, Alrosa and BHP Billiton.

the De Beers, Trans Hex, Rio Tinto, BHP Billiton and a hand-full of other companies which use their cartel power to control the supply of diamonds on the wholesale market (diamond pipeline), thereby controlling and stabilizing prices. The process under the diamond pipeline is given in Exhibit-42:

Silver, Gemstones and Platinum
Major producers of silver in the world in the year 2008 include: Peru (19%), Mexico (15.8%), China (13.7%), Chile (10.5%) and Australia (9.5%). There has been an increase in the production compared to the previous year in almost all the major countries, except USA and Australia, which witnessed a decline of (–) 11.1% and (–) 4.3%, respectively.

The Diamond Pipeline
The trade in gem-grade rough diamonds is primarily controlled by

Exhibit 2: COMPANY-WISE WORLD DIAMOND PRODUCTION, 2007

SOURCE: Indian Gems and Jewellery Sector, ICRA Sector Analysis

2

SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html

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Exhibit 3: WORLD’S LARGEST PRODUCERS OF DIAMOND (2007)

SOURCE: Indian Gems and Jewellery Sector, ICRA Sector Analysis

Exhibit 4: DIAMOND PIPELINE

1.

Rough diamonds are sent directly from De Beers mining operations in Africa (#1), or secondary mining producers in Canada and Russia, to De Beers’ Diamond Trading Company (DTC) in London, Gaborone, Kimberley and Windhoek, for sorting and resale. The rough stones are separated into 16,000 categories based on size, color and quality, then divided by human or automated sorters into individual lots called “boxes.” The DTC is part of the De Beers Group supply-chain known as the Central Selling Organization (CSO), which combines (“aggregating”) supplies of rough diamonds from multiple sources into one wholesale market (#2). The DTC holds a sale called a “site” or “sight”, ten times per year, in London and Johannesburg, where De Beers sells the “boxes” to its select group (“supplier of choice”) of 125 “sightholders” (#3) or diamond manufacturers, cutters, and retailers. De Beers (DTC) sets the price of each box in advance, determining the quantity and quality that each site-holder will receive. A ‘sight’ can have a value of between US $ 500,000 to US $ 2,000,000. The sightholder then transports the box of rough diamonds back to diamantaire firms (cutting and polishing factories) located around the world (#4). India cuts the vast majority of small stones (0.20 carats or less) in Mumbai and Surat, while large stones are primarily cut in Antwerp, Tel Aviv, Ramat Gan, and New York. Other major cutting centers are located in Johannesburg, China, and Thailand. The diamonds are then re-sold from the cutting and polishing (manufacturing) centers to wholesalers (Diamond Bourses), or to jewellery manufacturers (#5) around the world. Both traders and manufacturers may sell diamonds “upstream” and “downstream” through the diamond pipeline, to take advantage of market fluctuations. Once the diamonds are set into jewellery, they are sold to retailers or directly to the customers.

2.

3.

4.

5.

SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html

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Box 1: WORLD DIAMOND COUNCIL Amid growing concern over human rights violations and atrocities committed against innocent victims in diamond producing countries, the World Federation of Diamond Bourses, and the International Diamond Manufacturers Association passed resolution creating the World Diamond Council (WDC). The resolution called for the newly formed WDC to include representation from the diamond industry itself, and also from among countries where diamonds play a major economic role, and from the international banking sector. The mandate for the World Diamond Council is the development, implementation and oversight of a tracking system for the export and import of rough diamonds to prevent the exploitation of diamonds for illicit purposes, such as war and inhumane acts. Human rights activists refer to diamonds exploited in this way as “blood” or “conflict” diamonds. As a result of the commitment and resolve of WDC leaders and members, significant strides have been made towards resolving and reconciling the issues threatening the diamond industry because of “conflict” diamonds. Various committees, under the aegis of WDC, were formed for efficient functioning to cover areas such as legal, technical, legislative, steering, finance, banking, information and research. The world diamond industry does not condone the exploitation of diamonds for illicit or immoral purposes. Nor, will it acquiesce to outside efforts to disrupt the importance that diamonds are to the established and emerging economies around the world. Rather it is the goal of the diamond industry, working through the World Diamond Council, to work openly and in partnership with the people of the world whenever and wherever such challenges occur. SOURCE: World Diamond Council

In the case of gemstones (other than diamond), the major producers in the world include: Botswana (26.5%), Russia (24.7%), Canada (19.1%), Angola (10.6%), and South Africa (6.5%). Though most of the countries haven’t shown an increase in its production in 2008, over 2007, some countries such as Sierra Leone (66.7%), Guinea (35%), Central African Republic (27%) and Angola (14.9%) have shown tremendous increase in its production in 2008 over the previous year. Brazil (– 33.3%) and Australia (– 0.4%) were

the only countries, which showed a decline in production compared to the previous year (Table 4). The largest producer of platinum in the world was South Africa holding a share of 76.6% of the total world production, followed

by Russia (12.5%), Canada (3.6%), Zimbabwe (2.8%) and USA (1.9%). However, the major producers such as South Africa (–7.8%), Russia (– 7.4%) and USA (– 4.1%) have shown a decline in their production in 2008 over the previous year.

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Table 3: MAJOR PRODUCERS OF SILVER IN THE WORLD Countries Peru Mexico China Chile Australia Poland USA Canada South Africa Other countries World Total SOURCE: USGS Table 4: MAJOR PRODUCERS OF GEMSTONES IN THE WORLD Countries 2007 2008 25000 23300 18000 10000 6100 5400 2200 1100 720 600 470 350 230 230 210 200 100 210 94420 % Change 0.0 0.0 0.0 14.9 0.0 0.0 0.0 35.0 0.0 66.7 27.0 0 -0.4 0 0 -33.3 0 0 2.0 %Share in 2008 26.5 24.7 19.1 10.6 6.5 5.7 2.3 1.2 0.8 0.6 0.5 0.4 0.2 0.2 0.2 0.2 0.1 0.2 100.0 Botswana 25000 Russia 23300 Canada 18000 Angola 8700 South Africa 6100 Congo 5400 Namibia 2200 Guinea 815 Ghana 720 Sierra Leone 360 Central African Republic 370 Guyana 350 Australia 231 Tanzania 230 Cote d’lvoire 210 Brazil 300 China 100 Other countries 210 World total SOURCE: USGS 92596 2007 3500 3000 2560 1900 1880 1200 1260 800 70 4630 20800 2008 3600 3000 2600 2000 1800 1300 1120 800 70 4600 20890 % Change 2.9 0.0 1.6 5.3 -4.3 8.3 -11.1 0.0 0.0 -0.6 100.0 %Share in 2008 19.0 15.8 13.7 10.5 9.5 6.9 5.9 4.2 0.4 24.2

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Table 5: MAJOR PRODUCERS OF PLATINUM IN THE WORLD Countries South Africa Russia Canada Zimbabwe USA Columbia Other countries World total SOURCE: USGS 2007 166000 27000 6200 5300 3860 1400 3490 213250 2008 153000 25000 7200 5600 3700 1700 3500 199700 % Change -7.8 -7.4 16.1 5.7 -4.1 21.4 0.3 -6.4 %Share in 2008 76.6 12.5 3.6 2.8 1.9 0.9 1.8 100.0

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3. INTERNATIONAL TRADE IN PRECIOUS METALS, GEMS AND JEWELLERY

EXPORTS AND IMPORTS OF PRECIOUS METALS AND STONES Gold
The largest exporter of gold in the world, in the year 2007, was USA with a share of 19.9% in the total world exports, followed by Australia (15.9%), Canada (9.3%), Hong Kong (7.3%) and Peru (7.1%). The world’s largest importers of gold include: Switzerland (25.7%), UK (19.6%), USA (8.4%), India (7.5%) and South Africa (4.4%). (Annexure: 3).

addition, and for exports, as cut and polished diamonds.

Precious Stones
Hong Kong, USA, Switzerland, Thailand and India were among the largest exporters, as well as importers of precious stones (other than diamond) in the world in 2007. Hong Kong was the largest exporter of precious stones (other than diamonds), with a share of around 17.1% of the total world exports, and was followed by USA (13.2%), Switzerland (12.7%), Thailand (12.2%), and India (9%). In the case of imports, the leading importers include: USA (26.5%), Hong Kong (14.4%), Switzerland (9.2%), Thailand (7.2%), and India (6.3%).

Diamond
Israel (with a share of 19.7%), Belgium (19.6%), India (14.3%), USA (12.8%), and UK (9.1%) were the largest exporters of diamond in the world, in the year 2007. The largest importers of diamonds include: USA (17.7%), Belgium (16.2%), India (13.1%), Israel (13%) and Hong Kong (12.9%). India was an exporter as well as an importer of diamonds with a respective share of 14.3% and 13.1%, in the world. This may be because, India imports rough diamonds, for value

Pearls
In the case of Pearls, Hong Kong was the largest exporter, with the exports valued US $ 482.92 million, constituting a share of 30.2% in the world exports of pearls in the year 2007. Japan, China, Australia, and French Polynesia were the other major exporters of pearls.

41

Hong Kong was the largest importer with a share of around 33.2%, followed by Japan (18.3%), USA (15.8%), Germany (4.4%), and Australia (4%).

Articles of Natural / Cultured Pearls, Precious Stones
World exports of articles of natural and cultured pearls, or made of precious stones was valued at US $ 1945.99 million in 2007. Major exporters include USA (76.4%), Hong Kong (6.4%), China (5.4%), Switzerland (2%) and Japan (1.3%); major importers under this category include: Hong Kong (15.7%), Switzerland (14.9%), UK (9%), Netherlands Antilles (9%), and Japan (8.6%).

Platinum
South Africa, constituting a share of 32.5% was the largest exporter of platinum in the world in the year 2007. UK, USA and Germany were the other major exporters. USA was also a major importer of platinum constituting a share of 24.4% in the world, followed by Japan (19.2%), Germany (12.7%), and UK (8.6%).

Articles of Imitation Jewellery
World exports of articles of imitation jewellery were valued at US $ 4967.03 million in 2007. Major exporters of imitation jewellery include Hong Kong (21.9%), China (17.2%), Austria (8%), France (6.4%), and Italy (5.7%); major importers under this category include USA (19.6%), Germany (7.3%), France (7.3%), UK (6.4%), and Italy (6.2%).

Silver
Major exporter of silver was China, with a share of 15.9% in the world, in the year 2007, followed by Mexico (11.2%), Hong Kong (8.7%), and Germany (8.1%). USA, Hong Kong, UK, Germany and India were the major importers of silver in the world.

EXPORTS AND IMPORTS OF JEWELLERY Articles of Jewellery
World exports of jewellery articles made of precious metals was valued at US $ 42.5 billion in 2007; major exporters include: Italy (14.2%), India (11.9%), USA (10.5%), and Hong Kong (9.9%). Major importers of jewellery include: USA (23.7%), UAE (13.7%), Hong Kong (9.1%), and Switzerland (6.7%).

SELECT GLOBAL TRENDS
One of the recent major trends witnessed by the gems and jewellery industry, due to the economic slowdown, has been the increase in recycling of gold or usage of gold scrap. Key focus has been the surge in the levels of gold scrap coming back to the market. With mine production on a declining trend and the outlook relatively benign, scrap levels are likely to remain as the primary supply of

gold. Selling of gold jewellery has provided the consumers with access to the much-needed funds during the economic crisis. In the price sensitive markets, the profittaking motive behind recycling activity has been very strong, highlighting the intrinsic value of jewellery and the strength of the savings/investment aspect of gold jewellery purchases. Cash flow challenges have forced consumers to sell some of their assets, including their jewellery, to raise the much-needed cash. Increase in recycling activity has been both a western and non-western phenomenon, although volumes in the non-western markets have continued to dominate. In western markets, the primary motivation behind recycling of gold has been distress selling, while in the more traditional non-western markets, the primary motive has been profittaking. Research by World Gold Council suggests that jewellery buyers across the world recognize that gold jewellery is both a store of value, as well as a means of adornment. Nevertheless, the investment and adornment motives tend to overlap strongly in traditional markets, such as the Middle East (including Turkey) and India, largely due to the very strong cultural values underpinning jewellery ownership; bar and coin demand in these regions account for a relatively modest proportion of total demand for gold.

New technologies, often adapted from other industries, are finding their way into jewellery manufacturing. The use of Computer Aided Design (CAD) is fast growing, and is increasingly being coupled with Rapid Prototyping, which enables new designs to reach the market more quickly, thereby increasing competitiveness. Laser technology is also being increasingly utilised, not only for repair of defective castings and broken jewellery (it enables gem set jewellery to be repaired without the need for removing the gemstones), but also for decoration (laser engraving), cutting and hallmarking. Examples of technologies being adapted from other industries include cables (in place of conventional chains), knitted wires and powder metallurgy processing. According to World Gold Council, in the first quarter of 2009, total demand for gold increased by 38% to reach a level of 1016 tonnes, valued US

$ 29.7 billion. The overall demand for gold has fallen in the third quarter of 2009, by 34% over the corresponding period of previous year, along with investment demand which witnessed a decline of 46% over the corresponding period of previous year. The impact of high gold prices, at a time of global economic crisis, led to a widespread decline in consumer demand for gold jewellery, by 30%, compared to the same period in 2008. In India, despite economic pressures and

sustained increase in gold prices, second quarter gold demand recovered from the exceptionally weak levels witnessed in the previous quarter, but remained well below the levels of a year before. Total gold off-take in India was down by 48% during the first three quarters, with jewellery, the largest component of demand, falling by 36%. Following the global financial crisis, the growth environment for the global gems and jewellery industry remains uncertain. The world

diamond industry, which is large sub- segment of global gems and jewellery industry faced demand slump following the global economic crisis. Diamond prices in the world, like many other commodities, bottomed out, forcing the diamond majors (such as De Beers, Zao Alrosa) to cut down production and supply of rough diamonds to boost up the prices. Mining was halted at many mines, which were put on maintenance during this period. The most prominent example was the move by Debswana, jointly owned by De Beers and the Government of

Box 2: RESPONSIBLE JEWELLERY COUNCIL The Responsible Jewellery Council (RJC) is an international, not-for-profit organization established to reinforce consumer confidence in the jewellery industry by advancing responsible business practices throughout the diamond and gold jewellery supply chain. The Council aims to build ‘a community of confidence’ across every step of the diamond and gold jewellery supply chain in all geographies, and among businesses, both large and small. It seeks to work with a wide range of stakeholders in defining and implementing responsible jewellery practices through the RJC’s certification system. The certification process starts with the Council accrediting conformity assessment bodies and auditors who verify RJC member organizations for conformance with RJC Code of Practices. Membership opportunity is open to all businesses and associations participating in the diamond and gold jewellery supply chain and / or engaged in activities that have a potential impact on consumer confidence in diamond or gold jewellery. In 2005, a group of 14 organisations from a cross section of the diamond and gold jewellery business came together to form the Council for Responsible Jewellery Practices. These founding organisations were ABN AMRO, BHP Billiton Diamonds, Cartier (part of Richemont), World Jewellery Confederation, Diamond Trading Company (part of De Beers), Diarough, Jewelers of America, National Association of Goldsmiths (UK), Newmont Mining, Rio Tinto, Rosy Blue, Signet Group, Tiffany & Co., and Zale Corporation. SOURCE: Responsible Jewellery Council

Box 3: KIMBERLEY PROCESS The Kimberley Process (KP) is a joint initiative of governments, industry and civil society to stem the flow of conflict diamonds – rough diamonds used by rebel movements to finance wars against legitimate governments. The trade in these illicit stones has fuelled decades of devastating conflicts in countries such as Angola, Cote d’Ivoire, the Democratic Republic of the Congo, and Sierra Leone. The Kimberley Process (KP) is open to all countries that are willing and able to implement its requirements. As of November 2008, the KP has 49 members (Annexure: 5) representing 75 countries, with the European Community and its member states counting as an individual participant. KP members account for approximately 99.8% of the global production of rough diamonds. In addition, the World Diamond Council representing the international diamond industry, and civil society organizations – Global Witness, Partnership – Africa Canada – are participating in the KP, and have played a major role since its outset. The Kimberley Process Certification Scheme (KPCS) imposes extensive requirements on its members to enable them to certify shipments of rough diamonds as ‘conflict-free’ and prevent conflict diamonds from entering the legitimate trade. Under the terms of the KPCS, participating states must meet ‘minimum requirements’ and must put in place national legislation and institutions; export, import and internal controls; and also commit to transparency and the exchange of statistical data. Participants can only legally trade with other participants, who have also met the minimum requirements of the scheme, and international shipments of rough diamonds must be accompanied by a KP certificate guaranteeing that they are conflict-free. The Kimberley Process is chaired, on a rotating basis, by participating countries. So far, South Africa, Canada, Russia, Botswana, the European Community, and India (was the Chair in 2008) have chaired the KP. KP participating countries, industry and civil society observers gather twice a year at intersessional and plenary meetings, as well as in working groups and committees that meet on a regular basis. Implementation is monitored through ‘review visits’ and annual reports as well as by regular exchange and analysis of statistical data. The joint efforts of governments, industry leaders and civil society representatives have enabled the KP to curb successfully the flow of conflict diamonds in a very short period of time. Diamond experts estimate that conflict diamonds now represent a fraction of one percent of the international trade in diamonds, compared to estimates of up to 15% in the 1990s. That has been the KP’s most remarkable contribution to a peaceful world, which should be measured not in terms of carats, but by the effects on people’s lives. KP has done more than just stem the flow of conflict diamonds; it has also helped stabilise fragile countries and supported their development. KP has brought large volumes of diamonds into the legal market that would not otherwise have made it there and this has increased the revenues of poor governments, and helped them to address their development challenges. For instance, some US $ 125 million worth of diamonds were legally exported from Sierra Leone in 2006, compared to almost none at the end of the 1990s. SOURCE: Kimberley Process

Botswana, which decided to close mining operations in three of its four mines for several months. De Beers (which account for over 40% of global rough diamond production) cut its production drastically across the world, which resulted in a 90% fall in the supply during the first

quarter of 2009, as compared to the corresponding period of the previous year. It was also reported that the sales by the Diamond Trading Corporation has declined by over 50% in the first half of 2009, due to reduced purchases by sightholders3.

3

The Diamond Trading Company, which is the world´s largest single source of rough diamonds, sells its rough diamonds exclusively through its Sightholders, who work within the strategic framework of “Supplier of Choice”.

4. PROFILE OF SELECT COUNTRIES

Brazil
The development of gems and jewellery industry in Brazil was followed by the discovery of gold and diamonds at the end of the 17th century. Brazil is known for its diversity and volume of precious stones deposits in its soil, such as tourmaline, aquamarine, agate, amethyst, citrine, topaz and quartz; Brazil is the only source of imperial topaz and paraiba tourmaline in the world. The jewellery sector in Brazil is basically characterized by the production of small volume of highvalued items; the industry develops its own style by incorporating symbols of their culture in pieces made of a variety of raw-materials. While the extraction of precious stones and gold are carried out by thousands of individual miners and small number of mining companies, the cutting and manufacturing of stone artifacts is carried out by small home based firms with growing volume of outsourcing in the last few years. During 2007, Brazil’s exports, under the HS Code 71 category, consisted mainly of gold (valued US $ 790.88 million), followed by

precious stones (with a value of US $ 111.57 million), and articles of jewellery and parts (with a value of US $ 72.9 million). Major export destinations of gems and jewellery include: USA, Germany, UK, Korea DPR (North), and Belgium, and the major import sources include: Germany, Peru, USA, Chile, and Italy. Gold was largely exported to USA (around 94% of the total exports of gold by Brazil). India was a source country for import of diamonds, imitation jewellery, articles of jewellery and precious stones.

China
Gems and jewellery industry in China, since the onset of reforms over 25 years ago, has been growing to emerge as an industry with dynamism and high development prospects. China is one of the largest consumers of gold, with gold jewellery being the major item of demand. During 2008, the total demand for gold in China was 392.7 tonnes, a growth rate of 19.8%, over the year 2007. During the third quarter of 2009, the demand was 120.2 tonnes, a

Table 6: BRAZIL’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY
(US $ Million) HS Code 71 7108 7103 7113 7106 7117 7102 7116 Items Total Precious Metals, Gems and Jewellery Gold Precious stones (other than diamonds) Articles of jewellery and parts Silver Imitation jewellery Diamonds Articles of natural or cultured pearls and precious and semi precious stones Platinum 2005 2006 2007 1242.93 790.88 111.57 72.90 30.36 20.72 18.88 14.73 % share CAGR (%) in total 100.0 63.6 9.0 5.9 2.4 1.7 1.5 1.2 25.6 31.3 8.6 7.6 22.0 7.1 -3.8 -3.2

787.41 1080.12 458.88 94.59 62.97 20.40 18.07 20.42 15.73 658.6 109.15 73.50 35.84 19.26 5.15 15.28

7110

8.53

34.62

0.39

0.0

-78.6

SOURCE: UN COMTRADE

growth rate of 12% over the corresponding quarter of 20084. Gold has been a traditional item of interest for the Chinese consumers. Shenzen and Payu are the major processing centres of gold in China. The Shenzhen special economic zone is the largest jewellery manufacturing and wholesale center supplying to the domestic market in China; it is also a major manufacturing centre for gem-set gold jewellery for the domestic market; major centre for platinum jewellery production; and a major centre for gemstone polishing. During 2008, China was the largest

producer of gold in the world with 295 metric tonnes5 with a growth rate of 7.3% over the previous year. During 2008, China’s share in world gold production was 18.9%. Demand for diamond in China is increasing, and the Chinese diamond industry is growing fast. Previously, diamond was used only for industrial use, and rarely for jewellery. After diamond was found in the three provinces of Liaoning, Shandong and Hunan, the diamond industry started growing since the 1980s. The annual production of diamonds in 2008 was valued at US $ 1.3 million6

4 5

World Gold Council USGS

6

World Diamond Council

Table 7: BRAZIL’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF PRECIOUS METALS, GEMS AND JEWELLERY
HS Code 71 Total Precious Metals, Gems and Jewellery Items Export destinations Countries USA Germany UK World USA UK Peru World USA Hong Kong India World USA Germany Israel World USA Germany Belgium World USA Argentina Colombia World Israel USA Belgium World USA Germany France World US $ Million (% share) Import sources Countries US $ Million (% share) 178.23 (40.1) 117.94 (26.5) 49.97 (11.2) 444.40 (100.0)

862.44 (69.4) Germany 120.88 (9.7) Peru 53.57 (4.3) USA 1242.93 (100.0) World

7108 Gold

740.62 (93.6) France 0.66 (64.7) 50.20 (6.3) Korea Republic (S) 0.25 (24.5) 0.05 (0.01) Germany 0.05 (4.9) 790.88 (100.0) World 1.02 (100.0) 33.78 (30.3) 17.91 (16.1) 9.29 (8.3) 111.57 (100.0) 32.25 (44.2) 4.99 (6.8) 4.49 (6.2) 72.9 (100.0) 21.93 (72.2) 5.61 (18.5) 1.32 (4.3) 30.36 (100.0) 6.59 (31.8) 1.53 (7.4) 1.33 (6.4) 20.72 (100.0) 7.33 (38.8) 6.02 (31.9) 4.33 (22.9) 18.88 (100.0) 4.68 (31.8) 3.08 (20.9) 0.61 (4.1) 14.73 (100.0) USA Madagascar Thailand World Italy USA Germany World Peru Chile Germany World 0.87 (21.5) 0.64 (15.8) 0.57 (14.1) 4.04 (100.0) 9.80 (46.5) 5.80 (27.5) 1.82 (8.6) 21.09 (100.0) 117.92 (74.4) 33.85 (21.3) 2.11 (1.3) 158.58 (100.0)

7103 Precious stones

7113

Articles of jewellery and parts

7106 Silver

7117

Imitation jewellery

China 8.48 (42.8) Hong Kong 4.81 (24.3) Korea Republic (S) 1.94 (9.8) World 19.81 (100.0) Israel USA Belgium World USA Switzerland Hong Kong World 5.43 (68.1) 0.93 (11.7) 0.84 (10.5) 7.97 (100.0) 1.4 (95.2) 0.07 (4.8) 0.01 (0.7) 1.47 (100.0)

7102 Diamonds

7116

Articles of natural or cultured pearls and precious and semi precious stones

7110 Platinum

Argentina USA Canada World

0.25 (64.1) 0.08 (20.5) 0.04 (10.3) 0.39 (100.0)

Germany USA Belgium World

173.19 (82.0) 35.31 (16.7) 2.12 (1.0) 211.15 (100.0)

SOURCE: UN COMTRADE

49

50

(69.4 thousand carats), an increase of 18% in value (13% in carat) since 2006. In order to promote the development of China’s diamond industry, authorized by the state council, the Shanghai Diamond Exchange was established. This non-profit organization brought together most of the diamond processing and trading companies in China, and in addition attracted alliances from several foreign diamond companies. China is a one of largest producers of silver in the world. During 2008, China produced silver worth 26007 tonnes, an increase of 1.6% over the previous year; China, in the year 2008, held a share of

13.7% in the world production of silver. There have been changes in consumption pattern in China. People no longer want to buy jewellery as a store of value, and use them more for aesthetic use. This has created increased demand for silver jewellery in China. Platinum jewellery has been emerging as a fast growing sector, competing the gold jewellery sector. China’s exports of gems and jewellery have grown by 21% (CAGR) since 2005; from US $ 5.5 billion to US $ 8.1 billion in 2007. The item which was largely exported (according to value) from China, under the HS Code 71 category. was articles of jewellery and parts with a

Table 8: CHINA’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY
(US $ Million) HS Code 71 7113 7106 7102 7117 7101 7116 Items Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Silver Diamonds Imitation jewellery Pearls Articles of natural or cultured pearls and precious and semi precious stones Precious stones Platinum 2005 2006 2007 8122.75 2507.37 2017.17 1904.23 855.00 208.37 105.55 % share CAGR (%) in total 100.0 30.9 24.8 23.4 10.5 2.6 1.3 21.2 11.8 42.0 14.8 18.2 19.3 30.8

5532.84 6893.92 2004.58 2102.48 1000.91 1642.18 1443.66 1752.02 611.53 146.50 61.74 721.58 143.97 93.16

7103 7110

29.13 4.19

18.17 6.73

15.77 6.14

0.2 0.1

-26.4 21.1

SOURCE: UN COMTRADE
7

USGS

share of 30.9% in the total exports of gems and jewellery during 2007. However, silver (42%), and articles of natural or cultured pearls and precious and semi precious stones (30.8%) were the items which showed highest CAGR during the period 2005-2007. The exports of precious stones showed a negative CAGR of (-26.4%) over the years, from US $ 29.1 million in 2004 to US $ 15.8 million in 2007. Major export destinations for China are given in Table 9; Hong Kong, USA, Belgium, Switzerland and UK were the major export destinations for China’s gems and jewellery exports. However some of the other major destinations include: India for pearls and silver; Japan for pearls, precious stones, platinum and articles of natural and cultured pearls; and Korea Republic for precious stones and articles of jewellery and parts. In the case of imports, major source countries were Hong Kong, Belgium, Switzerland, USA and UK.

Israel is one of the world’s largest sources of polished diamonds. The partnership between the diamond and jewellery industries has no middlemen, in order to keep the prices competitive. Diamond jewellery is the main sub segment of Israel’s gems and jewellery industry, followed by gold, silver and imitation jewellery. The artists in Israel make use of most of their skills, innovative technologies and techniques, which enable them to offer their products at very reasonable prices. It may be mentioned that Israel’s jewellery is allowed duty free in USA, Europe, Jordan, Canada, Mexico and Egypt. The exports of diamonds, according to the Central Bureau of Statistics, Government of Israel, witnessed a decline in 2008 (Table 10). During January - September 2009 there was a drastic decline in exports ranging around 60%. The economic slowdown was cited as the main reason for this level of decline in exports. Israel was largely an exporter of precious metals, gems and jewellery, than an importer of the same. During 2007, the export of precious metals, gems and jewellery by Israel touched US $ 19.1 billion, achieving a CAGR of 7.5%, during 20052007; and the imports of Israel were US $ 12.6 billion in 2007. Israel was a major exporter of diamonds, which constituted
51

Israel
Israel is one of the world’s largest centres for diamond cutting. The country’s integrated culture, with immigrants from over 70 countries, offers diversity in artistic ideas, styles, techniques and know-how. The Israeli jewellery industry has developed unique technologies that add to the strength, design, beauty and quality of its products.

around 97% of the total

Table 9: CHINA’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF PRECIOUS METALS, GEMS AND JEWELLERY
HS Code 71 Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Silver Items Export destinations Countries Hong Kong USA Belgium World US $ Million (% share) 4512.02 (55.5) 1296.30 (16.0) 664.58 (8.2) 8122.75 (100.0) Import sources Countries Hong Kong Belgium Switzerland World Italy Hong Kong France World US $ Million (% share) 2422.07 (37.8) 851.32 (13.3) 555.85 (8.7) 6407.63 (100.0) 150.99 (34.7) 113.51 (26.1) 43.66 (10.0) 435.33 (100.0)

7113

Hong Kong 1303.35 (52.0) USA 823.84 (32.9) Korea Republic (S) 79.46 (3.2) World 2507.37 (100.0) Hong Kong Thailand India World Hong Kong Belgium Switzerland World USA Hong Kong UK World Hong Kong India Japan World Hong Kong USA Switzerland World 1641.91 (81.4) 135.32 (6.7) 107.38 (5.3) 2017.17 (100.0) 932.94 (49.0) 653.12 (34.3) 165.37 (8.7) 1904.23 (100.0) 334.94 (39.2) 135.76 (15.9) 54.42 (6.4) 855.00 (100.0) 178.10 (85.5) 19.64 (9.4) 3.81 (1.8) 208.37 (100.0) 60.73 (57.5) 17.62 (16.7) 5.40 (5.1) 105.55 (100.0)

7106

Hong Kong 198.61 (55.7) Japan 69.04 (19.4) Korea Republic (S) 30.38 (8.5) World 356.53 (100.0) Hong Kong Belgium Israel World 847.75 (43.3) 843.24 (43.1) 171.08 (8.7) 1957.14 (100.0)

7102

Diamonds

7117

Imitation jewellery

Hong Kong 45.47 (56.6) Korea Republic (S) 20.06 (25.0) Switzerland 2.9 (3.6) World 80.36 (100.0) Hong Kong Japan UK World USA Taiwan Hong Kong World 16.38 (80.3) 2.59 (2.7) 0.53 (2.6) 20.39 (100.0) 6.12 (41.3) 5.03 (33.9) 2.22 (15.0) 14.82 (100.0)

7101 Pearls

7116

Articles of natural or cultured pearls and precious and semi precious stones Precious stones

7103

Hong Kong USA Thailand World USA Japan Hong Kong World

10.03 (63.6) 1.80 (11.4) 0.93 (5.9) 15.77(100.0) 4.59 (74.8) 1.01 (16.4) 0.39 (6.4) 6.14 (100.0)

Hong Kong Brazil Uruguay World Switzerland UK Germany World

80.75 (78.7) 7.67 (7.5) 5.40 (5.3) 102.63 (100.0) 525.47 (28.5) 477.57 (25.9) 287.74 (15.6) 1844.92 (100.0)

7110

Platinum

SOURCE: UN COMTRADE

53

52

gems and jewellery exports, and around 2% was accounted by articles of jewellery. Major export destinations of diamonds from Israel include: USA, constituting a share of 48.5%, followed by Belgium (16.7%), Hong Kong (15%), India (4.8%) and Switzerland (4.7%). Major source countries for imports of diamonds by Israel include: USA (40%), Belgium (24.8%), India (8.5%), Hong Kong (8.2%), and UK (8.1%).

Italy
Italy has a large gems and jewellery industry, mainly located in the regions, namely, Veneto, Toscana, Lombardia, Lazio and Piedmont. These regions have captured more than half of the Italian market for gems and jewellery. There are two major clusters in Italy for gems and jewellery which are located in Vicenza and Arezzo. Italian jewellery industry has been enjoying spiraling growth in exports. This scenario may change due to slump in demand in the most important markets, due to global economic crisis. It is reported that the producers in the Vicenza area may face relatively less challenges, because of the level of automation and the possibility of reduction in cost of operations, and thereby the price at the hands of endconsumers. Also the gems and jewellery industry in Valenza has an edge over others due to high quality design skills for diamond and other precious stones. The
55

gems and jewellery industry in Arezzo is likely to face challenges mainly due to overseas competition. In addition, a greater share of Arezzo’s jewellery exports goes to Latin America and the USA, markets which have been having weak demand of late. Exports of gems and jewellery from Italy are given in Table - 13. Constituting a share of 69.5%, articles of jewellery and parts was the major export item, under the HS Code 71 category, in Italy. However, all the categories of precious metals, gems and jewellery have witnessed an increase in exports from Italy, with platinum and diamonds witnessing the highest CAGR of 69.8% and 52%, respectively, during 2005 to 2007. Exports of platinum increased from US $ 222.71 million to US $ 642.17 million, and that of diamonds increased from US $ 56.83 million to US $ 131.45 million during this period. The total exports of precious metals, gems and

jewellery (HS Code 71) witnessed a CAGR of 17.4%, since 2005, an increase from US $ 6.3 billion to US $ 8.7 billion, in value terms. Major export destinations of Italy’s precious metals, gems and jewellery industry include: USA, Switzerland, France, UAE and UK, and the major source countries for import of precious metals, gems and jewellery include USA, Switzerland, France, Belgium and Hong Kong (Table 14). Major export destinations

Table 10: EXPORTS AND IMPORTS OF DIAMONDS BY ISRAEL
(US $ Million) Items 2007 2008 % change Exports Diamonds Polished Rough Total Rough and polished diamonds (net) 7116.9 3373.2 10490.1 9642.5 6299.2 3318.2 9617.4 8836.4 -11.5 -1.6 -8.3 Imports -8.4 7447.4 3125.7 -58.0 5503.7 2176.4 5963.4 2609.5 1278.9 2396.1 -52.6 -41.2 -59.8 Jan-Sep 2008 Jan-Sep 2009 % change

SOURCE: Monthly Bulletin of Statistics, October 2009, Central Bureau of Statistics, Government of Israel

Table 11: ISRAEL’S EXPORTS OF PRECIOUS METAL, GEMS AND JEWELLERY
(US $ Million) HS Code 71 7102 7113 7103 7108 7117 7106 7110 7101 7116 Items 2005 2006 16659.59 16127.49 338.30 64.19 21.44 48.51 0.08 0.68 0.05 0.08 2007 19060.29 18416.94 356.30 67.38 65.55 51.89 6.46 0.44 0.05 0.01 % share CAGR (%) in total 100.0 96.6 1.9 0.4 0.3 0.3 0.0 0.0 0.0 0.0 7.5 7.2 1.5 12.9 205.8 22.4 798.6 369.0 -52.3 -64.6

Total Precious Metals, 16484.13 Gems and Jewellery Diamonds Articles of jewellery and parts Precious stones (other than diamonds) Gold Imitation jewellery Silver Platinum Pearls Articles of natural or cultured pearls and precious and semi precious stones 16017.00 345.62 52.85 7.01 34.66 0.08 0.02 0.22 0.08

SOURCE: UN COMTRADE

57

54

Table 12: ISRAEL’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF PRECIOUS METALS, GEMS AND JEWELLERY
HS Code 71 Total Precious Metals, Gems and Jewellery Items Export destinations Countries USA Belgium Hong Kong World USA Belgium Hong Kong World USA UK Switzerland World USA Hong Kong Switzerland World Jordan Canada Italy World USA UK Japan World USA World US $ Million (% share) 9246.77 (48.5) 3083.87 (16.2) 2789.76 (14.6) 19060.29 (100.0) 8938.86 (48.5) 3074.27 (16.7) 2762.04 (15.0) 18416.94 (100.0) 201.19 (56.5) 30.27 (8.5) 16.06 (4.5) 356.30 (100.0) 33.34 (49.5) 11.58 (17.2) 9.18 (13.6) 67.38 (100.0) 63.44 (96.8) 0.80 (1.2) 0.55 (0.8) 65.55 (100.0) 32.78 (63.2) 2.70 (5.2) 2.54 (4.9) 51.89 (100.0) 6.46 (100.0) 6.46 (100.0) Import sources Countries USA Belgium India World USA Belgium India World Italy Thailand Turkey World USA Italy Switzerland World Singapore Italy Germany World China USA Italy World Belgium Italy Germany World USA Switzerland Germany World Japan Hong Kong Switzerland World USA Hong Kong China World US $ Million (% share) 4931.49 (39.1) 3036.84 (24.1) 1047.94 (8.3) 12611.42 (100.0) 4867.90 (40.0) 3021.66 (24.8) 1037.26 (8.5) 12178.19 (100.0) 85.77 (30.8) 46.17 (16.6) 41.40 (14.9) 278.12 (100.0) 19.69 (52.9) 5.81 (15.6) 3.21 (8.6) 37.24 (100.0) 4.10 (36.8) 3.74 (33.6) 1.32 (11.8) 11.14 (100.0) 2.72 (25.9) 1.72 (16.4) 1.59 (15.1) 10.50 (100.0) 13.12 (44.1) 11.87 (39.9) 4.32 (14.5) 29.78 (100.0) 7.29 (65.9) 2.78 (25.1) 0.77 (7.0) 11.06 (100.0) 0.49 (50.0) 0.19 (19.4) 0.12 (12.2) 0.98 (100.0) 0.80 (81.6) 0.07 (7.1) 0.05 (5.1) 0.98 (100.0)

7102 Diamonds

7113

Articles of jewellery and parts

7103 Precious stones

7108 Gold

7117

Imitation jewellery

7106 Silver

7110

Platinum

Italy UK World UK Panama World World

0.30 (68.2) 0.12 (27.3) 0.44(100.0) 0.03 (60.0) 0.01 (20.0) 0.05 (100.0) 0.01 (100.0)

7101 Pearls

7116

Articles of natural or cultured pearls and precious and semi precious stones

SOURCE: UN COMTRADE

55

56

of articles of jewellery and parts include: USA (15.4%), UAE (13.6%), Switzerland (10.2%), France (6%) and UK (4.9%), and the major source countries for articles of jewellery and parts include: Switzerland (29.6%), Hong Kong (13.9%), France (8.8%), Poland (7.9%), and Turkey (7.7%).

Malaysia
Malaysia is another major producer and exporter of gems and jewellery, with the industry having concentration in Penang. According to industry sources, approximately, 75-80 percent of the gold and jewellery in Malaysia are manufactured or fabricated in Penang, followed by Johor Bahru and Kuala Lumpur, with activities

ranging from manufacturing to import, export, retail and wholesale. There are about 300 registered companies engaged in the gold and jewellery industry in Penang, including major gold and jewellery manufacturers such as OE Design, Zenmax, Yikon and Zhulia n. Penang is one of the major export regions of gold and jewellery in South East Asia. More than 70 percent of the gold and jewellery manufactured in Penang is meant for the export market. The primary suppliers of raw materials for gems and jewellery trade in Penang are bullion banks (such as UOB (United Overseas Bank), RHB and Maybank) and international private bullion houses.

Table 13: ITALY’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY (US $ Million)
HS Code 71 7113 7108 7110 7117 7106 7102 7103 7101 7116 Items Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Gold Platinum Imitation jewellery Silver Diamonds Precious stones Pearls Articles of natural and cultured pearls and precious and semi precious stones 2005 2006 2007 8694.05 6044.74 969.47 642.17 280.74 161.37 131.45 58.42 27.19 15.76 % share CAGR (%) in total 100.0 69.5 11.2 7.4 3.2 1.9 1.5 0.7 0.3 0.2 17.4 12.7 23.8 69.8 19.8 35.6 52.1 44.1 19.1 25.5

6304.66 7418.79 4758.31 632.08 222.71 195.64 87.80 56.83 28.15 19.17 10.00 5211.16 859.73 486.47 236.30 126.36 117.76 41.38 20.86 11.85

SOURCE: UN COMTRADE

56

Table 14: ITALY’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF PRECIOUS METALS, GEMS AND JEWELLERY
HS Code 71 Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Items Export destinations Countries USA Switzerland France World USA UAE Switzerland World Switzerland France Croatia World France USA Switzerland World France Spain USA World Spain France UK World France Hong Kong Israel World France Switzerland Hong Kong World Switzerland Hong Kong Japan World France Spain Germany World US $ Million (% share) 1180.00 (13.6) 1123.63 (12.9) 955.96 (11.0) 8694.05 (100.0) 932.65 (15.4) 823.71 (13.6) 614.34 (10.2) 6044.74 (100.0) 350.82 (36.2) 304.35 (31.4) 63.31 (6.5) 969.47 (100.0) 134.36 (20.9) 116.58 (18.2) 101.39 (15.8) 642.17 (100.0) 53.46 (19.0) 29.73 (10.6) 28.17 (10.0) 280.74 (100.00) 31.30 (19.4) 26.62 (16.5) 16.41 (10.2) 161.37 (100.0) 23.66 (18.0) 23.30 (17.7) 19.53 (14.9) 131.45 (100.0) 13.55 (23.2) 11.32 (19.4) 6.77 (11.6) 58.82 (100.0) 7.35 (27.0) 5.23 (19.2) 5.15 (18.9) 27.19 (100.0) 3.60 (22.8) 2.56 (16.2) 2.44 (15.5) 15.76 (100.0) Import sources Countries USA Switzerland France World Switzerland Hong Kong France World France Switzerland Kazakhstan World USA Switzerland UK World Hong Kong Austria France World Germany Argentina France World Belgium Israel India World Switzerland Hong Kong India World Hong Kong Switzerland Japan World USA Hong Kong Switzerland World US $ Million (% share) 1169.04 (26.7) 660.42 (15.1) 447.71 (10.2) 4374.06 (100.0) 290.90 (29.6) 136.86 (13.9) 86.25 (8.8) 983.18 (100.0) 249.93 (58.9) 67.29 (15.9) 31.02 (7.3) 424.46 (100.0) 849.29 (68.2) 140.93 (11.3) 107.79 (8.7) 1245.51 (100.0) 122.23 (39.5) 50.76 (16.4) 43.85 (14.2) 309.79 (100.0) 35.77 (48.2) 8.76 (11.8) 8.02 (10.8) 74.14 (100.0) 371.99 (66.1) 81.39 (14.5) 38.09 (6.8) 563.05 (100.0) 26.18 (28.8) 14.49 (15.9) 13.70 (15.1) 91.00 (100.0) 16.31 (41.0) 8.23 (20.7) 6.52 (16.4) 39.76 (100.0) 16.79 (48.3) 11.63 (33.4) 2.73 (7.9) 34.77 (100.0)

7113

7108 Gold

7110

Platinum

7117

Imitation jewellery

7106 Silver

7102 Diamonds

7103 Precious stones

7101 Pearls

7116

Articles of natural or cultured pearls and precious and semi precious stones

SOURCE: UN COMTRADE

57

A dominant international private bullion house is MKS Precious Metal Switzerland, and its Malaysian office is a key local supplier for many of the jewellery fabricators and manufacturers. The Chinese have been the major players in the gold and jewellery industry in Penang for years with their experience encompassing manufacturing and trading of gold articles (bangles, necklace, bracelet, earrings, etc.), and gem setting (diamond & precious stones). Apart from the Chinese, smaller groups of Indian jewellers are also involved, mainly in gem setting, focusing on retail, wholesale, and a small portion of

import and export. Most of the Indian players provide the design and specifications based on their customer ’s requirements to the Chinese goldsmiths and manufacturers for production. During 2007, exports of precious metals, gems and jewellery from Malaysia were valued at US $ 2.1 billion, of which 64% constituted articles of jewellery and parts, followed by gold, with 19% share. Other export segments of gems and jewellery, namely, diamonds, precious stones, pearls, and silver constituted marginal share in the total gems and jewellery exports from Malaysia.

Table 15: MALAYSIA’S EXPORTS OF PRECIOUS METALS, GEMS AND JEWELLERY (US $ Million)
HS Code 71 7113 7108 7102 7117 7103 7116 Items Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Gold Diamonds Imitation jewellery Precious Stones Articles of natural or cultured pearls and precious and semi precious stones Pearls Silver Platinum 2005 2006 2007 2154.87 1381.53 421.71 11.91 4.10 1.13 0.38 % share CAGR (%) in total 100.0 64.1 19.6 0.6 0.2 0.1 0.0 22.5 21.6 7.1 -21.3 52.2 -4.5 -16.9

1435.15 1736.33 934.88 367.89 19.21 1.77 1.24 0.55 991.98 506.27 12.98 4.43 0.19 0.36

7101 7106 7110

0.43 0.10 0.32

1.56 0.05 0.01

0.16 0.04 0.02

0.0 0.0 0.0

-39.0 -36.8 -75.0

SOURCE: UN COMTRADE

Table 16: MALAYSIA’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCES OF PRECIOUS METALS, GEMS AND JEWELLERY
HS Code 71 Total Precious Metals, Gems and Jewellery Articles of jewellery and parts Items Export destinations Countries UAE Singapore Switzerland World UAE Singapore USA World Thailand Australia Hong Kong World Hong Kong Singapore Thailand World Indonesia Saudi Arabia Thailand World Hong Kong Singapore World Singapore Germany World US $ Million (% share) 1004.58 (46.6) 342.87 (15.9) 137.59 (6.4) 2154.87 (100.0) 984.15 (71.2) 294.92 (21.3) 35.26 (2.6) 1381.53 (100.0) 117.80 (27.9) 58.77 (13.9) 55.64 (13.2) 421.71 (100.0) 6.62 (55.6) 3.51 (29.5) 0.55 (4.6) 11.91 (100.0) 2.99 (72.9) 0.32 (7.8) 0.16 (3.9) 4.10 (100.0) 0.09 (56.3) 0.07(43.8) 0.16 (100.0) 0.29 (76.3) 0.08 (21.1) 0.38 ( 100.0) Import sources Countries Japan Singapore Taiwan World Singapore China Hong Kong World Japan Singapore Indonesia World Singapore Hong Kong India World Singapore China Hong Kong World Singapore Japan Germany World USA Hong Kong China World US $ Million (% share) 768.06 (51.5) 348.76 (23.4) 107.88 (7.2) 1490.11 (100.0) 64.16 (60.1) 14.95 (14.0) 7.47 (7.0) 106.71 (100.0) 636.84 (71.3) 171.46 (19.2) 28.87 (3.2) 893.31 (100.0) 71.99 (49.9) 33.17 (23.0) 19.37 (13.4) 144.23 (100.0) 4.61 (33.6) 3.11 (22.7) 1.88 (13.7) 13.72 (100.0) 1.76 (48.2) 1.02 (27.9) 0.64 (17.5) 3.65 (100.0) 1.04 (54.2) 0.35 (18.2) 0.27 (14.1) 1.92 (100.0)

7113

7108 Gold

7102 Diamonds

7117

Imitation jewellery

7101 Pearls

7116

Articles of natural or cultured pearls and precious and semi precious stones

7103 Precious stones

Singapore USA Hong Kong World USA World

0.38 (33.6) 0.27 (23.9) 0.22 (19.5) 1.13 (100.0) 0.03 (75.0) 0.04 (100.0)

India Singapore Thailand World Japan Singapore Australia World Japan USA Taiwan (Taipei) World

1.18 (22.6) 1.16 (22.2) 1.11 (21.3) 5.22 (100.0) 49.07 (48.8) 24.42 (24.3) 15.38 (15.3) 100.65 (100.0) 14.57 (40.0) 12.45 (34.2) 8.87 (24.4) 36.38 (100.0)

7106 Silver

7110 Platinum

World

0.02 (100.0)

SOURCE: UN COMTRADE

59

Major export destinations for gold include: Thailand (27.9%), Australia (13.9%), Hong Kong (13.2%), China (8.9%), and Taiwan (8.2%), whereas the major source countries for gold include: Japan (71.3%), Singapore (19.2%), Indonesia (3.2%), USA (2.9%), and Hong Kong (1%). In the case of

articles of jewellery and parts major export destinations include: UAE (71.2%), Singapore (21.3%), USA (2.6%), China (1.7%), and Hong Kong (1%); and the major source countries include: Singapore (60.1%), China (14%), Hong Kong (7%), USA (4.8%), and Switzerland (4.1%).

5. STATUS OF PRECIOUS METALS, GEMS AND JEWELLERY INDUSTRY IN INDIA

The gems and jewellery industry plays a very important role in the Indian economy. The primary jewellery demand in India is for gold; from historic times, gold and jewellery have played a pivotal role in the Indian social scenario. Gold jewellery is the most preferred jewellery worn by women in India irrespective of their religious beliefs and is the most preferred gifts in Indian weddings. The basic value chain of the gems and jewellery industry is given in Exhibit 5. The gems and jewellery industry in India comprises of sourcing,

processing, manufacturing and selling of precious metals, diamonds, pearls, precious and semi-precious gemstones, and artificial jewellery. India is one of the fastest growing jewellery markets in the world and is the largest consumer of gold in the world. Indian gems and jewellery industry is also one of the largest diamond processors in the world; more than 90% in terms of pieces, around 80% in terms of carats, and around 55% in terms of volume are processed in India. This means that India processes 9 out of 10 diamonds processed in the world. India is also the largest consumer of gold in the world (over 700 tonnes

Exhibit 5: VALUE CHAIN OF GEMS AND JEWELLERY INDUSTRY

6 61

in 2008), accounting for around 24% of world gold consumption, majority of them goes into production of jewellery. India is also emerging as the largest trading centre for gold. The demand for gold jewellery in India has been traditionally linked to social and religious significance, as gold is valued as an important savings and investment vehicle in India, and is the second most preferred investment after bank deposits. This is mainly because gold and jewellery is highly portable and holds its value in times of need. It is considered to provide a hedge against economic, social, political and personal risks. Hence, jewellery is a preferred, handy investment, as it can be worn and enjoyed in ordinary times and sold in times of financial distress. In the case of diamonds and precious stones, the value chain is as given in Exhibit 6.

India sources rough diamonds mainly from De Beers; the country has a large cutting and polishing industry, which processes the diamonds, after which the design and fabrication of studded jewellery takes place. India mainly concentrates on small stones in the case of diamonds. Major segment of the Indian gems and jewellery industry is unorganized and fragmented with most of the players running familyowned business. It is estimated that there are nearly 500,000 goldsmiths, over 100,000 jewellers, over 6,000 diamond processors, and about 8,000 diamond jewellers in the country. The country is dependent on importing precious metals, gemstones as also diamonds. Further, the Indian gems and jewellery industry thrive on the availability of skilled workforce and large market size.

Exhibit 6: VALUE CHAIN OF DIAMONDS AND PRECIOUS STONES

Gold
The production of gold in India during 2007 was 3000 kilograms witnessing an increase of 25% over the production in the previous year. However, the production of gold has shown a declining trend over the years. The total resources of gold in the country, as on April 2005, were estimated at 390.28 million tonnes. Out of these, only 19.25 million tonnes were under the

reserves category, and the balance of 371.03 million tonnes were under the resources category (Table 17). Besides, the total resources of gold ore of placer type in the country were estimated at 26.12 million tonnes. Karnataka has the largest known reserves of gold in India, followed by Rajasthan and Kerala (Table 18). Although there have been significant ore resources, India’s gold production has shown a decline over the years.8

Exhibit 7: PRODUCTION OF GOLD IN INDIA

SOURCE: USGS Minerals Yearbook 2006 & 2007
8

Placer: a deposit of sand or gravel that contains particles of gold, gemstones, or other heavy minerals of value. Reserves: an estimate within specified accuracy limits of the valuable metal or mineral content of known deposits that may be produced under current economic conditions and with present technology; that part of the reserve base that could be economically extracted or produced at the time of determination. Resources: a concentration of naturally occurring solid, liquid, or gaseous material in or on the Earth’s crust in such form and amount that economic extraction of a commodity from the concentration is currently or potentially feasible.

Table 17: RESERVES OF GOLD (As on 1.4.2005) IN INDIA Mineral Gold (Tonnes) Ore (Primary) Metal (Primary) Ore (Placer) Metal (Placer) Reserves Remaining resources 371,035,286 406.12 26,121,000 5.86 Total

19,253,951 85 0 0

390,289,237 491.12 26,121,000 5.86

SOURCE: Indian Minerals Yearbook, 2006 Table 18: RESERVES OF GOLD IN INDIA - STATE WISE (As on 1.4.2005) (In tonnes) States Andhra Pradesh Bihar Chhattisgarh Jharkhand Karnataka Kerala Primary Placer Madhya Pradesh Maharashtra Rajasthan Tamil Nadu West Bengal Ore 12,098,347 22,884,860 900,000 346,850 66,172,387 558,460 26,121,000 7,322,000 1,517,000 65,589,000 67,000 12,833,333 Metal 31.58 37.60 2.70 3.12 153.41 0.20 5.86 7.81 3.55 125.84 1.00 124.00

Note: All reserves are primary unless specified otherwise SOURCE: Indian Minerals Yearbook, 2006

India has been the largest consumer of gold jewellery in recent times, and during 2008, the consumption was estimated to be 501 tonnes accounting for 23% of world demand (Exhibit 8). The main

reason for demand for gold has been the traditions and cultures in India, which gives a lot of importance to gold as a gift in marriages or other functions and also the need for gold, as an investment. For the purpose

of purchase of gold ornaments, from reputed jewellers and/or gold coins, many financiers have introduced financing schemes. The customer can purchase ornaments or gold coins under these financing schemes and pay back in installments. Inspite of an increase in gold prices, the demand for gold jewellery has been increasing, barring few years. The continuous rise in prices of gold however dampened the jewellery demand after 2005, and in the year 2008, the demand showed a decline of 9% over the previous year. During the first three quarters of 2009, the consumption for gold jewellery in India has declined by nearly 36%, and the total consumption of gold has declined by around 49%, over the same period in the previous year.

Trends in foreign exchange reserves show that the share of gold in the total foreign exchange reserves has been declining over the years. During 1993-94, gold accounted a share of 21%, whereas during the period 2008-09, the share had fallen to 3.8%. The upward movement of gold price has contributed to the partial growth in value of gold under the country’s foreign exchange reserves. It may be noted that despite economic recession around the world and crash in commodity prices, gold price has been increasing. Between December 2008 - December 2009, the price has increased from Rs. 13,445 per ten grams to Rs. 16,870 per ten grams, an increase of 25 %. (Exhibit 10)

Exhibit 8: INDIA’S SHARE IN WORLD CONSUMPTION OF GOLD JEWELLERY

SOURCE: World Gold Council

Exhibit 9: INDIA’S GOLD CONSUMPTION

SOURCE: World Gold Council, Note: *First three quarters of 2009 Table 19: TRENDS IN FOREIGN EXCHANGE RESERVES OF INDIA
(US $ Million) Year End of Month March SDR Gold Foreign Currency Assets Reserve tranche position Total Foreign Exchange Reserves (1+2+3+4) 5 19553 25517 21997 26714 29650 33153 38694 42897 54716 76100 112959 141514 151622 199179 309723 251985 % share of gold in total foreign exchange reserves 6 20.9 17.1 20.7 15.2 11.4 8.9 7.7 6.4 5.6 4.6 3.7 3.2 3.8 3.4 3.2 3.8

1 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 SOURCE: RBI 108 7 82 2 1 8 4 2 10 4 2 5 3 2 18 1

2 4078 4370 4561 4054 3391 2960 2974 2725 3047 3534 4198 4500 5755 6784 10039 9577

3 15068 20809 17044 22367 25975 29522 35058 39554 51049 71890 107448 135571 145108 191924 299230 241426

4 299 331 310 291 283 663 658 616 610 672 1311 1438 756 469 436 981

Exhibit 10: TRENDS IN PRICES OF GOLD (JAN 2005-DECEMBER 2009) IN INDIA

SOURCE: MCX

India imports gold largely for processing into jewellery, both for domestic consumption and exports. During 2007-08, India imported gold (largely in the form of raw gold) valued US $ 17 billion, witnessing an increase of 15.6% over the previous year. In the same year, India exported gold mainly in the form of jewellery, valued US $ 4.32 billion (majority of them are studded with diamonds), which witnessed an increase of 2.2% over the previous year. This signifies the importance of domestic demand for jewellery and the reliance of imported gold for jewellery manufacturing. During the year 2008-09, the export of gold (or jewellery) has

witnessed a growth rate of 51.1% over the previous year. All the categories of gold jewellery has witnessed tremendous increase in exports during this period, except gold jewellery set with diamonds, which witnessed a marginal growth of 1% in exports. Major source countries for import of raw gold by India include Switzerland, constituting 44.6% of the total imports of raw gold during 2008-09, followed by Australia (19.7%) and UAE (19.6%). In the case of export of gold jewellery during the year 2008-09, main export destinations include UAE, USA, UK, Singapore and Hong Kong. (Annexure 4)

68
Code Commodity Name Exports 7108 71131910 71131920 71131930 71131940 Jewellery of gold unset Total Imports 7108 71131910 71131920 71131930 71131940 Jewellery of gold unset Total SOURCE: DGCIS

Table 20: EXPORT AND IMPORT OF GOLD JEWELLERY BY INDIA
(US $ Million)
2005-06 2006-07 2007-08 2008-09 % Change 2006-07 vs 2005-06 % Change 2007-08 vs 2006-07 % change 2008-09 vs 2007-08

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form Jewellery of gold set with pearls Jewellery of gold set with diamond Jewellery of gold set with precious and semi precious stones other than diamonds

0.3

1.00

4.66

28.08

233.3

366.0

502.6

683.61 239.33 2151.83 89.67

771.94 108.15 3,265.61 80.37

840.04 123.17 3,259.28 94.07

2320.88 470.18 3293.00 419.27

12.9 -54.8 51.8 -10.4

8.8 13.9 -0.2 17.0

176.3 281.7 1.0 345.7

3164.74 10829.37

4,227.07 14,452.27

4,321.22 16739.36

6531.41 20758.68

33.6 33.5

2.2 15.8

51.1 24.0

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form Jewellery of gold set with pearls Jewellery of gold set with diamond Jewellery of gold set with precious and semi precious stones other than diamonds

14.05 6.29 120.22 6.88 10976.81

25.21 3.35 262.05 11.36 14,754.24

23.65 2.34 263.78 21.53 17,050.66

16.8 5.57 407.36 17.37 21205.78

79.4 -46.7 118.0 65.1 34.4

-6.2 -30.1 0.7 89.5 15.6

-29.0 138.0 54.4 -19.3 24.4

Exports of gold jewellery by SEZ/ EPZ had witnessed a tremendous increase during the year 2008-09, over the year 200708, a growth of almost 80%. However, during the period AprilNovember 2009-10, gold jewellery exports from SEZ/EPZ witnessed a decline of 11% over the previous year. One of the reasons for this negative trend is the global economic slowdown, which engulfed the demand for jewellery worldwide.

Diamond
Traditionally, India has always excelled in the field of diamond cutting, gem cutting, polishing and processing. India’s diamond tradition goes back thousands of years and is one of the oldest in the world. In fact, it was reported that diamonds were discovered by India and were the only source of diamonds until 1730s. At present, India is one of the the world’s leading diamond cutting and polishing centers in the world.

According to USGS data, diamond production (gem and industrial) in India in the year 2007 was 55 thousand carats and has remained more or less stagnant over the years. As per United Nations Framework Classification (UNFC) system, as on 1.4.2005, India had total resources of around 4.5 million carats, of which 1.2 million carats was reserves. By grades, about 17% of resources are of gem variety, 18% are of industrial variety, while bulk of the resources (65%) is placed under unclassified category. Andhra Pradesh accounts for 40% of diamond resources, followed by Madhya Pradesh (32%), and Chhattisgarh (28%) (Table 22). Gujarat is one of the major states in India promoting gems and jewellery sector as one of the thrust areas for development. Gujarat, having the largest human resource pool in the country in diamond cutting and polishing, accounts for 80% of the total diamonds processed in

Table 21: EXPORTS OF GOLD JEWELLERY BY SEZ/EPZ IN INDIA (US $ Million) Year 2007-08 2008-09 April-Nov 2008-09 April-Nov 2009-10 Exports 2653.72 4767.93 4677.88 4161.33 % change to previous period 79.7 -11.0

SOURCE: Gems and Jewellery Export Promotion Council (GJEPC)

6 69

Exhibit 11: DIAMOND PRODUCTION IN INDIA

SOURCE: USGS Minerals Yearbook 2006 & 2007

Table 22: RESERVES OF DIAMOND IN INDIA (As on 1.4.2005) (in carats) Mineral Diamond By grades Gem Industrial Unclassified By States Andhra Pradesh Madhya Pradesh Chhattisgarh Reserves 1,205,577 – – 1,205,577 – 1205,577 – Remaining resources 3,376,336 756,765 840,823 1,778,748 1,822,955 249,381 1,304,000 Total 4,581,913 756,765 840,823 2,984,325 1,822,955 1,454,958 1,304,000

SOURCE: Indian Minerals Yearbook, 2006

India. The state intends to further enhance its dominance in the sector and has introduced various schemes, including:

Financial support for modern jewellery enterprises; Assistance for setting up Hallmark certification centres

for jewellery and testing centres for gems; Scheme for support to safety measures and protection from occupational hazards; Scheme for setting up training institute for the development of gems and jewellery sector; Support for development of jewellery parks. India imports rough diamonds and process them for value addition and exports. As a result, India is a net exporter under this category in value terms. India exported diamonds valued US $ 14.2 billion during 2007-08, an increase of 34% over the previous year. During the year 2008-09, the exports of diamonds witnessed an increase of 10.6%, touching US $ 15.7 billion. Export of crushed industrial diamonds showed a tremendous increase during this period. (Table 23). India imported diamonds valued US $ 7.7 billion in 2007-08; during the year 2008-09, the imports increased by 110% from US $ 7.7 billion to US $ 16.3 billion. In the case of diamond exports, major destinations include: Hong Kong (30.1%), UAE (22.5%), USA (17.6%), Belgium (11.4%) and Israel (5.0%). As regards diamond imports, Hong Kong (27.6%), UAE (25.6%), UK (6.4%), and USA (4.8%) were the

major source countries for India. (Annexure 4).

Precious Stones
Gems or precious stones have fascinated mankind since ancient times. Precious stones are not only adorned as the items associated with royalty, they are considered as valuable gifts along with gold. The role played by precious and semiprecious stones in Indian mythology and society is well-known. In India, people, for astrological reasons, have used gems, as they are considered to be influencing various planetary positions, which in turn are believed to be influencing human life cycle and human destiny. Gems are also used in preparation of some Ayurvedic medicines. Although traditional Indian gemologists have identified around 84 precious and semiprecious stones, amongst them 9 stones namely: Ruby, Emerald, Pearl, Diamond, Red coral, Zircon, Blue sapphire, Yellow sapphire, and Cat’s Eye, form the ‘Navratnas’ or nine gems. Table 24 gives the total reserves and resources of select precious stones. India was more an exporter of precious stones than an importer of the same, and the difference between these two being minimal. During 2007-08, the exports of precious stones were US $ 280.8

72

Exhibit 12: INDIA'S MAJOR EXPORT DESTINATIONS AND SOURCE COUNTRIES FOR DIAMONDS (2008-09)

SOURCE: DGCIS

Table 23: INDIA’S EXPORTS AND IMPORTS OF DIAMONDS
(US $ Million)
Code Commodity Name 2005-06 2006-07 2007-08 2008-09 % Change 2006-07 vs 2005-06 -8.8 6.1 58.8 -54.9 13.1 -9.7 % Change 2007-08 vs 2006-07 34.2 3.8 316.7 -54.7 5.6 35.6 % change 2008-09 vs 2007-08 10.6 127.8 254.7 6048.3 18.7 10.2

Exports 7102 71021000 710221 710229 71023100 710239 Imports 7102 71021000 710221 710229 71023100 710239 Diamonds, whether or not worked, but not mounted or set Unsorted diamonds w/n worked,not mounted Unworked or simply sawn, cleaved or bruted: Other : Non-industrial diamonds unworked/ simply sawn cleaved or bruted Others : 8953.57 0.81 – 0.5 6259.31 2692.94 7,308.23 3.24 0.08 2.30 5,762.00 1,540.61 7,764.88 1.00 0.02 15.51 5,895.75 1,852.61 16300.44 0.28 2.14 0.01 6512.72 9785.28 -18.4 300.0 360.0 -7.9 -42.8 6.2 -69.1 -75.0 574.3 2.3 20.3 109.9 -72.0 10600.0 -99.9 10.5 428.2 Diamonds, whether or not worked, but not mounted or set Unsorted diamonds w/n worked,not mounted Unworked or simply sawn, cleaved or bruted: Other : Non-industrial diamonds unworked/simply sawn cleaved or bruted Others : 11610.33 0.49 0.34 1.42 438.23 11169.85 10,586.45 0.52 0.54 0.64 495.56 10,089.19 14,211.75 0.54 2.25 0.29 523.32 13,685.35 15725.30 1.23 7.98 17.83 621.22 15077.03

SOURCE: DGCIS

73

Table 24: RESERVES AND RESOURCES OF SELECT PRECIOUS STONES IN INDIA (As on 1.4.2005) Mineral Diamond Ruby Sapphire Garnet Unit Carats Kilogram Kilogram Carats Reserves 1,205,577 1,925 0 20,975,605 Remaining Resources 3,376,336 3,346 450 36,680,028 Total Resources 4,581,913 5,271 450 57,655,633

SOURCE: Indian Mineral Yearbook, 2006

million, an increase of 6.5% over the previous year, and in the year 200809, exports of precious stones witnessed a marginal decline of (-)0.1%, over the previous year. Import of precious stones has grown marginally; during the year 2008-09, imports grew by 4.6% over the previous year. Major export destinations for precious stones (other than diamonds, which were not worked or graded) include: USA (30.5%), Hong Kong (22.7%) and Thailand (13.9%). The source countries for the same include Thailand (23.3%), Hong Kong (19.1%), and Zambia (13.9%). In the case of articles of precious stones other than diamonds (natural/ synthetic), the major export destinations include: USA (38.8%), Germany (23.9%), and Switzerland (9%), and the source countries for the same include: Hong Kong (27.8%), Sri Lanka (22.2%), and Germany (16.7%).
74

(Annexure 4).

Platinum
Platinum is a naturally occurring rare metal which is scantier than gold. One of the main advantages of platinum in jewellery fabrication is its strength and resistance to tarnish. It can be repeatedly heated and cooled without hardening and oxidation effects; even the most slender sections of platinum, permanently retain their shape, providing a secure setting for diamonds, and giving jewellery designers a freedom of invention, not always possible with other metals. The total resources of platinum group of metals in India, as on April 2005, was only 14.2 tonnes; the entire known resources are located in Niligiri, Boula- Nuasahi and Sukinda areas in Orissa. The exports of platinum which had witnessed an increase of 175% in value terms during 2007-08, over the previous year, witnessed a

Table 25: INDIA’S EXPORTS AND IMPORTS OF PRECIOUS STONES
(US $ Million)
Code Commodity Name 2005-06 2006-07 2007-08 2008-09 % Change 2006-07 vs 2005-06 -1.8 % Change 2007-08 vs 2006-07 6.5 % change 2008-09 vs 2007-08 -0.1

Exports 7103 Precious stones (other than diamonds) and semiprecious stones, whether or not worked or graded but not strung, mounted or set Unworked or simply sawn or roughly shaped: Ruby, sapphire and emeralds Other: Articles of precious or semi precious stones (natural synthetic/reconstructed) Total Imports 7103 Precious stones (other than diamonds) and semiprecious stones, whether or not worked or graded but not strung, mounted or set Unworked or simply sawn or roughly shaped: Ruby, sapphire and emeralds Other: Articles of precious or semi precious stones (natural synthetic/reconstructed) Total SOURCE: DGCIS 166.89 161.97 190.18 198.9 -2.9 17.4 4.6 268.23 263.30 280.46 280.04

710310 710391 710399 71162000

4.6 94.42 169.21 3.06

7.22 81.55 174.54 0.41

14.76 87.12 178.58 0.35

8.08 103.67 168.29 0.67

57.0 -13.6 3.1 -86.6

104.4 6.8 2.3 -14.6

-45.3 19.0 -5.8 91.4

271.29

263.71

280.81

280.71

-2.8

6.5

-0.04

710310 710391 710399 71162000

120.38 25.89 20.62 0.07

124.73 15.53 21.71 0.15

133.61 25.66 30.91 0.14

113.97 46.09 38.84 0.18

3.6 -40.0 5.3 114.3

7.1 65.2 42.4 -6.7

-14.7 79.6 25.7 28.6

166.96

162.12

190.32

199.08

-2.9

17.4

4.6

75

tremendous increase of 1804% during the year 2008-09, over the previous year. Imports also showed an increase during 2008-09, of around 6542% over the previous year. During 2007-08, the imports had grown by 55% over the previous year. UAE was the major export destination for India’s export of raw platinum, constituting 49.1% of total exports; major source countries for raw platinum imports by India include: UAE (78.7%), South Africa (15.3%), Switzerland (2.7%), and UK (1.9%). UAE and Australia were the major export destinations of platinum jewellery constituting a combined share of 43.8%, and the major source countries for imports by India were Thailand and Belgium with 69% and 13% share, respectively (Annexure 4).

USA (38.6%), UAE (14.1%), Austria (12.0%), and Hong Kong (10.8%). The source countries for import of pearls by India include: Japan (34.5%), China (31.9%), and Hong Kong (21.1%). (Annexure 4).

Silver
During 2007-08, exports of silver (unwrought and semi-manufactured form) witnessed a negative growth of 35.5%, and silver jewellery witnessed a growth of 19.5%. However, during 2008-09, the exports of silver (unwrought and semi-manufactured form) grew by 27.4%, and silver jewellery witnessed a growth of 87.7% in exports (Table 28). During 2008-09, India imported unwrought silver valued around US $ 2 billion, a growth of 79% over the previous year. Import of silver jewellery witnessed a growth of 80.6%. (Table 28). Major export destinations of silver include: Switzerland (29.7%), USA (21.3%), UK (13.8%), Iran (11.5%) and Japan (9.3%), and that of silver jewellery include: USA (38.1%), China (12.6%), UAE (10.4%), Hong Kong (7.1%) and UK (5.8%). The source countries for import of silver by India include: UK (37.8%), China (15.4%), Russia (11.8%), Switzerland (11.6%), and Hong Kong (3.8%), and that of silver jewellery include: USA (35.2%), Italy (17.6%), UAE (12.4%), Hong Kong (12.3%), Thailand (6.1%), and Turkey (7.2%) (Annexure 4).

Pearls
During 2007-08, the exports of pearls had witnessed an impressive performance, with the sub-segment - cultured pearls - witnessing a growth of 125%. During 2008-09, the exports of pearls grew by 17.6%, driven by the tremendous growth of 778% in the export of cultured pearls (unworked) category (Table 27). During 2008-09, the imports of pearls declined by 7.8% over the previous year (Table 27). Major export destinations of pearls include:

76

Table 26: INDIA’S EXPORTS AND IMPORTS OF PLATINUM
(US $ Million)
Code Commodity Name 2005-06 2006-07 2007-08 2008-09 % Change 2006-07 vs 2005-06 % Change 2007-08 vs 2006-07 % change 2008-09 vs 2007-08

Exports 7110 71131950 Platinum, unwrought or in semi- manufactured form, in powder form Jewellery of platinum group metals unset Total Imports 7110 71131950 Platinum, unwrought or in semi- manufactured form, in powder form Jewellery of platinum group metals unset Total SOURCE: DGCIS 32.2 0.31 32.51 14.09 3.11 17.20 21.62 5.01 26.63 1474.69 294.18 1768.87 31.3 -20.7 17.4 53.4 61.1 54.80 6720.95 or 5771.86 6542.40 10.73 3.92 14.65 55.84 1.06 56.90 155.26 1.24 156.50 2979.17 0.83 2980.00 73.4 241.9 75.0 178.0 17.0 175.0 1818.83 or -33.06 1804.15

77

78
Code Commodity Name Exports 7101 710110 71012100 71012200 Imports 7101 Natural pearls Cultured pearls unworked Cultured pearls worked 710110 71012100 71012200 Natural pearls Cultured pearls unworked Cultured pearls worked SOURCE: DGCIS

Table 27: INDIA’S EXPORTS AND IMPORTS OF PEARLS
(US $ Million)
2005-06 2006-07 2007-08 2008-09 % Change 2006-07 vs 2005-06 % Change 2007-08 vs 2006-07 % change 2008-09 vs 2007-08

Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; pearls, natural or culture

2.34

1.95

2.84

3.34

-16.7

45.6

17.61

1.78 0.22 0.33 4.83

0.83 0.08 1.03 4.37

1.52 0.18 1.13 7.01

1.45 1.58 0.31 6.46

-53.4 -63.6 212.1 -9.5

83.1 125.0 9.7 60.4

-4.61 777.78 -72.57 -7.85

Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; pearls, natural or culture

0.89 3.59 0.36

0.4 3.38 0.6

0.98 5.05 0.98

1.66 3.59 1.21

-55.1 -5.8 66.7

145.0 49.4 63.3

69.39 -28.91 23.47

Table 28: INDIA’S EXPORTS AND IMPORTS OF SILVER
(US $ Million)
Code Exports 7106 71061000 71069100 710692 711311 Silver (including silver plated with gold or platinum), unwrought or in semi- manufactured forms, or in powder form Silver in powder form Unwrought silver Semi-manufactured : Jewellery of silver, whether or not plated or clad with other precious metal: Total Imports 7106 71061000 71069100 710692 711311 Silver (including silver plated with gold or platinum), unwrought or in semi- manufactured forms, or in powder form Silver in powder form Unwrought silver Semi-manufactured : Jewellery of silver, whether or not plated or clad with other precious metal: Total SOURCE: DGCIS 213.93 30 115.23 68.7 7.34 1152.06 8.14 959.21 184.7 14.61 2061.94 1.27 1982.56 78.11 26.38 438.5 -72.9 732.4 168.9 99.0 79.0 -84.4 106.7 -57.7 80.6 17.98 0.01 15.87 2.1 82.93 11.59 00.0 0.00 11.59 99.08 14.76 0.02 1.8 12.95 195.01 -35.5 Neg Neg 451.9 19.5 27.4 Neg Neg 11.7 96.8 Commodity Name 2006-07 2007-08 2008-09 % Change 2007-08 vs. 2006-07 % change 2008-09 vs 2007-08

100.91

110.67

207.77

9.7

87.7

221.27

1166.67

2088.32

427.3

79.0

79

Government Initiatives
Gems and Jewellery, diamonds and precious metals have been given a special thrust by the Ministry of Commerce & Industry, Government of India, under the Foreign Trade Policy through the following measures: Allowing 100 per cent FDI in the gems and jewellery sector under the automatic route; Abolishing duty on polished diamonds; Lowering import duty on platinum, and exempting rough, coloured, precious gems stones from customs duty. Rough, semi-precious stones are also exempted from import duty; Setting up of Gems and Jewellery Parks and SEZs to stimulate sectoral investments; Allowing import of gold of 8 k and above under replenishment scheme, subject to the condition that import being accompanied by an Assay Certificate specifying purity, weight and alloy content; Allowing personal carriage of gems and jewellery products in case of holding/participating in overseas exhibitions, up to US $ 5 million, and up to US $ 1 million in case of export promotion tours;

Increase in number of days, up to 90 days, for re-import of unsold items in case of participation in an exhibition in USA; Allowing duty free import (based on FOB value of exports during the previous financial year) of consumables and tools, for: o Jewellery made out of: Precious metals (other than Gold and Platinum) – 2% Gold and Platinum – 1% Rhodium finished Silver – 3% o Cut and Polished Diamonds – 1%

Following items, if exported, would be eligible for facilities: o Gold jewellery, including partly processed jewellery and articles including medallions and coins (excluding legal tender coins), whether plain or studded, containing gold of 8 carats and above; Silver jewellery including partly processed jewellery, silverware, silver strips and articles including medallions and coins (excluding legal tender

o

80

coins and any engineering goods) containing more than 50% silver by weight; o Platinum jewellery including partly processed jewellery and articles including medallions and coins (excluding legal tender coins and any engineering goods) containing more than 50% platinum by weight.

and having an average annual turnover of Rs. 3 crores or above during preceding three licensing years, may also carry out their business through designated Diamond Dollar Accounts (DDA) (Box 4); In an endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse(s)”.

Increasing the entitlement of duty free import of commercial samples up to Rs. 300,000; Allowing duty free re-import of rejected jewellery with 2% of FOB value of exports; Permitting import of Diamonds on consignment basis for Certification/ Grading, and re-export by the authorized offices/agencies of Gemological Institute of America (GIA) in India or other approved agencies; Firms and companies dealing in purchase/ sale of rough or cut and polished diamonds/ precious metal jewellery plain, minakari and / or studded with/ without diamond and/or other stones, with a track record of at least two years in import or export of diamonds / coloured gemstones/ diamond and coloured gemstones studded jewellery / plain gold jewellery,

Investment Scenario
India has a favourable investment climate with the policy allowing 100% FDI under the automated route. However, the FDI inflows into this industry has been meager; during the period April 2000 to October 2009, the diamond and gold ornaments sector received an FDI inflow of US $ 263.56 million, constituting a share of 0.26% in the total FDI inflows during this period into India. This may be because, the industry is significantly fragmented, and the large portion of the domestic market is in the unorganized sector. However, of late, India is gaining prominence among foreign firms as international hub for manufacturing, retailing and sourcing for quality designer jewellery. Global retailers, such as Wal-Mart, JC Penny, are increasingly procuring jewellery from India. The domestic players are also looking at expanding their footprints in the country; especially in retail

81

Box 4: DIAMOND DOLLAR ACCOUNT SCHEME Under the Diamond Dollar Account Scheme (DDAS), eligible firms and companies may be allowed to open Diamond Dollar Account with their bankers. A maximum of two Diamond Dollar Accounts would be allowed with two separate bankers. The sources of dollars in Diamond Dollar Accounts shall be (i) bank finance; (ii) export proceeds from shipments of polished/rough diamonds; and (iii) sale proceeds from local sales of polished/rough diamonds. Through DDAS, firms and companies, dealing in the purchase/sale of rough or cut and polished diamonds/precious metal jewellery, plain, minakari and/or studded with/without diamond and/or other stones with a track record of atleast 3 years in import or export of diamonds/coloured gemstones/diamond and coloured gemstones studded jewellery/ plain gold jewellery and having an average annual turnover of Rs 5 crore or above during the preceding three licensing years, have been allowed to carry out their business. This scheme shall be optional and those importers/exporters who wish to continue to use Rupee Accounts shall be allowed to do so under the existing policies. Under this scheme, Dollars kept in such accounts and are available from bank finance and/or export proceeds shall be used only for import/purchase of rough diamonds from overseas/local sources.

space; some of the developments include9:

major

30 stores by 2009, up from the current 13; The Gitanjali Group has bought ‘Nakshatra’, the premium brand of jewellery promoted by Diamond Trading Company (DTC); Gitanjali Gems, a diamond and jewellery manufacturer has entered into an agreement with the Mineral and Metal Trading Corporation of India (MMTC), a leading bullion trader, for a joint venture; Thai company, Pranda Jewellery, is foraying into retailing in India and has plans towards retail expansion in the country;

Reliance Retail is planning an aggressive entry into the jewellery retail market. The company has plans to open around 400 to 500 jewellery retail outlets across the country; Damas India, part of one of the largest jewellery retail outlets in the world, is adding 16 new stores to the 12 stores it has already established in India; Swarovski, the global crystal goods manufacturer and marketer, plans to set up
9

Source: Indian MSME Ecosystem, February 2009

82

Box 5: EXIM BANK’S ROLE IN SUPPORTING INDIAN GEMS AND JEWELLERY INDUSTRY Exim Bank of India seeks to create an enabling environment to promote twoway transfer of technology, trade and investments and operates a wide range of lending, service and support programmes. The Bank has a variety of loan products to cater to the financing requirements of enterprises. The credit facilities are available for financing at all stages of export cycle of Indian firms. The Bank’s Lines of Credit (LOC) extended to commercial banks, financial institutions, regional development banks, and entities overseas serve as a market entry mechanism to Indian exporters and provide a safe mode of non recourse financing option to Indian exporters. Apart from LOC, the Bank offers buyer’s credit and supplier’s credit for exports on deferred payment terms. These facilities help companies, especially the SMEs, to offer competitive credit terms to the buyers and to explore new geographical markets.The Bank has extended supplier’s credit, pre shipment credit, post shipment credit, and foreign currency packing credit (FCPC), to its clients in the gems and jewellery sector. Exim Bank has signed a Memorandum of Understanding (MOU) with the Indian Diamond Institute (IDI), which enables the development of human resources through professional training, and hence be supportive of the export efforts of the industry. The Bank has provided grant to IDI for upgrading LRS (Laser Raman Spectroscopic Machine) equipment, and thereby enabling the Institute to provide training to carry out in-depth study of all types of gems. The MOU will also enable both the institutions to exchange literature, data, information and research output on the gems and jewellery industry, and also facilitate the exchange of foreign experts visiting the two institutions, and in organizing their respective training programmes.

Geneva-based luxury watch and jewellery brand De Grisogono is firming up its plans to foray into the Indian market through establishing mono-brand outlets;

Kiah, the diamond jewellery retailer, which currently operates 15 retail stores in India and one store in Dubai, is planning to expand the retail network of ‘Kiah Diamond Jewellery’ stores.

6. MARKET ANALYSIS

In this chapter, market analysis has been undertaken to understand the competitive position of India visà-vis other competitor countries, and also to identify the export destinations which have not been fully tapped by India for its exports of gems and jewellery under select product categories. Since India is one of the major exporting countries, for articles of jewellery, the world’s largest exporters and importers, and India’s export destinations for the various categories under select subproduct groups have been analyzed. Other product groups which are covered in this chapter are articles of natural and cultured pearls, precious and semi precious stones; and imitation jewellery.

ARTICLES OF JEWELLERY
Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal (HS 7113): Major importers under this category include USA, UAE, Hong Kong, Switzerland and UK. Among the major source countries, Italy exported to all the major importers. India was one of the major exporters of articles of

jewellery and was one of the major source countries for USA and UAE. Even though India was exporting to all the major importers, Switzerland was one major importer where India needed to improve its exports. Of the total exports of US $ 42.5 billion under this category, India exported US $ 5.06 billion constituting a share of 12% in the total world exports in 2007. (Table 29). Articles of jewellery and parts thereof of silver, whether or not plated or clad with other precious metal (HS 711311): Among the Asian markets, Thailand, Hong Kong and China were major source countries, and among the western markets, Italy was a major source country under this category. The major importers include: USA, Hong Kong, Germany, UK and Singapore. Thailand was a major source country for USA, Hong Kong, Germany and UK. China was a major source country for USA, Hong Kong and Germany. India was not a major exporter under this category; its exports amounted to US $ 94.2 million and had a share of only 2.4% in the world exports in 2007. India’s

Table 29: MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 7113)* (US $ Million) World’s Major Importers Imports (US $ Million) Hong Kong India Major Source Countries China USA UK Switzerland France USA Italy

World USA UAE Hong Kong Switzerland UK

42554.14 10086.29 5829.26 3872.93 2842.76 2714.45

NOTE: *Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal. SOURCE: UN - COMTRADE Table 30: MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711311)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries

World USA Hong Kong Germany UK Singapore

3844.93 1306.33 251.95 250.82 249.87 183.07

Note: *Articles of jewellery and parts thereof of silver, whether or not plated or clad with other precious metal. SOURCE: UN - COMTRADE 86

Hong Kong

Thailand

China

Italy

85

major markets include USA (55.3%), UK (8.3%), Germany (5.6%) and Italy (4.3%). However, India has the potential to target USA, Hong Kong and Singapore as its export markets under this category (Table 30). Articles of jewellery and parts thereof of other precious metal (gold or platinum group of minerals), whether or not plated or clad with precious metal (HS 711319): USA, UAE, Hong Kong, Switzerland and UK were the major importers of articles of jewellery and parts thereof of other precious metal, whether or not plated or clad with precious metal in 2007 (HS 711319). Major source countries under this category include: Italy and UK,

exporting to almost all the major importers of the world. Other major source countries include: India, Hong Kong and USA. India was one of the major exporters under this category, and exported around US $ 5 billion during 2007, constituting a share of 13% in the total world exports. India was a major source country for USA, UAE and Hong Kong. India should however improve its exports to Switzerland, which is another major importer under this category (Table 31). Articles of jewellery and parts thereof of other precious metal, whether or not plated or clad with precious metal (HS 711320): Japan, UK, USA, New Zealand and

Table 31: MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711319)* (US $ Million) World’s Major Importers Imports (US $ Million) Hong Kong India Major Source Countries China USA UK Switzerland France Italy

World USA UAE Hong Kong Switzerland UK

38343.25 8749.95 5757.91 3598.27 2759.48 2411.15

86

NOTE: *Articles of jewellery and parts thereof, of precious metal (gold and platinum group of mineral) whether or not plated or clad with precious metal. SOURCE: UN - COMTRADE

Hong Kong were the major importers in this category, and the major exporters include USA and Italy in 2007. USA was among the world’s major exporters, as also among world’s major importers. USA was the largest exporter constituting almost 52% of the total exports in the world. Among the major importers, USA was a major source country for Japan, UK, New Zealand and Hong Kong; and Italy was a major source country for Japan, UK, USA and Hong Kong (Table 32). India had very minimal exports under this category, amounting to US $ 0.02 million.

ARTICLES OF NATURAL AND CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES Articles of natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed) (HS 7116): Major importers under this category include: Hong Kong, Switzerland, UK, Netherlands Antilles and Japan in 2007. Major source countries for imports of pearls and precious stones include: USA and China. China was a major source country to all the major importers, except

Table 32: MARKET ANALYSIS OF ARTICLES OF JEWELLERY (HS 711320)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries Australia Ireland Germany 87 UK

World Japan UK USA New Zealand Hong Kong

365.95 88.57 53.43 30.01 27.57 22.72

Note: * Articles of jewellery and parts thereof of base metal, whether or not plated or clad with precious metal. SOURCE: UN - COMTRADE

USA

Italy

Table 33: MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 7116)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries

Switzerland

World Hong Kong Switzerland UK Netherlands Antilles Japan

3844.93 304.78 289.94 176.08 174.26 167.93

Note: **Articles of natural or cultured pearls, precious or semi precious stones (natural, synthetic or reconstructed). SOURCE: UN - COMTRADE

Netherlands Antilles, and USA was a major source country for all the major importers (Table 33). India had very minimal exports in this category, amounting to US $ 0.27 million. Articles of natural/cultured pearls (HS 711610): Major importers of products under this category include: Hong Kong, USA, Japan, Switzerland and UAE in 2007. Major source countries for these importers include: China and Hong Kong. China dominated the export scene by supplying to all the major importers, while Hong Kong was a major source country for USA,

Hong Kong

China

USA

Italy

Japan, Switzerland and UAE. Hong Kong was both an importer and exporter under this category (Table 34). India had negligible exports (US $ 0.02 million) under this category. Articles of precious or semi precious stones (natural synthetic/reconstructed) (HS 711620): Switzerland, Hong Kong, Netherlands Antilles, UK and Japan were the major importers under this category in 2007. The only supplier to Netherlands Antilles was USA. USA was a major supplier to all the major importers; Japan has mainly sourced from USA, Germany, China

Table 34: MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 711610)* (US $ Million) World’s Major Importers Imports (US $ Million) China Major Source Countries Polynesia French Hong Kong Germany Japan Australia USA

World Hong Kong USA Japan Switzerland UAE

205.00 72.94 35.79 21.00 13.99 6.56

Note: * Articles of natural/cultured pearls SOURCE: UN - COMTRADE

and Hong Kong. UK has mainly sourced from USA, China, Italy, Switzerland and Hong Kong (Table 35). India had negligible exports (US $ 0.25 million) under this category.

IMITATION JEWELLERY Imitation jewellery (HS 7117): The Asian and European countries dominated the export of imitation jewellery – Hong Kong, China, Austria and France. Major importers of artificial jewellery include USA, Germany, France, UK and Italy in 2007. Hong Kong was a major source country for all the major importers, followed by China and Austria. India’s exports under this

product category amounted to US $ 117.46 million. Though India is also one of the major exporters of artificial jewellery, India’s products are mainly sourced by UK. Other major export destinations for India include: USA, UAE, Spain and Saudi Arabia; however, the volumes are insignificant as compared to the potential. India needs to target these markets through various strategies (Table 36). Cuff links & studs of base metal w/n plated with precious metal (HS 711711): Major importers of products under this category include: USA, UK, Japan, France,

Table 35: MARKET ANALYSIS OF ARTICLES OF NATURAL AND CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES (HS 711620)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries China Italy Switzerland Hong Kong Germany

World Switzerland Hong Kong Netherlands Antilles UK Japan

1741.00 275.95 231.84 174.06 170.94 146.93

Note: * Articles of precious or semi precious stones (natural synthetic/ reconstructed) SOURCE: UN - COMTRADE

and Hong Kong; major source countries for products under this category include: Thailand, UK, Hong Kong, China, and Germany in 2007. Thailand served as a source country for all major importers of the world (Table 37). India’s exports under this product group amounted to US $ 2.58 million. Though India was not a major exporter under this category, India was a major source country for USA contributing 8.1% of the total imports by the USA. In value terms, India’s export to USA was US $ 2.09 million, a share of 81 % of India’s total exports under this product group.

USA

IN SUM
The product-country analysis shows that USA, EU, Japan and Hong Kong are the leading importers of major gems and jewellery products. These countries have been sourcing their jewellery import requirements mainly from countries such as Hong Kong, China, Italy, USA, Germany and UK, of which USA, UK and Germany are importers as well as exporters. Hong Kong appears to be more of a trading hub in the Asian continent. India served as one of the major source countries for diamonds, as

Table 36: MARKET ANALYSIS OF IMITATION JEWELLERY (HS 7117)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries

France

World USA Germany France UK Italy

4967.03 974.73 365.01 364.99 316.89 309.79

Note: * Imitation jewellery SOURCE: UN - COMTRADE Table 37: MARKET ANALYSIS OF IMITATION JEWELLERY (HS 711711)* (US $ Million) World’s Major Importers Imports (US $ Million) Major Source Countries Hong Kong UK Germany China Italy

World USA UK Japan France Hong Kong

123.45 25.71 10.7 7.93 6.48 5.79

Note: * Cuff links & studs of base metal w/n plated with precious metal SOURCE: UN - COMTRADE

Thailand

Hong Kong

Austria

China

India

91

92

also some articles of jewellery. In the case of diamonds, India is one of the major importers of rough diamonds, and one of the major exporters of cut/polished diamonds. India’s exports of cut and polished diamonds have been to all major markets in the world. India is also a major exporter of articles of jewellery and parts, and exported to all the major importers of the world. However, some of the markets are not well-explored by Indian gems and jewellery exporters. For example, India may endeavour to concentrate on markets like: UK and Switzerland for articles of jewellery of gold and platinum group of minerals (HS code 711319); USA, Germany, UK and Switzerland for articles of

jewellery made of silver (HS code 711311); USA, Japan, Switzerland and UAE for articles of natural and cultured pearls (HS code 711610); Switzerland, UK and Japan for articles of semi-precious stones (HS code 711620); and USA, Germany, France, UK and Italy for articles of imitation jewellery (HS code 7117). India may leverage its traditional craft-skills, low-cost labour, and fabrication techniques in some of the jewellery products (such as processing of small-sized diamonds), and replicate such advantages in the production of other products, and thereby become a global player across the gems and jewellery segments.

7. CHALLENGES AND STRATEGIES

CHALLENGES Unorganized Sector
India’s gems and jewellery industry is highly unorganized and fragmented with more than 90% of the players having family owned businesses. According to a FICCI study, the gold processing industry has around 15,000 players, with only around 80 units having revenues of over US $ 5 million. India is also home to around 450,000 goldsmiths, over 100,000 gold jewellers, about 6,000 diamond-processing players, and 8,000 diamond jewellers. The unorganized and small-scale nature of the sector hampers the ability of Indian gems and jewellery industry to innovate, upgrade technologies, and emerge as a world-class supplier.

year. The growth trend continued even in 2008-09 during which the exports showed a growth of 44% over the previous year. However, during the period April- September 2009-10, due to economic slowdown, the demand for gems and jewellery shrank, which resulted in export slowdown for India. This has been depicted in Table 38. Following the economic slowdown, asset price devaluations, job losses and decrease in disposable income have happened, along with escalation in gold prices, which have changed the consumption pattern of gems and jewellery. Further, the economic slowdown has also affected the consumer buying pattern, with growing demand for single-line jewellery, low-carat jewellery, and gems-studded jewellery. An analysis of India’s major export destinations of gems and jewellery reveals that during the period April – September 2009-10, exports to all the major export destinations, except Singapore had witnessed a decline (Table 39). Exports to countries like China, UAE
93

Impact of Recession
There had been a loss of market for gems and jewellery exports due to recession and global economic slowdown. As can be seen in Table 38, during 2007-08, there was a growth in gems and jewellery exports by 23%, over the previous

Table 38: EXPORT PERFORMANCE OF INDIAN GEMS AND JEWELLERY INDUSTRY (US $ Million) 2006-07 Exports Growth Rate 15,983.57 — 2007-08 19,691.58 23.2 2008-09 28,411.38 44.3

Comparative Export Performance in April – September 2008 and April – September 2009 2008 April – September April May June July August September 17,387.66 3,074.25 2,969.89 3,063.81 2,635.75 2,842.69 2,801.27 2009 13,608.40 1,824.42 2,011.60 2,298.99 2,443.92 2,386.83 2,642.65 Growth (%) -21.7 -40.7 -32.3 -25.0 -7.3 -16.0 -5.7

and Singapore, which had witnessed tremendous increase during 2008-09 witnessed a decline during the period April-September 2009-10. The financial performance of players in this sector has also been impacted by the recessionary trends in demand. Out of the fourteen jewellery companies analyzed, 6 companies witnessed a decline in income, and eight companies witnessed decline in profit during the first half of 2009-10. (Table 40).

Rise in Prices
As mentioned earlier, the prices of precious metals, especially gold and silver, has been witnessing steep increase, since the last few years, which has been changing the buying pattern of consumers.

Exhibit 13 shows the prices of gold and silver in the last one year, which has been on a rising trend. During the period December 2008 - December 2009, the price of gold per ten grams, has increased from Rs. 13,445 to Rs. 16,870, witnessing an increase of 26%. Even though the prices of silver had witnessed a decline after February 2009, it again started rising after April 2009. From Rs. 17,847 per kg in December 2008, the silver price increased to Rs. 27,430 per kg in December 2009. The steep rise in raw material prices has squeezed the cost efficiency of the Indian gems and jewellery sector. The ratio of production cost to net sales of this industry, which hovered around 86%

Table 39: ANALYSIS OF MAJOR EXPORT DESTINATIONS OF INDIA FOR GEMS AND JEWELLERY (US $ Million)
Countries UAE Hong Kong USA Singapore China Subtotal of Export of 5 Countries 2007-08 4039.43 5105.36 4975.96 217.85 35.06 14373.66 2008-09 % change 10967.06 5294.56 4660.00 549.35 739.5 22210.47 171.5 3.7 -6.3 152.2 2009.2 54.5 Apr-Sep 2008-09 6762.61 3023.34 2840.01 297.46 341.21 13264.63 Apr-Sep % change 2009-10 5805.52 2913.49 2177.32 326.24 235.29 11457.86 -14.2 -3.6 -23.3 9.7 -31.0 -13.6

India’s Total 19691.58 Export of Gems and Jewellery %Share of Gems and Jewellery in India’s total Exports 12.07

28411.38

44.3

17387.66

13608.41

-21.7

15.33

-

15.97

17.77

-

SOURCE: Department of Commerce, Ministry of Commerce & Industry, Government of India

in 2004-05 increased to 92% in 200809, affecting the profitability of this sector. Table 42 shows the ratio of cost of production to net sales of various industries within the manufacturing sector, including gems and jewellery. The ratio reveals that the gems and jewellery industry is an exceptionally high cost industry. After 2004-05, the ratio has been showing an increase varying between 85% and 95%.

Possible Threats from China, and From Other Countries Producing Diamonds
Although India currently enjoys dominance in the world’s cut and polished diamond market, China may emerge as a rival in the long- term, mainly because of the availability of cheap labour, growing domestic demand, and also the improvement in the quality of workmanship in the country. It may

Table 40: FINANCIAL PERFORMANCE OF COMPANIES (APRIL-SEPTEMBER 2009-10)
Company Name Apr- Sep 2008-09 Rajesh Exports Ltd. Titan Industries Ltd. Gitanjali Gems Ltd. Su-Raj Diamonds & Jewellery Ltd. Suashish Diamonds Ltd. Shrenuj & Co. Ltd. Classic Diamonds (India) Ltd. Flawless Diamond (India) Ltd. Renaissance Jewellery Ltd. C G Impex Ltd. Vaibhav Gems Ltd. Goldiam International Ltd. Shantivijay Jewels Ltd. Shukra Jewellery Ltd. 4804.51 1901.21 1439.83 1111.63 536.72 413.99 371.35 336.92 175.37 145.41 96.40 29.51 33.58 25.27 Income Apr-Sep % change 2009-10 7695.48 2034.47 1687.35 1416.65 647.64 407.07 365.05 283.15 212.89 179.44 50.70 33.23 21.01 11.02 60.2 7.0 17.2 27.4 20.7 -1.7 -1.7 -16.0 21.4 23.4 -47.4 12.6 -37.4 -56.4 Apr- Sep 2008-09 60.92 120.49 68.74 24.61 -10.28 5.47 9.13 13.55 8.89 1.59 -1.62 -7.88 0.72 0.12 Net profit Apr-Sep 2009-10 50.95 123.64 75.35 25.56 30.44 6.69 10.39 10.50 8.9 0.98 -11.73 -1.00 -0.75 0.05 % change -16.4 2.6 9.6 3.9 -396.1 22.3 13.8 -22.5 0.1 -38.4 624.1 -87.3 -204.2 -58.3

SOURCE: Prowess Exhibit 13: PRICES OF GOLD AND SILVER (DECEMBER 2008 - DECEMBER 2009) IN INDIA

SOURCE: MCX

Table 41: PRODUCTION COST*/NET SALES RATIO ACROSS MANUFACTURING SECTOR Industry 2004-05 Food products Textiles Chemicals Gems and jewellery Iron and steel Non electrical machinery Electrical machinery Electronics Transport equipments Diversified 51.6 67.0 62.7 86.0 56.0 70.9 74.3 41.3 72.9 66.6 2005-06 55.6 62.7 63.3 89.1 63.5 69.8 78.3 41.4 72.7 63.9 Year 2006-07 59.0 66.1 58.6 93.4 61.6 74.7 76.5 44.1 72.2 59.2 2007-08 62.2 70.6 60.4 91.0 64.2 74.8 69.5 54.5 72.0 58.3 2008-09 67.0 69.3 62.7 92.2 67.3 76.3 66.6 53.9 73.6 61.1

Note: *Production cost include: Raw materials, stores and spares & purchase of finished goods; salaries and wages; power and fuel expenses, royalties, technical know-hows fees etc; rent and lease rent and interest expenses SOURCE: Exim analysis; data derived from Prowess

be added that increasing number of diamond processors are setting up their facilities in China due to these reasons. Also, there has been growing pressure in major diamond producing countries in Africa, like Botswana, Namibia and South Africa, to gain further economic benefits from diamond value chain, seeking investments in cutting and polishing industry. Such developments may affect the prospects of India.

Low level of Technology Absorption
Utilization of hi-tech, speedy and efficient machinery and software has led to the gradual replacement

of traditional / manual methods of polishing, manufacturing and designing of gems and jewellery. Proactive players in the Indian gems and jewellery industry are always on the lookout for better technology for their units. However, such technology absorption is relatively low in Indian gems and jewellery industry, due to the small size, and unorganized nature of majority of the players. Also, mere absorption of technology may not be helpful, without a proper blend between manual labour and machinery to provide ethnicity to the end-products. Usage of semiskilled and unskilled workforce in operation of such high-end

machines may result in significant under-utilization of the machinery / technology, and may at times cause losses in operations. Skill development is therefore very essential for proper reclassification of the workmen in this industry.

R&D and Product Development
Another major challenge faced by the industry is the low level of R&D intensity and facilities for undertaking R&D and product development. Proper R&D solutions would help in improving product quality, reducing wastage, introducing new designs and concepts, and innovation in supply chain management and marketing. The gap between hi-end machines and unskilled labour can also be reduced with innovative R&D solutions.

unbranded jewellery from local jewellers. At that time, confidence in the local jeweller was the hallmark of the gold jewellery trade in India. This used to be a major challenge in the way of development of branded jewellery in India. However, since the late 1990s, there has been a shift in consumer preferences: women are increasingly opting for fashionable and lightweight jewellery instead of traditional bulky jewellery. There has been change in consumer trend with the buyers regarding jewellery as an accessory and not as an investment. Consumers have also started realizing the value of brands, since it gave them the surety of quality and durability. Though in its nascent stage, branded jewellery in India has been showing encouraging signs, despite tough competition. According to an estimate by the Indian Brand Equity Foundation (IBEF), the market for branded jewellery is expected to become US $ 2.2 billion by 2010. Some of the jewellery brands in India are DeBeers, D’damas, Tanishq, Oyzterbay, and Gili. In order to gain market share, branded jewellers may have to come up with designs that customers want, and win the trust and confidence of consumers by hallmarking and demonstrating the purity of the gold used by them. To compete with traditional players, branded players may also find some ways to differentiate themselves from others. While the success of a

STRATEGIES Branding of Jewellery
Branding of jewellery plays a very important role in the jewellery market as it assures consumers that the products are of certain quality, durability and conform to several social, environmental and durability standards. Brand promotion is therefore one of the best modes of market penetration. India’s gems and jewellery industry is highly unorganized and fragmented, and till the early 1990s, the average Indian had bought

particular brand may depend on differentiation and affordability, quality will be a key element in sustaining a brand. In addition, branded players require focused advertising and astute salesmanship to compete with traditional jewellers. In this context it may be mentioned that the Gem & Jewellery Export Promotion Council has launched the brand ‘Anant’, an exquisite range of single line diamond jewellery, exclusively for Indian women. This initiative was jointly undertaken by the Council along with Gold Souk, Rio Tinto, International Gemological Institute (IGI), and All India Gems and Jewellery Trade Foundation (GJF), with the objective of promoting diamond jewellery trade in India. ‘Anant’ is available at over 200 retail outlets across the country and is being promoted extensively through print, electronic and outdoor media. This promotional campaign covers 15 major and mini metros such as Mumbai, Delhi & Gurgaon, Ahmedabad, Rajkot, Baroda, Jaipur, Bangalore, Chennai, Hyderabad, Kochi, Kolkata, Kanpur, Nagpur and Akola.

Hallmarking of Jewellery
As the jewellery making and marketing is largely at the hands of unorganized sector, often, Indian consumers are faced with issues related to quality and low caratage. In case of traditional handcrafted

jewellery often the joints are soldered with the use of solder alloys of a much lower caratage. To counter this challenge, many countries are promoting Hallmarking Scheme to protect the consumers against the adulteration, and guarantee the purity or fineness of gold jewellery. Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in jewellery. Government of India has been protecting the interests of consumers from adulteration, and irregular metal quality, and launched the Hallmarking Scheme through Bureau of Indian Standards. The principal objectives of the Hallmarking Scheme are to protect the consumers against the fraud of adulteration and to oblige the manufacturers to maintain legal standards of fineness. However, it is difficult to make Hallmarking of gold jewellery mandatory across the country due to insufficient number of

certification centres. At present, there are over 100 BIS-recognised assaying and hallmarking centres in India, which are centred around Tier – 1 and Tier – 2 cities. It is proposed that India may consider expanding the network of hallmarking infrastructure across the country and help penetrate quality products even in rural areas. India may also consider becoming a member of international Hallmarking

Convention, and derive the benefits of such Convention.

Increasing Market Presence of Platinum Jewellery
With the gold prices increasing at record levels, consumers have started showing interest in ornaments made from other metals, like platinum and palladium. The fall in prices of platinum has also triggered the demand for platinum jewellery across the world, including India. During the past one year, the prices of platinum have witnessed decline, which is one of the main reasons for the consumers to opt for platinum jewellery (Exhibit 14). During March 2008, the price of platinum stood at US $ 2005 per troy ounce (31.1 gms), and during November 2008, the price fell down to as low as US $ 844 per troy ounce. As on December 2009, the price of platinum stood at US $ 1448 per troy ounce. As the demand for platinum jewellery is increasing, and especially when the consumer preferences are shifting to platinum jewellery, due to rise in price of gold, Indian jewellers need to diversify their product range and concentrate more in the manufacture of platinum-based jewellery. Leading retail jewellers should also add exclusive space for platinum jewellery in their stores. According to industry observers, at present, facilities for ore beneficiation and extraction of

platinum group metals do not exist in the country. Technology has also to be imported for extraction of platinum group of metals, which should be promoted in India.

Change in Product Portfolio
As with all luxury products, the demand for diamond and jewellery is highly income elastic. With the recession affecting the demand for jewellery products worldwide, it is necessary to diversify the export product portfolio, and concentrate more on lesser-priced jewellery, such as imitation, fashion or costume jewellery. One such example would be the concept of one gram gold jewellery which has picked up in the Indian retail market recently. Players in the jewellery industry, eyeing the domestic market has brought this idea of producing large jewellery item with minimal gold content, and thereby making attractive and affordable to the low-end consumers. This concept could be carried forward to international markets, especially developing economies, targeting middle class population. Countries with ethnic Indian population could also be another range of target markets. It is believed that in such product range, the risk of volatility in gold prices is likely to be lower, leading to improvement in margins, as compared to sale of pure gold jewellery. Another such example is the changing demand trend from

Box 6: BIS CERTIFICATION SCHEME FOR HALLMARKING OF GOLD JEWELLERY Government of India has identified Bureau of Indian Standards (BIS), a sole agency in India, to operate the BIS Hallmarking Scheme. The Scheme has been aligned with International Criteria on Hallmarking (Vienna Convention 1972). As per this Scheme, jewellers are granted with licences by BIS to sell jewellery after hallmarking them from any of the BIS recognized Assaying and Hallmarking Centre. BIS maintains surveillance of the certified jewellers, at a defined periodicity. Market surveillance involves collection of hallmarked gold jewellery from licensee’s retail outlet/manufacturing premises and having it tested for conformity in BIS recognized Hallmarking Centre. Deviations in degree of purity of fine metal and observance of operation not in conformance to the system may result in cancellation of BIS recognition of the centre as per provisions under the BIS Act, Rules and Regulations. BIS HALLMARK A Hallmark, consists of five components i.e. BIS Mark, the Fineness number (corresponding to given caratage), Assaying and Hallmarking Centre’s Mark, Jeweller’s Identification Mark, and Year of Marking denoted by a code letter and decided by BIS (e.g. code letter ‘A’ was approved by BIS for year 2000, ‘B’ being used for the year 2001 and ‘C’ for 2002 and ‘J’ for 2008). The marking is done either using punches or laser marking machine. BIS Hallmark for purity and fineness is as given below: 958 – Corresponding to 23 carat 916 –Corresponding to 22 carats 875 - Corresponding to 21 carats 750 - Corresponding to 18 carats 585 - Corresponding to 14 carats 375 - Corresponding to 9 carats The BIS Precious Metals Sectional Committee (MTD 10) has also formulated and published the following Indian Standards on Gold and Gold Alloys: IS 1417 (Grades of gold and gold alloys, Jewellery/ artifacts – Fineness and Marking) IS 1418 (Assaying of Gold in Gold Bullion, Gold Alloys and Gold Jewellery/ Artifacts Cupellation (Fire Assay Method)) IS 2790 (Guidelines for manufacture of 23,22,21,18,14 and 9 carat gold alloys) IS 3095 (Gold Sellers for use in manufacture of Jewellery) SOURCE: http://bis.org.in

Box 7: BENEFITS OF BECOMING A MEMBER OF HALLMARKING CONVENTION Export facilitation Articles bearing the Convention Common Control Mark (CCM) – together with national mark from the Assay Office – do not have to be re-hallmarked upon import in a HMC Contracting State. The CCM system is applied independently from the marking / hallmarking system in place in a country. Thus, it is always a voluntary mechanism. CCM is also considered as quality mark in many countries around the world. Avoids duplication in controls Since articles marked with CCM can be imported without further testing, the Convention considerably reduces the time and costs involved in control, certification and marking. International Harmonisation CCM is the only worldwide instrument which harmonises the control and marking of precious metals. The participant countries also contribute to the development and harmonization of international standards. Mutual recognition The Convention not only strengthens international harmonization, but also helps in establishing systems for mutual recognition of control marks (Marks of Assay Offices). Networking and Sharing of Experiences Members of the Convention benefit from personal contacts with other Assay Offices, which help them establish systems for exchange of information and sharing of experiences. This helps the Assay Offices to keep up high standards and track fraudulent practices. Fair Trade The Convention encourages Fair Trade between precious metals operators, especially to avoid under-carrating from the stage of metal trading. Consumer satisfaction is also maintained through quality in nature of articles made out of such metals. SOURCE: Hallmarking Convention

Exhibit 14: PRICES OF PLATINUM (January 2008 - December 2009)

SOURCE: Platinum today

small diamonds to single diamond jewellery. Accordingly, capabilities need to be developed in cutting, polishing and marketing of single diamond jewellery. Indian gems and jewellery industry may also diversify the export product portfolios on the lines of the change in perception of the consumers. It may be mentioned that the new-age consumer perceives jewellery as a personal accessory that manifests the wearer’s attitude, personality and lifestyle. Significant opportunities may be available to the players in the Indian jewellery industry, if they leverage and package the products with the blending of tradition and culture in designs that are universal and contemporary in their aesthetic appeal. While the products with

such

blend would stand out with resemblance of cultural and regional identity, they may not significantly look as ethnic products. In other words, the products should be a newlook piece, but with traditional inspiration. Branding and packaging are very important in marketing such products. Focusing on such product lines would enable the players in establishing an edge over their competitors. Players should also have desire for product innovation to catch-up with the change in consumer trends.

Continuous Development

Skill

Human resource is one of the critical factors for the gems and jewellery industry, as the industry is labour-centric. Non-availability of skilled workers is often cited as one of the major reasons for the inability

of the players in this industry to scale up their operations. Thus, the players need to constantly upgrade the skills of the workmen, through training and retraining strategies, to enhance their productivity. Some of the focus areas for imparting skillupgradation include: technology interface of design and product development, innovation in manufacturing process and reduction of wastage, standardization and quality control, and international networking and marketing. In addition to firm level strategies, the industry also needs to address the challenge of skill development collectively. Supply of craftsmen / artisans that come through generations need to be complemented by fresh talents, trained in a professional manner, to have access to wider talent pool. The industry may establish close linkages with the existing learning centres, and help them in imparting skills / training that are needs of the hour. At present, there are few institutes which provide training in jewellery design, viz., Indian Institute of Gems and Jewellery, Indian Diamond Institute, and National Institute of Design. Also, the National Skill Development Corporation (NSDC), initiated by the Government of India, is expected to give thrust on skill development of various sectors, including gems and jewellery. It is also important for the players to accomplish

greater degree of professionalism and establish appropriate organization structure that would attract and retain best talent in the industry.

Technology Upgradation
Players in this industry need to adopt latest technology, including the ICT interface in all aspects, starting from mining, cutting and polishing, to fabrication and marketing. Technological solutions are available for several of the challenges faced by the gems and jewellery industry; these solutions include: innovations in designs (through CAD/CAM machinery), quality and finish of products (through infrared, photo-typing, etching, wax-casting), cost control in process and reduction of wastage (laser cutting, hollow-tube processing). Imparting of technological solutions may reduce cost and time, which may not be feasible under conventional methods. Technology also helps the fabricators to churn-out the newdesign products in a much speedy way.

Establishing Diamond Bourses
At present, one diamond bourse, Bharat Diamond Bourse, has been established in Mumbai. Nevertheless, the traders have to visit Antwerp, Israel, Hong Kong and other locations to buy and sell rough and polished diamonds.

Establishment of more diamond bourses would give a major fillip to India to emerge as an international diamond trading hub, and also to make trading in diamonds easier for the players in India. It will be easier to get the rough diamonds through these trading centres and also for getting buyers for the cut and polished diamonds. Government of India has already announced the plan for establishing more diamond bourses to make the country an international trading hub to boost the gems and jewellery exports. These diamond bourses are expected to provide a single platform for traders and it would make India more of a trading centre.

Increase in Exploration Activities
India is a vast country with a landmass of 3.28 million sq.kms, of which about 2.42 million sq.kms consist of hard rock. Out of the total hard rock area, around 700,000 sq.kms have been identified as having geological association, with the surface showing possible mineral occurrences. As per United Nations Framework Classification, total resources (reserves and remaining resources) of gold ore (primary) in India as on April 1, 2005, were estimated at 390.28 million tonnes, of which only 19.25 million tonnes are placed under reserve category, and the rest 371.03 million tonnes, under

resources category. Besides, it has been estimated that the total resources of gold of placer type in the country would be around 26 million tonnes. However, resource augmentation and gold production have not been significant in India. This may require increase in exploration activities with improvements in technology and know-how. According to a report by the Planning Commission, Government of India, the mining sector also requires improved method of narrow-vein-mining for achieving full economic benefits. Introduction of small scale mining culture in the gold industry is also another requirement with adoption of modern gold extraction technology. Cluster mining of small gold deposits may also deserve consideration and should be encouraged. The metallurgical technique for extraction of platinum group of elements from low grade ore is also required to be sourced from developed countries, in order for India to become a producer of platinum. Efforts should be made to increase the production of rough diamonds from India to partly meet the requirement of Indian diamond cutting and polishing industry. Exploration activity in different states is required to be boosted for discovering new economically viable kimberlite / lamporite rocks for indigenous production of diamonds.

Enhancing Visibility through Continuous Participation in International Exhibitions
Continuous participation in international trade shows and jewellery exhibitions is very important for the Indian gems and jewellery industry as such strategy would help in projecting the industry as a player in entire value chain, from cutting, polishing, fabricating of wide variety of plain and stonestudded jewellery. Participation in international exhibitions would also help establish new business links for the Indian gems and jewellery industry, and would also pave the way for the industry to develop further business links to enhance the level of their innovations in designs and technology. This platform would also help in attracting and mobilizing the major buyers of gems and jewellery, internationally, and also provide exhibitors with learning opportunities and exposure to new markets and trends. The recent foreign trade policy has increased the personal jewellery carriage limit to US $ 5 million, from US $ 2 million, and the limit in case of personal carriage, as samples, for export promotion tours, has also been increased from US $ 0.1 million to US $ 1 million. This would also help the industry promote exports, as it will be able to showcase more jewellery in exhibitions abroad.

CONCLUSION
World gems and jewellery industry is on the verge of transformation due to both supply-side and demand-side factors. Some of the recent trends in the global gems and jewellery industry include: fragmentation of rough diamond supply positions; emergence of new mining areas; beneficiation movement in mining countries, and ever-growing raw material prices. At fabrication level, fashion and styles have been changing significantly; the ratio of cost of raw materials to sales has been increasing, squeezing the profit margin of the fabricators. There has been volatility in raw material prices; the global slowdown led to low capacity utilization in this industry bringing down the margins in the jewellery manufacturing. In some countries, including India, some of the processing units have been partially shut down due to slackening demand. As a result, the value chain in the gems and jewellery industry may witness consolidation; only select major players are likely to cope with the trends and sustain the competitive pressures. It is expected that the spike in gold and silver prices might change the consumer preferences, as also impact their demand pattern. 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 gems and jewellery. Further, the consumer awareness and consciousness, generated through the vigilant measures adopted by various national Governments, are expected to drive the demand for branded and hallmarked jewellery. At national level, India has been adopting various strategies to cope with the global trends in gems and jewellery business. World Gold Council and the Indian gems and jewellery industry have jointly introduced international jewellery designing competitions among the Indian artisans to generate awareness about the skills of Indian artisans in the global market, as also to expose Indian artisans to new design developments emerging around the world. There have been initiatives taken by many designing centers to train Indian jewellers in international manufacturing and designing skills. This is expected to enhance demand as well as sales for the Indian gems and jewellery industry. The Gemological Institute of India (GII) and the Gems and Jewellery Export Promotion Council, along with other major industry associations, have established a National Research Centre, which will be engaged in certification, training of students and new entrepreneurs, and initiate market based research.

A R&D centre has also been opened at the premises of Indian Institute of Gems and Jewellery, Jaipur, to provide the requisite research and development support to the industry. Indian gems and jewellery industry is increasingly building its ability to produce full range of sizes and qualities of stones, utilizing not only the lowcost 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. Both the Government and the 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. While several such

measures have been taken, at firm-level, industry-level, and Government- level, there exists still need to strengthen the position of India in the global market place through a concerted strategy, addressing the challenges of raw-material sourcing, technological infusion at processing stage, adoption of dynamism in design and product development, and sustainable market entry approach.

ANNEXURE 1: WORLD GOLD DEMAND

World gold demand 2007 2008 In tonnes Jewellery consumption Industrial & dental Electronics Other industrial Dentistry Identifiable investment Net retail investment Bar hoarding Official coins Medals/imitation coins Other identifiable retail invt ETFs & similar products Total identifiable demand 2404.4 461.6 310.6 93.2 57.8 685.8 432.5 236.5 137 72.6 -13.6 253.3 3551.8 2185.8 435.5 292.7 86.9 55.9 1183.3 862.4 391.8 191.3 69.6 209.7 320.9 3804.6 US $ million Jewellery consumption Industrial & dental Electronics Other industrial Dentistry Identifiable investment Net retail investment Bar hoarding Official coins Medals/imitation coins Other identifiable retail invt ETFs & similar products Total identifiable demand SOURCE: World Gold Council 53,696 10,307 6,938 2,078 1,291 15,293 9,515 5,176 3,020 1,586 -267 5,778 79,296 61,073 12,275 8,270 2,437 1,568 32,486 23,601 10,832 5,280 1,933 5,556 8,885 105,834 13.7 19.1 19.2 17.3 21.5 112.4 148 109.3 74.8 21.9 -2180.9 53.8 33.5 47,063 9,983 6,877 1,888 1,218 21,225 14,761 7,667 3,633 1,438 2,023 6,464 78,271 36,616 8,185 5,380 1,631 1,174 31,465 14,924 3,577 5,349 617 5,381 16,541 76,266 -22.2 -18.0 -21.8 -13.6 -3.6 48.2 1.1 -53.3 47.2 -57.1 166.0 155.9 -2.6 -9.1 -5.7 -5.8 -6.8 -3.3 72.5 99.4 65.7 39.6 -4.1 -1641.9 26.7 7.1 1637.6 345.9 238.2 65.5 42.2 742.7 516.5 268.0 126.9 50.2 71.4 226.2 2726.2 1220.7 273.2 179.3 54.6 39.3 1061.0 497.8 117.0 179.3 20.4 181.1 563.2 2554.9 -25.5 -21.0 -24.7 -16.6 -6.9 42.9 -3.6 -56.3 41.3 -59.4 153.6 149.0 -6.3 % Change Jan-Sept Jan-Sept % Change 2008 2009

108

ANNEXURE 2: PRODUCTION OF DIAMOND IN THE WORLD AND IN INDIA

Countries

2005

2006

2007

% Change 2006 vs. 2005

% Change % Share 2007 vs. 2006

Volume (in thousand carats) Russian Federation Botswana Congo Australia Canada South Africa Angola Namibia Guinea Zimbabwe India World 38,000.99 31,889.77 33,054.99 32,941.06 12,314.03 15,559.53 7,079.12 1,866.32 548.52 248.26 60.12 38,360.81 34,293.40 28,990.24 29,940.45 13,277.70 14,934.70 9,175.06 2,402.47 473.86 1,046.02 10.27 38,291.20 33,638.00 28,452.49 18,538.64 17,007.85 15,210.83 9,701.71 2,266.09 1,018.72 695.01 0.00 0.9 7.5 -12.3 -9.1 7.8 -4.0 29.6 28.7 -13.6 321.3 -82.9 -0.4 -0.2 -1.9 -1.9 -38.1 28.1 1.8 5.7 -5.7 115.0 -33.6 0.0 -4.4 22.8 20.0 16.9 11.0 10.1 9.0 5.8 1.3 0.6 0.4 0.0 100.0

176,701.08 176,030.23 168,198.85 Value (US $ million)

Botswana Russian Federation Canada South Africa Angola Namibia Congo Australia Lesotho Sierra Leone India World

2,870.07 2,531.30 1,453.69 1,319.08 1,089.17 696.70 615.43 547.08 64.30 141.94 9.78 11,605.93

3,207.57 2,574.28 1,409.65 1,361.81 1,132.51 900.97 431.93 559.57 167.09 125.30 1.76 12,129.03

2,960.14 2,625.10 1,657.01 1,417.33 1,271.95 715.43 364.78 364.62 328.14 141.56 0.00 12,106.55

11.8 1.7 -3.0 3.2 4.0 29.3 -29.8 2.3 159.9 -11.7 -82.0 4.5

-7.7 2.0 17.5 4.1 12.3 -20.6 -15.5 -34.8 96.4 13.0 0.0 -0.2

24.5 21.7 13.7 11.7 10.5 5.9 3.0 3.0 2.7 1.2 0.0 100.0

SOURCE: World Diamond Council

109

ANNEXURE 3: WORLD EXPORTS AND IMPORTS (2007) OF SELECT PRECIOUS METALS, GEMS AND JEWELLERY
Exporters Countries Gold, (Including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form (7108) USA Australia Canada Hong Kong Peru World 11792.11 9395.53 5482.77 4349.27 4178.20 59216.05 19.9 15.9 9.3 7.3 7.1 100.0 Switzerland UK USA India South Africa World 15231.41 11627.47 4963.01 4430.99 2605.44 59216.05 25.7 19.6 8.4 7.5 4.4 100.0 US $ Million % Share in world exports Countries Importers US $ Million % Share in world imports

Diamonds, Whether or not worked, but not mounted or set (7102) Israel Belgium India USA UK World 18416.94 18308.22 13365.67 11911.36 8514.50 93373.85 19.7 19.6 14.3 12.8 9.1 100.0 USA Belgium India Israel Hong Kong World 16514.49 15126.96 12245.43 12178.19 12056.49 93373.85 17.7 16.2 13.1 13.0 12.9 100.0

Precious stones (Other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungrated precious stones (other than diamonds) and semiprecious stones, unit (7103) Hong Kong USA Switzerland Thailand India World 523.26 403.02 386.35 371.29 275.15 3053.59 17.1 13.2 12.7 12.2 9.0 100.0 USA Hong Kong Switzerland Thailand India World 808.78 440.29 279.64 220.59 191.55 3053.59 26.5 14.4 9.2 7.2 6.3 100.0 (Contd...)

110

(Contd...) Exporters Countries Pearls, Natural of cultured, whether or not worked or graded but not strung, mounted or set; ungraded pearls, natural or cultured, temporarily strung for convenience or transport (7101) Hong Kong Japan China Australia French Polynesia World 482.92 296.46 208.37 205.67 106.72 1599.66 30.2 18.5 13.0 12.9 6.7 100.0 Hong Kong Japan USA Germany Australia World 531.49 292.42 253.24 69.90 63.43 1599.66 33.2 18.3 15.8 4.4 4.0 100.0 US $ Million % Share in world exports Countries Importers US $ Million % Share in world imports

Platinum, Unwrought or in semi-manufactured forms, or in powder form (7110) South Africa UK USA Germany Switzerland World 9823.07 4056.44 3900.05 2985.95 2948.75 30215.23 32.5 13.4 12.9 9.9 9.8 100.0 USA Japan Germany UK Switzerland World 7358.67 5816.35 3848.76 2607.59 2195.93 30215.23 24.4 19.2 12.7 8.6 7.3 100.0

Silver (Including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form (7106) China Mexico Hong Kong Germany UK World 2017.17 1418.22 1103.16 1029.77 872.88 12717.68 15.9 11.2 8.7 8.1 6.9 100.0 USA Hong Kong UK Germany India World 2309.13 1992.55 1215.49 956.56 819.73 12717.68 18.2 15.7 9.6 7.5 6.4 100.0

Articles of jewellery And parts thereof, of precious metal or of metal clad with precious metal (7113) Italy India USA Hong Kong Switzerland World 6044.74 5060.02 4470.03 4201.69 3907.66 42554.14 14.2 11.9 10.5 9.9 9.2 100.0 USA UAE Hong Kong Switzerland UK World 10086.29 5829.26 3872.93 2842.76 2714.45 42554.14 23.7 13.7 9.1 6.7 6.4 100.0 (Contd...)

111

(Contd...) Exporters Countries US $ Million % Share in world exports Countries Importers US $ Million % Share in world imports

Articles of natural and cultured pearls precious or semi-precious stones (7116) USA Hong Kong China Switzerland Japan World 1486.92 124.33 105.55 39.02 25.10 1945.99 76.4 6.4 5.4 2.0 1.3 100.0 Hong Kong Switzerland UK Netherlands Antilles Japan World 304.78 289.94 176.08 174.26 167.93 1945.99 15.7 14.9 9.0 9.0 8.6 100.0

Imitation Jewellery Of base metal whether or not plated with precious metal (7117) Hong Kong China Austria France Italy World 1089.50 855.00 397.87 317.04 280.74 4967.03 21.9 17.2 8.0 6.4 5.7 100.0 USA Germany France UK Italy World 974.73 365.01 364.99 316.89 309.79 4967.03 19.6 7.3 7.3 6.4 6.2 100.0

SOURCE: UN Comtrade

112

ANNEXURE 4: INDIA’S MAJOR EXPORT DESTINATIONS AND IMPORT SOURCE COUNTRIES OF PRECIOUS METALS, GEMS AND JEWELLERY (2008-09)

Items (HS Code) GOLD

Exporter

% Share

Importer

% Share

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form UAE USA UK Singapore Hong Kong 72.2 11.9 11.4 2.2 1.4 Switzerland Australia UAE South Africa USA 44.6 19.7 19.6 10.4 2.3

7108

Jewellery of gold set with diamond UAE USA Hong Kong China UK 36.5 30.7 9.1 7.0 5.0 UAE USA Hong Kong UK Singapore 49.6 25.8 9.4 2.8 1.6

71131930

Jewellery of gold set with pearls USA UAE Hong Kong UK Singapore 35.9 31.8 6.2 5.4 2.7 Australia USA UAE Hong Kong UK 47.2 30.5 13.5 4.8 2.3

71131920

Jewellery of gold set with precious and semi precious stones other than diamonds USA Hong Kong UK Italy Germany 44.1 34.4 7.9 3.9 1.5 UAE Thailand USA Hong Kong Switzerland 35.3 22.7 21.0 4.1 1.7 (Contd...)

71131940

113

(Contd...) Items (HS Code) Exporter % Share Importer % Share

Jewellery of gold unset UAE USA UK Hong Kong Germany 76.7 6.3 2.7 1.8 1.2 USA UAE Hong Kong Japan Kuwait 32.0 25.4 8.8 5.7 3.6

71131910

DIAMONDS Hong Kong UAE USA Belgium Israel 30.1 22.5 17.6 11.4 5.0 Hong Kong UAE Belgium UK USA 27.6 25.6 24.4 6.4 4.8

7102

SILVER Silver (including silver plated with gold or platinum), unwrought or in semi- manufactured forms, or in powder form Switzerland USA UK Iran Japan 29.7 21.3 13.8 11.5 9.3 UK China Russia Switzerland Hong Kong 37.8 15.4 11.8 11.6 3.8

7106

Of silver, whether or not plated or clad with other precious metal: USA China UAE Hong Kong UK 38.1 12.6 10.4 7.1 5.8 USA Italy UAE Hong Kong Thailand 35.2 17.6 12.4 12.3 6.1

711311

PRECIOUS STONES Precious stones (other than diamonds) and semiprecious stones, whether or not worked or graded but not strung, mounted or set USA Hong Kong Thailand Japan Singapore 30.5 22.7 13.9 5.8 5.0 Thailand Hong Kong Zambia USA Brazil 23.3 19.1 13.9 12.2 8.8

7103

Articles of precious or semi precious stones (natural synthetic/reconstructed) USA Germany Switzerland Argentina Canada 38.8 23.9 9.0 6.0 4.5 Hong Kong Sri Lanka Germany USA Thailand 27.8 22.2 16.7 11.1 11.1 (Contd...)

71162000

114

(Contd...) Items (HS Code) PEARLS USA UAE Austria Hong Kong Japan 38.6 14.1 12.0 10.8 7.5 Japan China Hong Kong Thailand USA 34.5 31.9 21.1 5.7 2.0 Exporter % Share Importer % Share

7101

PLATINUM Platinum, unwrought or in semi- manufactured form, or in powder form UAE USA UK Germany Switzerland 49.1 8.2 8.1 7.9 3.0 UAE South Africa Switzerland UK Germany 78.7 15.3 2.7 1.9 0.8

7110

Jewellery of platinum group metals unset UAE Australia Germany UK Hong Kong SOURCE: DGCIS 22.4 21.4 9.9 9.4 3.6 Thailand Belgium Japan USA UK 68.7 13.3 9.6 7.2 1.2

115

ANNEXURE 5: MEMBERS OF KIMBERLEY PROCESS

The following nations with the exception of those indicated with an asterisk (*), meet the minimum requirements of the Kimberley Process Certification Scheme:
Members of Kimberley Process Angola Armenia Canada Central African Republic China Congo, Democratic Republic of Cote d’Ivoire** Croatia European Community Ghana Guinea Korea Republic Lao, Democratic Republic of Lebanon Lesotho Mexico Namibia Singapore South Africa Sri Lanka Turkey Ukraine

Australia Bangladesh

Guyana India

New Zealand Norway

UAE

Switzerland USA

Belarus Botswana Brazil

Indonesia Israel Japan

Liberia Malaysia Mauritius

Republic of Congo

Tanzania

Venezuela* Vietnam Zimbabwe

Russian Thailand Federation Sierra Leone Togo

Note: *Venezuela has voluntarily suspended exports and imports of rough diamonds until further notice ** Cote d’Ivoire is currently under UN Sanctions and is not trading in rough diamonds SOURCE: Kimberley Process

116

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