Chapter 3 Trends, Growth and Direction of Diamond Trade of India

3.1. Meaning of Trade:
In simple terms, trade is the transfer of ownership of goods and services from one person or entity to another by getting something in exchange from the buyer. It is a branch of commerce which is concerned with the exchange of goods and services. It may be a barter exchange, i.e., exchange of goods for goods or monetary trade where money is used as a medium of exchange. In prehistoric times, trade was in crude form with goods being exchanged for goods. This is known as barter exchange. Barter exchange suffered from number drawbacks. Some of these drawbacks were double coincidence of wants, indivisibility of certain goods, absence of common measure of value and difficulty in storage of wealth. To solve difficulty of barter, money was evolved. Initially, precious stones and metals were used as a medium of exchange. The evolution of money gave boost to trade and commerce.

3.2. Classification of Trade:
Trade may be classified on the basis of scope of its territorial boundaries as under: (a) Internal Trade: Trade between two regions of the same country is known as internal trade. It is also known as domestic trade or home trade. It is confined to the national boundaries of a nation. For example, trade between Gujarat and Rajasthan. (b) External Trade: Trade between two countries with different socioeconomic and political environment is referred to as external trade. It is also known as foreign trade or international trade. For example, trade between India and UK. External trade may be further classified as under: Export: Export means selling goods to the customers based in a foreign territory, outside the national boundaries of a country. For example, when goods are sold from India to Pakistan, it is an export

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trade. Export is the best method of expansion when additional capacity exists in the business organisation. Import: Import means purchasing goods from a seller based in a foreign territory, i.e., outside the national boundaries of a country. For example, when goods are purchased by India from the U.S.A., it is an import trade for India. The government discourages imports, unless essential because they lead to outflow of foreign currency and depletion in foreign exchange reserves of the nation. Entrepot Trade: Trade that involves re-exporting of imported goods is referred to as entrepot trade. It is also known as reexport trade. For example, an Indian trader may buy goods from Bangladesh and then sell to China. Ports which are conveniently located act as the distribution centres for wide areas. For example, ports of Singapore and Hong Kong. Internal trade is important from national point of view while external trade is significant from international point of view.

3.3. External Trade of India:
India is looked upon as a country with immense resources, spread through its length and breadth. India was famed for her fabulous wealth ever since the ancient times till the establishment of the British Empire. Indian goods were exported to far off places which brought great wealth to Indian economy. However, Mughal rulers and later the British plundered this wealth which made Indian economy solely dependent upon imports for most of its requirements. By the time India gained Independence from the British in 1947, the economy has completely dependent on foreign sources for the supply of its requirements. There were hardly any manufacturing facilities to suffice the needs

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Columbia University Press. 1 Imports were regulated through a licensing system without any policy prescriptions. The export of goods from India are broadly classified into the following four categories: Fig. J.N. in the post-independence period. 3. The foreign exchange reserve crisis of 1991 made it necessary for India to adopt policy of trade liberalisation. New York. 4 . “Foreign Trade Regimes and Economic Development: India ”. etc. Licensing was scrapped and a number of trade reforms were introduced to give boost to India’s export trade.of the growing Indian population. (1975). the trade regime was based on a complex system of licensing. both imports as well as exports. India’s trade policy heavily relied on quotas rather than on tariffs. All these factors led to poor development of India’s external trade. gems and jewellery sector. and Srinivasan T. the main objective of the India’s external trade policy was to protect its market from foreign competition. This had significant impact on several sectors of Indian economy such as IT sector.1 Composition of India’s Exports 1 Bhagwati. capital goods sector.4 Trends in India’s Export and Import since Independence: India’s foreign trade can be studies with reference to Export and Import: (1) Export: Export means sale of goods or services by the resident of one country to the resident of another country. In post-independence period. In the late 1970s and early 1980s. 3.N.

2% of GDP in the year 1971-72 and then to gradually fall to 3. It 5 . India’s export and import trade remained sluggish in the post-independence period with import rising by 4754 % between the periods 1950-51 to 1990-91. The import of goods in India are broadly classified into the following four categories: Fig.4% of GDP at the end of 2000-2001 which gradually increased due to liberalisation of imports in the subsequent period to reach peak of 10. India’s exports and imports experienced a significant growth in the postliberalisation period.1% in the year 1991-92. exports rising by only 4446% during the same period. exports rose by 3410% and imports rose by 3797%.(2) Import: Import means purchase of goods or services by the resident of one country from the resident of another country. Due to the policy of protectionism. 890 crore resulting into trade deficits of Rs.2 Composition of India’s Imports The following table analyses the export and import trade of India since independence. It rose to a maximum of 4. Some of the sectors in India such as IT sector and gems and jewellery sector became the drivers of export-led growth of the Indian economy.1 that the total exports of India stood at Rs. It can be seen in the table 2. 3. which was 1. Within a span of two decades between 1990-91 to 20102011. With imports rising at proportionately higher rate than exports. Trade balance eased at 1. India suffered from adverse trade balance. 716 crore during the period 1951-52 while imports stood at Rs. 174 crore.1% of GDP in the year 2008-2009.8% of GDP in the year 1981-82 and 2.7% of the GDP of the country.

818 1.5% of GDP in the year 2009-2010.467 – 174 – 480 – 217 – 5838 – 10. – Not available.649 crore in the year 2010-2011. 1. Source: Economic Survey.198 230. 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1951-52 1961-62 1971-72 1981-82 1991-92 2000-01 2010-11 E xports (Rs.608 6711 32.553 203. C r.) India’s Exports.873 1.marginally reduced to 8. Imports. 3.5 per cent during 2000-01 to 2008-09.6 per cent as a 6 .4 per cent in the 1990s. 203. 2010‐11.549 43.7 3.571 1. p. Trade Balance and Share in GDP Analysis of the Exports: It can be seen that India’s exports have registered a five-to-six fold increase in the last decade from Rs.8 2.A. Imports.649 890 1122 1.7 3.1 Im port (Rs. it increased to 19.1 India’s Exports. C r.142.4 N. Crores) Imports (Rs.571 crore in the year 2000-01 to Rs. Table No.1 1.645 – 27. The resilience of India’s trade can be seen from the fact that its export and import growth.142.A. which fell to 0.7 4.A-80.825 12. Government of India. 3.) Fig. No. Trade Balance and Share in GDP Period Exports (Rs.683.302 – 540. While the compound annual growth rates (CAGR) of India’s exports (in US dollar terms) was 8. Crores) Trade Balance Trade balance as a % of GDP 1951-52 1961-62 1971-72 1981-82 1991-92 2000-2001 2010-2011 N. 716 642 1.

electronics 21. After that growth decelerated to 41. In November 2011. etc. India’s exports witnessed a high growth of 40.1 per cent in 2010-11. but surpassed pre-crisis trends in export growth rate unlike many other developing and even developed countries.6 per cent. registering a growth of 23.4 per cent as per WTO).1 per cent respectively. it was positive but low at 6.5 per cent.5 per cent during 2011-12 (AprilJanuary). Its ranking in the leading exporters improved from 31 in the year 2000 to 20 in the year 2010. 1. However.1 per cent.5 per cent. Cumulative exports were at US $242. gems and jewellery 38. export growth was negative at – 0.5 per cent in 2010 (1. and drugs 21.873 crore in the year 2000-2001 to Rs. September. engineering 21. Exports registered a high growth of 61. Analysis of the Imports: India’s imports registered a seven fold increase in the last decade from Rs.467 crore in the year 2010-2011.7 per cent and 10. and 18.8 billion. since October 2011 there has been a deceleration in export growth as a result of the crisis originating in the periphery of the euro zone area and spreading to the core economies resulting in a now evident mild recession in the euro area. cotton fabrics made ups. 13 per cent.5 per cent.1 per cent in July 2011. India not only reached pre-crisis levels in exports.5 per cent but in December 2011 and January 2012.7 per cent in 2000 to 1.6 per cent.7 per cent. During the first half of 2011-12.683.2 per cent. During April-December 2011. 25. and October 2011 respectively.1 per cent in August.result of the shock from the 2008 global economic crisis. India’s share in global exports also increased from 0. readymade garments 23. the export sectors that have done well are petroleum and oil products registering a growth of 55 per cent. 7 . rebounded to 35. 230.

India is leading exporter of gems and jewellery.8 per cent in 2000 to 2. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. The volume index witnessed a growth of 10. fertilizers and chemicals.2 per cent mainly due to growth in unit values of crude materials.1 per cent during 2000-01 to 2008-09. The increase in growth of imports in rupee terms in 2010-11 was due to growth in both volume and unit value indices. Other imported products are: machinery.4 per cent in the 1990s. leather manufactures and services. lubricants and related materials (17. Analysis of Trade Deficit: India has been facing the problem of trade deficit since independence due to excessive imports in relation to exports. inedible. beverages and tobacco (31.1 per cent in 2010-11.9 per cent). textiles. India’s share in global imports also increased from 0.While the compound annual growth rates (CAGR) of India’s imports (in US dollar terms) were 8. except fuels (23 per cent).1 per cent as per WTO). and machinery and transport equipment (10. owing to subdued 8 . engineering goods. and chemicals and related products (8.1 per cent). it increased to 25. India’s trade deficit widened considerably during April-February 2011-12 compared with the corresponding period of the previous year. India’s imports that had fell to – 5 per cent in 2009-10 as a result of the shock from the 2008 global economic crisis. rebounded to 28. mineral fuels. gems. due to the high growth of manufactured goods classified chiefly by materials (56 per cent).2 per cent in 2010 (2.2 per cent in 2010-11. Its ranking in the leading importers improved from 26 in the year 2000 to 13 in the year 2010.1 per cent).1 per cent). chemicals. The unit value index of imports registered a growth of 11.

Thus. were to be permitted only if the firm in question certified to the government that they were ‘essential’ (as inputs or equipment for production). J. be expected in imports of gold following the increase in import duty announced in the Union Budget for 2012-13.2 Imports were regulated through a licensing system without any policy prescriptions. the imports. Almost all imports were subject to discretionary import licensing or were ‘canalized’ by the government monopoly trading organizations. and (2) The principle of ‘indigenous non-availability’. A slight moderation may.N. New York. 9 . The only exceptions were commodities listed in 2 Bhagwati. and Srinivasan T. inadequate pass through of higher global oil prices and the relatively price inelastic nature of some of India’s imports. In the late 1970s and early 1980s. Even the growth in non-oil non-gold imports remained sizeable despite signs of a slowdown in the domestic economy. viz.N. however.. import licenses allocated reflect two major criteria: (1) The principle of ‘essentiality’. Notwithstanding the rupee depreciation. Columbia University Press. The composition of Indian export has gradually changed from primary products to manufactured goods and finally to services. the trade deficit increased primarily due to a slowdown in global demand.export growth coupled with high imports. However. India’s trade deficit may remain high in near future.5 Composition of India’s Foreign Trade: Over the last six decades. ‘Foreign Trade Regimes and Economic Development: India’. 3. in terms of both magnitude and composition. Given the adverse global environment and elevated global crude oil prices. (1975). the commodity composition of Indian exports has changed in the face of structural changes in the Indian economy. the trade regime was based on a complex system of licensing. India’s trade policy heavily relied on quotas rather than on tariffs. gold and silver.

3% of total exports in the year 1960-61 to merely 8. These trends can be seen in the following table. thereafter downward trend was set in and it was 68.9% in the year 2010-2011. gems and jewellery. Table 3.5% of total exports in the year 2010-11.1% of the total exports in the year 1960-61 to 2. pharmaceuticals. In 1960-61 the share of manufactured products increased to 45. Structural Changes in Exports: In the 1950s.2% in the year 1960-61 to 16.9 per cent and reached its peak in 2000-01 to 72 per cent. The share of these products was 32.3 per cent and prior to economic reforms in 1990-91 it went up to 72. machinery.2 Composition of India’s Exports since Independence (%) 10 .3 per cent of the total exports in 2010-11. electronic goods and clothing products increased. Share of chemicals.6% of total exports in the year 20002001 to fall marginally at 14. The import of consumer goods was banned (except those that were considered essential and could only be imported by the designated government canalising agencies). The share of ore and minerals also fell from 8. The share of agriculture and allied commodity exports fell steeply from 44. the share of manufactures of metals declined in total exports but enhanced its share in world exports.9 per cent in the year 2010-11.75 per cent.6% in the year 2000-01 and finally rose to 4. Crude and petroleum products entered in substantial proportions in 2000-01 and reached 17.the Open General License (OGL) category. iron and steel. dyes. both in total exports and in world exports. transport equipment. The share of gems and jewellery has increased considerably in India’s exports from mere 0. gunny bags and gunny clothes. agricultural and allied commodities. including farm processed products dominated the export basket. These were basically agriculture-based products. The share of the manufactured goods in the total exports was nearly 39 per cent in 1950-51 which composed of cotton piece goods.2% in the year 2010-11. However.

1 2.5 2.0 2010-2011 3.0 2010-2011 8. namely food and allied products and fertilizers.4 39.3 8.0 • Gold and silver II.2 (0.0 2000-2001 2.1 44.0 11.3 1.5 4.7 31.2 15.2 Other unclassified Items 1.0 100.3 (8.7) (N. Total (Bulk Item) Capital goods Others: • Pearls & precious stones 1960-61 19.A. board and pulp I.6 Crude and Petroleum Products 1.2 68.1 6.1 2.2 7.0 (9.0 1990-91 2. ores and metals.2 1.6 78. Its contribution is less than 18 per cent of domestic consumption.0 50.0 Source: Compiled from various issues of Economic Survey. Table 3.5 100.6 1.) 50. The crude oil production has increased in India after 2001-02.2 31.9 1. The main reason for the rise in value of bulk items in India’s import basket is the rise in international oil prices.6 50.0 2.2 0. the share of bulk items in total imports accounted for 50 per cent which fell down to 44. Bulk items still comprise the main proportion of the national import bill.5 4.0 100. fertilizers and paper. In 1960-61.3 Composition of India’s Imports since Independence (%) Commodity Groups Food and allied products Fuel Ores and metals Fertilizers Paper. The liberalization episode did not dramatically alter the bulk imports although there was decline in other items of imports. Total (Non-bulk Item) (I + II) Total Imports 11 . The product groups such as food and allied products. Many of the restricted and canalized items were removed from quantitative restriction lists.4 0.7 Total 100.0 2000-2001 13.3 1.0 11.1 2.0 31.6 53.1 33.9 14.0 100.0 Gems and Jewellery 0. Structural Changes in Imports: India’s imports were broadly classified into bulk and non-bulk items.6) (N.6) (9.5 13. paper board and pulp fall under bulk category and rest of the items in non-bulk category.1 45.8 18.5 in the year 2010-2011.1) 46.5 24.0 4.2 14.3 1990-91 19. fuel.) 55.4 (7.4 73.7) (8.2) 61.9 4.A.5% in the year 1990-91. It further fell down to 39% and rose to 52.9 17.2 100.2 33.Commodity Groups Agriculture and Allied Products Ores and Minerals Manufactured Goods 1960-61 44. Government of India.2 16.0 100.5 100.2 16.3 25.

27 per cent was recorded.59 million as compared to US$ 9669.91 per cent. Middle East and Asia. The gems and jewellery industry is very much fascinating being traditionally glamorous and artistically modern. Export of Gold jewellery also grew in 2010-11. India. Ranked among the fastest growing sectors. it is also a leading sector for foreign exchange generation. A growth of 33. cover wide activities such as raw material procurement from far flung Africa. (c) Coloured Gemstones: Coloured gemstones include all other forms of 12 . Far East. Government of India. India mainly imports rough diamonds from other countries and processes and re-export them. Gold jewellery enjoys the leading position in most markets across the world. the export of cut and polished diamonds was US$ 28251. In 2010-11. The Gems and Jewellery trade of India basically include the following three commodities in its ambit: (a) Diamonds: Diamonds is the main constituents of the Gems and Jewellery trade of India.92 million as compared US$ 18237.Source: Compiled from various issues of Economic Survey. It employees and engages millions. and in many ways forms the backbone of the precious jewellery industry. Europe. the domestic demand for cut and polished diamond has increased. (b) Gold Jewellery: Gold has always been the jewellers' favourite metal given its intrinsic lustre and ease of fabrication. Australia. In recent years.10 million in 2009-10.6 Export of Gems and Jewellery from India: Gems and Jewellery has become an important component of India’s foreign trade. 3. registering US$ 12885. It is an important emerging sector in the Indian Economy. Canada and Russia.56 million during 2009-2010. and transforming these into products in demand with the skills available in China. Italy and Turkey for the sophisticated markets in the USA. recording a growth of 54.

Y. The exports from gems and jewellery sector grew from just US$ 28 million in 1966-67. 2001-2002 to F. is by far the major supplier. Among the three components of gems and jewellery exports from India. The industry is highly fragmented making it difficult to track supply. representing a 3 per cent of total merchandise exports of the country.Y.1. The UAE (44 percent). precious gemstones such as emeralds. 2011-2012.84 billion in F. when the Gem and Jewellery Export Promotion Council (GJEPC) was established. to US$ 42. The industry is a truly global one. demand and global trade. which accounts for 21. Export of cut and polished diamonds constituted 66% of the total exports from Gems and Jewellery sector during the financial year 2010-2011. 2011-12. making it a significant foreign exchange earner for the country. showing a growth of 9.Y. while Belgium.1 and figure no. (A) Trends in Exports of Gems and Jewellery vis-a-vis Total Merchandise Exports from India: Gems and jewellery and diamonds have been a part of the Indian civilisation since its recorded history.68 per cent. rubies and tanzanite and semi-precious gemstones like pearls.78 million in 2009-10.jewellery. The significance of the gems and jewellery industry in the Indian economic scenario is a development of the last four decades. with both suppliers and buyers from many different countries. contributing 15 per cent of total exports. Hong Kong (25 percent) and USA (12 percent) are among the major buyers.54 million in 2010-11 as compared to US$ 286. Gem and jewellery sector is one of the 13 .55 percent of all imports of raw materials. The table no. sapphires. 1.1 analyses the share of gems and jewellery sector in total merchandise exports of India during period ranging from F. Export of coloured gemstones was registered at US$ 314. The industry has registered a remarkable growth over the last four decades. cut and polished diamonds constitute a major segment.

67% 17. 2005-2006.07% 15.41% 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 (P) Source: Compiled from the annual reports of GJEPC. During the F.27% 16.64% and further to 12. Table No. 2001-2002 to 2011-2012.67% of the total merchandise exports of the country.47% 15.Y. The export of gems and jewellery sector stood at US$ 7306 million in the F.56% 16. 1.Y.1 Proportion of Gems and Jewellery Exports in the Total Merchandise Exports of India (2001-2012) Year Export of Gems & Jewellery (US$ in Million) 7306 9030 10573 13762 15529 15983 19692 28411 29081 40508 46957 Total Merchandise Export (US$ in Million) 43827 52719 63843 83536 103091 126414 163132 185295 178751 251136 304624 % Share in Total Exports 16.Y. The gems and jewellery sector contributed almost 16. This proportion has remained more or less same till the F. 14 . the share of gems and jewellery sector in the total merchandise export of the country fell to 12.64% 12.33% 16.07% in the F.06% 12.Y. This was due to failure of major banks in the US and the debt crisis in the European economy.13% 16. 2007-2008. 2006-2007.leading foreign exchange earners of the country.13% 15. 2001-2002 in the total merchandise export from India which stood at US$ 43.827 million during the same period.

2010-2011 and 15.1 Proportion of Gems and Jewellery Exports in the Total Merchandise Exports of India (2001-2012) The exports from gems and jewellery sector again bounced back in the F.Y.27% in the F. 16.41% in the year 20112012. 1. 1. 2009-2010. thus contributing 15. the export of gems and jewellery not only retained but strengthened its position to contribute 16. In the following years. No.33% of the total merchandise export of the country.Y.2 and figure 1. 2008-2009 to reach US$ 28411 as against the total merchandise export of India which stood at US$ 185295.350000 300000 250000 200000 150000 100000 50000 0 43827 52719 7306 9030 63843 83536 103091 126414 163132 185295 178751 251136 304624 28411 29081 10573 13762 15529 15983 19692 40508 46957 2001-022002-032003-042004-052005-062006-072007-082008-092009-102010-112011-12 (P) Export of Gems and Jewellery Total Merchandise Export Fig.2 analyses the average annual growth rate of exports of gems and jewellery sector from India vis-a-vis average annual growth rate of total 15 .13% in the F.Y. (B) Average Annual Growth in the Exports of Gems and Jewellery visa-vis Total Merchandise Exports from India: (2001-2012) Table no. Observation: The share of gems and jewellery sector exports in the total exports from India has remained more or less stable at 15% during last decade with some variations in between 2006-2008.

20 44.Y.63 29.30 Source: Compiled from the annual reports of GJEPC.28 2.05 13.Y. the export of gems and jewellery has increased 5.59 – 3. 16 . Table No. 2001-2002 to 2011-2012. During last decade.41 22.93 23.59 16. Total Merchandise Export (US$ in Million) % Growth over Previous F.29 21.36 43827 52719 63843 83536 103091 126414 163132 185295 178751 20.92 304624 21. 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 7306 9030 10573 13762 15529 15983 19692 28411 29081 23.5 times while that of total merchandise exports from India increased by 6 times.50 2011-2012 (P) 46957 15. 1.56 16.85 23.06 2.merchandise exports from India.30 251136 40.47 15.53 2010-2011 40508 39.10 30.2 Average Annual Growth in the Exports of Gems and Jewellery vis-a-vis Total Merchandise Exports of India (2001-2012) Year Export of Gems & Jewellery (US$ in Million) % Growth over Previous F. It can be seen that the export of gems and jewellery from India has grown consistently over last decade at variable rate.

50 45 40 35 30 25 20 15 10 23.59 20.29 30.85 23.41 16.47 15.06 22.63 29.05 23.2

44.28 40.5 39.3

21.1 16.56

21.3 13.59 15.92

) % ( R h t w o g r e v l a u n A

5 0

2.93 0

2.36 0

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (P)

Y ears
Average Annual Growth Rate of Gems and Jewellery Exports Average Annual growth Rate of Total Merchandise Exports

Fig. No. 1.2 Average Annual Growth in the Exports of Gems and Jewellery visa-vis Total Merchandise Exports from India: (2001-2012)

During 2002-2003, the export of gems and jewellery has increased by 23.59% over its previous year which is more that the annual average increase in merchandise exports of India which was 20.29% during the same period. During three years from 2003-2004 to 2005-2006, the exports of gems and jewellery has increased at a constant rate of 16% p.a., as against total merchandise exports at approximately 25% p.a. In the year 2006-2007, average annual growth rate of export of gems and jewellery sector fell to mere 2.93%, although the annual growth rate of total merchandise exports sustained at 23%. The reasons for this sharp fall in average annual growth rate of gems and jewellery sector was due to failure of some reputed companies and banks in the US and reports of debt crisis in European economy. In the year 2007-2008, the annual average growth rate of exports of gems

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and jewellery sector revived at 23.20% and total merchandise exports at 29%. In 2008-2009, although the total merchandise exports from India fell drastically at 13.59%, export of gems and jewellery sector jumped up by 44.28%. In 20092010, total merchandise exports grew negatively by 3.53% but export of gems and jewellery sector managed to grow by 2.36%. The impact of crisis in USA and the European economy can be clearly seen on both total exports as well as export of gems and jewellery sector during this period. However, the revival package announced by the respective governments and the efforts of the Indian government to revive exports led to revival to exports in 2010-2011, with gems and jewellery export rising by 39.30% and total merchandise export rose by almost same rate at 40.50%. In the F.Y. 2011-2012, the average annual growth rates of gems and jewellery exports and total merchandise exports of India stabilised at 16% and 21% respectively.

(C) Correlation between Average Annual Growth in the Exports of Gems and Jewellery vis-a-vis Total Merchandise Exports from India: (2001-2012)
X = Average Annual growth Rate of Export of Gems and Jewellery Sector Y = Average Annual growth Rate of Total Merchandise Exports from India Table No. 1.3 Correlation between Average Annual Growth in the Exports of Gems and Jewellery vis-a-vis Total Merchandise Exports of India (2001-2012)
Year % Growth over Previous F.Y.* (X) 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 24 17 17 15 3 23 44 2 39 % Growth over Previous F.Y.* (Y) 20 21 31 23 23 29 14 –4 41 480 357 527 345 69 667 616 –8 1599 576 289 289 225 9 529 1936 4 1521 400 441 961 529 529 841 196 16 1681 XY X2 Y2

18

2011-2012

16

21 219

336 4988

256 5634

441 6035

(P) Total 200 *rounded off to nearest unit.

Source: Compiled from the annual reports of GJEPC, 2001-2002 to 2011-2012.

ΣXY −

Karl Pearson’s Coefficient of Correlation

=
ΣX 2 −

ΣXΣY N

(ΣX ) 2 (ΣY ) 2 ΣY 2 − N N 200 X 219 10

4988 −

=

( 200) 2 ( 219)2 5634 − 6035 − 10 10
4988 − 4380 40.4228 X 35.1980 608 1422.8017

= =

= 0.4273

Interpretation of the results: It can be concluded that there is a weak positive correlation between average annual growth rate of export of gems and jewellery and average annual growth rate of total merchandise exports from India. Observation: It is observed in the above analysis that the average annual growth rate of export of gems and jewellery from India is independent of the average annual growth rate of merchandise exports. This is clearly reflected in the years of the US and the European financial crisis.

3.7 Components of Export of Gems and Jewellery from India during 2001-02 to 2011-2012:
The gems and jewellery sector consists of export of the following 10 items in its ambit: (1) Cut and polished diamonds.

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Therefore. (8) Sales of above items to foreign tourist. (7) Costume fashion jewellery. (3) Gold jewellery. (9) Export of Rough diamonds. (6) Synthetic stones.(2) Coloured gem stones. coloured gem stones. Table 1. cut and polished diamonds. (10)Rough stones and pearls. the researcher has considered the above four items in his analysis. gold jewellery and rough diamonds are the major contributors.3 Components of Export of Gems and Jewellery from India during 2001-02 to 20112012 (in US$ in Million) Cut & Coloured Gold Rough Polished Gem Stones Jewellery Diamonds Diamonds 2001-2002 5982 183 1169 142 2002-2003 7105 192 1512 241 2003-2004 8603 178 2666 533 2004-2005 11163 193 3784 357 2005-2006 11831 234 3882 566 2006-2007 10910 247 5209 565 2007-2008 14205 276 5562 567 2008-2009 14804 261 8746 776 2009-2010 18244 287 9679 744 2010-2011 28221 315 12702 1137 2011-2012 (P) 23330 343 16517 1773 *Total export includes export of all the constituents of gems and jewellery sector. Year Total Exports* 7569 9162 12112 15658 16701 17159 20921 24894 29442 43048 46957 20 . Among these. (4) Pearls. (5) Silver jewellery.

Cut and polished diamonds. the researcher has selected analytical study of diamond trade of India under the title “Diamond Trade of India”.Figure No.3 analyse the export of gems and jewellery sector from India during the period from 2001-02 to 2011-2012. 1.3 and figure no.1 An Overview of Indian Diamond Industry: From ancient times.3 Major Components of Gems and Jewellery Exports from India (2001-2012) The table no. 4. Among these. 1. Observation: It is observed in the above analysis that the cut and polished diamonds constitute major parts of the gems and jewellery export of India. gold jewellery and rough diamonds are the four major components of export basket of gems and jewellery sector. coloured gem stones. Cut and polished diamonds consisted of more than 50% of the total export of gems and jewellery sector from India. Considering the major contribution of the cut and polished diamonds in the total exports from the gems and jewellery sector. 1. India is well known in the world as the birthplace of 21 . the export of cut and polished diamonds majorly contribute to total export of the sector.

the USA. India leads the globe in diamond manufacturing with 60% share in value. Nassak. of which Surat and Navsari. Indian diamond trade mainly consists of import trade whereby rough diamonds are imported into the country mainly for the purpose of cutting and polishing and after processing they are re-exported. Nine out of ten diamonds cut and polished in the world are cut and polished in India. remained undisputed leader till 18th century when Brazilian fields were discovered in 1725 AD followed by emergence of South Africa. Today. Regent. The USA. 85% in volume and 92% share in the number of pieces produced. It has remained the home of diamonds for over two millenniums. the Orloff. rough diamonds have been mined since historic times. Switzerland and Thailand. It is difficult to trace the origin of diamond but the history says that in the remote past. were the products of India and many of these world famous diamonds were discovered in India from 16th and 17th centuries. Diamond production in India can be traced back to almost 8th century B. The cut and polished diamonds are mainly exported to the United States of America. is the largest market for loose polished diamonds and diamond jewellery. Nearly 80% of the country's natural diamond processing is done in Gujarat. Belgium. Japan and Switzerland are consumer markets and the rest of them are trading countries. India in fact. Florentine. But it was only after the year 1962 AD that processing. 22 . diamonds were mined only in India. Sancy Hope. the Great Mogul. Russia and Australia. India processes 100mn carats of rough diamonds against the world’s total output of 117mn carats of rough diamonds. and some districts of Saurashtra region account for most of it. In India. World famous diamonds such as Koh-i-noor. Pitli. on the other hand. Hong Kong.diamonds. Nizam etc. and is the largest diamond polishing centre.C. Some commission agents supply roughs to the firms in India for processing on behalf of the sight-holders who take the finished product for export. Japan. cutting and polishing of diamonds developed as an industry. Of these.

India has its diamond bourse functioning at Mumbai. It also has the largest resource hub in diamond cutting and processing. The industry is well supported by government policies and the banking sector with around 50 banks providing nearly $3 billion of credit to the Indian diamond industry.1 Significance of Diamond Trade for Indian Economy: The Gems and Jewellery industry in India is structured as diamonds. India is.000 offices for the promotion and marketing of Indian diamonds. Still. Low cost of labour involved in production of finished diamonds has lured global attention. 4. of more than 3. therefore. In addition. The Indian diamond industry employs around 2 million people (constituting 94 per cent of global workers in the industry) with more than 500 hi-tech laser machines. India has a large pool of skilled and low cost manpower for its gems and jewellery industry. the industry has set up a worldwide distribution network. The country has world’s one of the best skilled manpower to design and make high volumes of exquisite jewellery at relatively low labour cost. Earlier it was scattered in a cottage industry format but now it has emerged as a modern mechanized industry undertaking its operations on a large scale with modern technology. 96% of industry consists of family-owned businesses scattered in large area. Only 4% industry comes under organized sector. thereby resulting into the growth of the industry. 23 . The cost per carat for cutting and polishing diamond is US$ 10 in India as compared to US$ 17 in China and US$ 150 in Belgium. a significant player in the world gems and jewellery market both as a source of processed diamonds as well as a large consuming market. The Indian diamond industry is largely family owned.The Indian gems and jewellery industry is competitive in the world market due to its low cost of production and the availability of skilled labour.

The following diagram indicates the structure of gems and jewellery sector and various sub-segments operating under the umbrella term. diamond has a lion’s share in Indian Gems and Jewellery exports and contributes approximately 60-70% of the revenue of the Gems and Jewellery sector. Diamond industry has been growing at 15-17% annually since last two decades. The following diagram shows the growth rate of diamond industry since the year 1975. These segments are further divided into sub-segments. Figure 11: Gems and Jewellery share (%) in India’s total exports 24 . Gems and Jewellery Industry Structure Among these.jewellery and precious and semi-precious stones.

Rough and uncut diamonds are imported and processed in India and finally exported in the form of diamond jewellery for final consumption. An important feature of this industry is that it contributes a large share to India’s total exports as well as to the country’s imports (averaging over 9 percent of total imports since 1997 and 15% of total exports). it has the (single) highest share in Indian merchandise exports and is therefore. the latter’s share has declined since 2008. It is one of the fastest growing industries and a leading earner of foreign exchange for India. However. one of the most significant industries for India. in part. As a commodity.Diamond trade constitutes an important industry for the Indian economy. 25 . It is this feature that makes the industry highly import-intensive in nature. the diamond industry in India is mostly concentrated in the unorganized sector and employs around 2 million workers. the remainder of the analysis focuses on the performance of Indian diamond exports. due to the economic meltdown which reduced the import demand from USA and other trading partners of India. The diamond segment contributes a major share of nearly 60-70 percent of the total (gems and jewellery) export and thus. As stated earlier.

Israel and US. 80% in karatage and 90% in pieces. diamonds are a luxury item and consequently have a highly elastic demand in the market.4. they do not have an internationally set standard price. Diamond exports from India recovered substantially with the onset of a gradual global economic recovery. clarity and carat (weight). The price is determined based of physical attributes such as cut. Even though diamond processing takes place in about 30 countries across the globe. The diamond processing industry is largely dependent on supply of rough diamonds. In this industry. South Africa. silver or platinum. India has a comparative advantage in labour-intensive activities like gem cutting and polishing. The production of rough diamonds from mines is presently dominated by De Beers (DTC). unlike gold. China and Thailand are also catching up as centres for diamond cutting and polishing. coupled with higher demand and government incentives. Like other forms of (valuable) jewellery. although a part of the increase was attributed to weaker Indian Rupee. Botswana.2 Diamond Trade of India vis-à-vis Global Diamond Trade: India is the world's largest diamond cutting and polishing centre in the world with the country processing 11 out of 12 diamonds sold in the global market. a big chunk of concentration lies in five countries of India. Russia and South Africa are the major suppliers of rough diamonds. has led to improved liquidity for most 26 . Australia. India accounts for approximately 60% of the global polished diamonds in value terms. Indian companies operate at a beneficial level in the value chain where they import rough diamonds. colour. The favourable exchange rate. which is the largest diamond miner in the world. which are processed and exported for final consumption as diamond jewellery. Belgium. A unique feature of diamonds is that. Therefore.

4 percent in 2000. (B) Major Exporters of Diamonds and their Share in World Trade: 27 . whereas Belgium and Israel have had the advanced technology to work with larger diamonds. too have an important share in the global diamond exports. Indian exports performed particularly well in 2009 and India became a leading exporter of gems and jewellery.1 percent in 2009. with a market share exceeding 23 percent. The figure reveals that India has always been an important source market for gems and jewellery and its significance has grown considerably during last two decades. India’s share in the world market has usually been lower than that of Israel and Belgium.diamond processors and jewellery makers. Since the market for small-sized diamonds is relatively small. to 20. (A) India’s position in the export of diamonds in the global market: India’s position in the world market for gems and jewellery exports can be seen in the Figure 12. India has traditionally specialized in the processing of small diamonds. India’s main competitors in the diamond industry are Israel and Belgium. It has grown from 13. Figure 12: India’s Share in World exports of Gems and Jewellery India’s diamond exports. and both these countries have a technological advantage in the processing of raw diamonds. which form the major share of gems and jewellery exports.

which could partly be due to the stronger impact of the sub-prime crisis of 2008 on the demand for large sized diamonds. making cut and polished diamonds from roughs.2Trends in Export of Diamonds from India: The structure of the global diamond industry can be explained with the help of the 3. USA on the other hand is the largest market for loose polished diamonds and diamond jewellery.1 Global Diamond Industry Structure 28 .1 diagram. Australia India USA (Largest Diamond Producer) (Biggest Diamond Processor) (Largest Diamond Market) Fig 3.e. i.Table 2 reveals the change in market share since 2000.. which resulted in a decline in market share for Israel and Belgium. India processes 100mn carats of rough diamonds against the world’s total output of 117mn carats of rough diamonds. Table 2: Major exporters of Diamonds and their share in world exports (%) 4. In 2009. and the largest diamond polishing centre. It is seen that India’s market share remained unchanged and well below Israel and Belgium’s share between 2000 and 2005. India is the main centre for processing of diamonds. India’s share rose considerably above that of Belgium and Israel. however.

mostly in the states of Maharashtra and Gujarat. against China's US$17 and South Africa's US$40 to US$60. $ per Carat ~10 ~15-20 ~40-60 ~60-80 ~100+ Source: Dogrib Diamond Report. $ per carat Country India China South Africa Belgium. The vast resources of manpower combined with "the skill of the Indian artisan" and the "relentless efforts of Indian entrepreneurs who took on the daunting task of setting up this industry" are additional contributors to India's success. Before the recent recession. Israel and Russia United States Estimated Cost of Cutting and Polishing Diamond.000 diamond cutters work in India.000 to 50. and the numbers there are rising. Table 3. bolstered in part by government subsidies. In addition to export of cut and polished diamonds. India also exports rough diamonds. But the proportion of export of rough diamonds in total export of gems and jewellery sector is very low. India spends US$10 per carat on the polishing and cutting of diamonds. About 30. Israel and Russia US$60-80 while United States approximately US$ 100. expert interviews Currently 700.000 cutters operate in China and Thailand. (A) Trends in Exports of Cut and Polished Diamonds vis-a-vis Gems and Jewellery Exports and Total Merchandise Exports from India: 29 .2 Estimated Cost of Cutting and Polishing. Belgium. Indian craftspeople cut 14 out of 15 diamonds worldwide. Sri Lanka is also making significant inroads.The availability of low-cost labour is one of the main factors behind India's dominance in export of cut and polished diamonds.000 to 800. Guangzhou in China is now one of the world’s largest global cutting centres.

66% Total Merchandise Exports 43827 52719 63843 83536 103091 126414 163132 185295 178751 251136 304624 2001-2002 5982 79.21% 11.48% 8. the share of cut and polished diamonds in the total gems and jewellery sector export fluctuated between 60% to 70%. 1.58% 17159 2007-2008 14205 67.03% 12112 2004-2005 11163 71. In the FY 2011-2012.36% 11. 1.55% 9162 2003-2004 8603 71. In the year 2001-02.4 and figure no. The export of cut and polished diamonds constituted almost 14% of the total merchandise exports from India in the year 2001-2002.47% 24894 2009-2010 18244 61.4 Trends in Export of Cut and Polished Diamonds vis-a-vis Gems and Jewellery Exports and Total Merchandise Exports from India Year Cut & Polished Diamonds (US$ in Million) % of Export of Gems and Jewellery Total Export of Gems & Jewellery Sector* (US$ in Million) % of Total Merchandise Exports 13. The table no. It can be seen in the above table that export of cut and polished diamonds is one of the major constituents of the gems and jewellery sector.63% 8. It is interesting to note that during the last decade the export of gems and 30 .29% 15658 2005-2006 11831 70. the export of cut and polished diamonds constituted almost 80% of the total exports from gems and jewellery sector.24% 7.96% 29442 2010-2011 28221 65.5 show the export of cut and polished diamonds as a percetange of total exports from gems and jewellery sector and total merchandise exports from India from 2001-02 to 2011-2012.03% 7569 2002-2003 7105 77.4 and figure no.65% 13. the share of cut and polished diamonds fell down to 50%. By 2005-2006.00% 10.90% 20921 2008-2009 14804 59.71% 8.84% 16701 2006-2007 10910 63.48% 13.68% 46957 *Includes export of all the constituents of gems and jewellery sector. this proportion fell down to 70% due to increase in the export of gold jewellery and coloured gem stones.66% of the total merchandise exports of India in the year 2011-2012. 1.56% 43048 2011-2012 (P) 23330 49. 1. This has fallen to merely 7.Table No. Between 2006-2007 and 2010-2011.48% 13.

a.jewellery sector as a whole has increased at an average rate of 15% p. The share of export of gold jewellery in total exports of gems and jewellery sector has increased from 15% in the year 2001-2002 to approximately 35% of the total exports from gems and jewellery sector in the year 2011-2012.4 Export of Cut and Polished Diamonds as a % of Total Exports of Gems and Jewellery Sector 31 . There are several factor responsible for this fall. the proportion of cut and polished diamonds in the export basket of gems and jewellery sector has declined during the same period. However. 1. Figure No. prominent among them is the increase in the share of gold jewellery and bottlenecks in the supply of rough diamonds from mines.

this proportion has gradually come down to 50% of the exports of gems and jewellery sector mainly due to increase in the export of gold jewellery.47 15.Figure No.63 32 .59 16.5 Year Export of Cut & Polished Diamonds (US$ in Million) 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 5982 7105 8603 11163 11831 10910 Average Annual Growth Rate over Previous Year 18.93 Total Merchandis e Export (US$ in Million) 43827 52719 63843 83536 103091 126414 Average Annual Growth Rate over Previous Year 20.79% Exports of Gems and Jewellery Sector* (US$ in Million) 7306 9030 10573 13762 15529 15983 Average Annual Growth Rate over Previous Year 23.98% .41 22.5 Export of Cut and Polished Diamonds as a % of Total Merchandise Export of India Observation: It can be concluded from the above analysis that cut and polished diamonds have contributed almost 80% of the exports from gems and jewellery sector at the turn of this century. However.85 23.56 16.10 30. 1.77% 21.29 21.75% 5. (B) Analysis of the Average Annual Growth Rate of Export of Cut and Polished Diamonds from India during 2001-02 to 2011-2012: Table No.08% 29. 1.7.06 2. which constituted only 15% of the total exports from gems and jewellery sector in the year 2001-2002 and increased to 35% of the exports from gems and jewellery sector at the end of 2011-2012.

98% which turned into negative at – 7.a. with few exceptions. However. During 2002-2003 to 2004-2005.53 40. (C) Correlation between Average Annual Growth in the Exports of Cut and Polished Diamonds vis-a-vis Total Exports of Gems and Jewellery Sector from India: (2001-2012) X = Average Annual growth Rate of Export of Cut and Polished Diamonds 33 .36 2010-2011 28221 54.20% 19692 23. 163132 185295 178751 251136 304624 29.a.20 2008-2009 14804 3. the prominent among them is the rise in the price of rough diamonds and slackening demand from the US and European countries. It can be seen that the export of cut and polished diamonds has increased steadily during the last decade at an average annual rate of 20% p.59 – 3. it again turned sluggish to increase by mere 3. during 2005-2006 this growth slumped to mere 5. There are several reasons for this slump. the export of cut and polished diamonds revived to rise annually by 23. The provisional figures announced for the financial year 2011-2012 showed a fall of 17. In the year 2008-2009.33% in the annual growth of export of cut and polished diamonds from India.2007-2008 14205 30.30 The above table analyses the average annual growth rate of exports of cut and polished diamonds vis-a-vis the average annual growth rate of exports of gems and jewellery and total merchandise exports from India during 2001-2002 to 2011-2012.33% 46957 15. the export of cut and polished diamonds increased at an annual rate of almost 20-25% p.69% respectively. The export of cut and polished diamonds revived during 2007-2008 to jump by over 30% over its previous year.24% 29081 2.28 2009-2010 18244 23.69% 40508 39.30 2011-2012 (P) 23330 .79% during 2006-2007. This sluggishness was marked by rapid increase in the export of gold jewellery.50 21.24% and 54.90% 28411 44.92 *Includes export of all the constituents of gems and jewellery sector.9% over its previous year. In the year 2009-2010 and 2010-2011.17.05 13.

3 Correlation between Average Annual Growth in the Exports of Cut and Polished Diamonds vis-a-vis Total Exports of gems and Jewellery Sector from India (20012012) Year % Growth over Previous F.* (Y) 24 17 17 15 3 23 44 2 39 16 200 XY X2 Y2 456 357 510 90 – 24 690 176 46 2145 – 272 4174 361 441 900 36 64 900 16 529 3025 289 6561 576 289 289 225 9 529 1936 4 1521 256 5634 55 2010-2011 2011-2012 (P) – 17 Total 163 *rounded off to nearest unit.Y.* (X) 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 19 21 30 6 –8 30 4 23 % Growth over Previous F.4228 914 2525.Y = Average Annual growth Rate of Total Exports of Gems and Jewellery Sector Table No.4828 X 40. Source: Compiled from the annual reports of GJEPC. 2001-2002 to 2011-2012. ΣXY − Karl Pearson’s Coefficient of Correlation = ΣX 2 − ΣXΣY N (ΣX ) 2 (ΣY ) 2 ΣY 2 − N N 163 X 200 10 4174 − = 6561 − (163) 2 (200) 2 5634 − 10 10 = = 4174 − 3260 62.Y.3619 Interpretation of the results: It can be concluded that there is a weak positive correlation between average annual growth rate of export of cut and polished 34 . 1.7297 = 0.

64% 3. (4) The Foreign Trade Policy of the Indian government and that of other countries also affect the demand and supply conditions.72% 121. (3) Processing of diamond also depends upon demand from the US and European nations.54% – 0.88% 2.78% Average Annual Growth Rate over Previous Year 69. (D) Trends in Exports of Rough Diamonds vis-a-vis Total Exports of Gems and Jewellery Sector from India (2001-02 to 2010-11): Table No.40% 2.86% – 4.63% 4.29% 2. Observation: It is observed in the above analysis that the average annual growth rate of export of cut and polished diamonds from India is independent of the average annual growth rate of total exports from gems and jewellery sector.28% 3. This is clearly reflected in the years of the US and the European financial crisis.12% 2.02% 58. which are facing a tough time.18% 0.71% 3.16% – 33.12% 52. 1. There are several factors that contribute to this independence: (1) Gems and jewellery trade consists of a number of sub-sectors which are independent of each others.39% 3.diamond and total exports of gems and jewellery sector from India.82% 55.53% 2.35% 36.5 Trends in Export of Rough Diamonds vis-a-vis Total Exports of Gems and Jewellery Sector from India Year Rough Diamonds (US$ in Million) Exports of G&J Sector (US$ in Million) 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 (P) 142 241 533 357 566 565 567 776 744 1137 1773 7569 9162 12112 15658 16701 17159 20921 24894 29442 43048 46957 % Share of Rough Diamonds in Total Exports of G&J sector 1. (2) Export of processed diamonds depends mainly on the supply of rough diamonds which are sourced internationally.94% 35 .

88% of the total export of gems and jewellery sector. in the year 2004-2005. the export of rough diamonds from India again fell to 2. The export of rough diamonds stood at US$ 142 million in the year 2001-2002 which constituted 1. India. its role in the mining of gold and diamond is minimal.02% over its previous year. Thus. The African continent dominates the mining space of diamonds whereas India is the dominant player in diamond processing.40% in the year 2002-2003 and 2003-2004 respectively.Rough diamonds are mined in more than 20 different countries including India. 4. Since then. Though India plays a dominant role in the Gems and Jewellery industry in terms of processing and consumption.3Trends in Import of Rough Diamonds in India: The Indian diamond processing industry took roots in the 1960s. Indian mainly imports 36 . opened up new possibilities for the world diamond industry by making diamonds affordable for new. less affluent buyers. the share of export of rough diamonds in total exports of gems and jewellery sector has remained between 2% to 4% of the total exports of gems and jewellery sector. This proportion increased to 2. The average annual growth rate of export of rough diamonds from India showed a spectacular rise of 52. and at present.94% during the year 2010-2011 and 2011-2012 respectively. India imports gold and rough diamonds along with other precious metals. with its low labour cost. However.63% and 4. India’s annual production is negligible at around 19000 carats. As compared with the traditional diamond cutting and polishing centres of Belgium. India is the world’s leading diamond cutting and polishing centre. The share of rough diamonds in total export basket of gems and jewellery sector is negligible. As a result. India captured an increased proportion of this market.82% and 55.28% of the export of gems and jewellery sector registering a negative growth of – 33.

raw and rough diamonds from other countries.77% 7. By 2009.648 8.273 7.5 Trends in Import of Rough Diamond by India from 2001-2002 to 2011-2012 Year Rough Diamonds (US$ in Million) 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 4. 1. This share rose to 11. India grabbed 16.11% 13.16% 13. processes them into cut and polished diamonds and exports them to several other countries of the world. Table 4 Main World Importers of Diamonds Reproduced from an ICRA Report on the Indian Gems and Jewellery Industry (October 2010). bagging first position in terms of importer of rough diamonds.2% of the total rough diamonds supply in the world in the year 2000.207 6.73% 37 .137 7.698 Average Annual Growth Rate over Previous Year 49. p. mainly from African countries. It can be seen in the following table that India imported 8. putting India at the second place next to the USA in terms of the importer of rough diamonds.8% of the market share of total rough diamond supply in the world. 30 (A) Trends in Import of Rough Diamonds by India: Table No.8% in the year 2005.

56% 26. This will also send signal to the banking system that the diamond industry will not increase its indebtedness at the time when our 38 . The economic crisis followed by crippling demand forced GJEPC to urge for a 30 day ban. There after it grew at an average of about 10% until 2007-2008.994 15132 0.797 7. The cited reason was to send a signal to the banks that the industry will not increase indebtedness.67% 32. In order to protect the interest of the industry at large the Indian Diamond Industry has decided to curtail import of rough diamonds. In the year 2008-2009. The ban was in interest of the Indian diamond industry to help stabilize prices by reducing oversupply of diamonds and shielding companies from borrowing money to purchase diamonds.75% – 18. The following is the full text of the GJEPC announcement: “The Global financial situation is causing a strain on the players throughout the diamond value chain. there was a negative growth in the import of rough diamonds in India.2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 8.79% 11.75% 13.960 9. The import of rough diamonds during 2008-2009 fell by 18. Indian mainly imports rough diamonds for processing and re-exporting.767 9.048 11. The year 2002-2003 showed a sudden jump in import of rough diamonds by almost 49.16% It can be seen in the above table that the import of rough diamonds has gradually increased in India during last decade from mere US$ 4207 million in the year 2001-2002 to US$ 15132 million in the year 2011-2012. The main reason for this fall was the ban put by the GJEPC on import of rough diamonds in the country.75% over its previous year. The organized Indian diamond industry decided to stop all rough diamond imports to the country for a month starting November 25.11% over its previous year.

Mr.20% 3. Vasant Mehta.69% .75% 5.137 2004-2005 7.90% 23.11% 13.698 2006-2007 8. Therefore. 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 1775 832 1466 3515 3133 2143 4408 6844 9196 16227 8198 The Gems and Jewellery industry collectively contributed only 0.7.797 2008-2009 7.79% 11. Mehta added "Our move will basically cause fewer rough to enter the diamond pipeline and the producer companies will thus indirectly share in the financing burden and contribute to a faster restoration of normalcy in an otherwise healthy business".2% of the 3 Official web-site of GJEPC. observed "Our members have sufficient rough diamonds in stock to minimize the impact on our labour force".273 2003-2004 7.”3 Mr.downstream colleagues continue to meet consumer demand – a demand heightened by the inherent value which consumers attach to our product. the Gems & Jewellery Export Promotion Council has asked its members to cease the imports of rough diamonds for a month from November 25.648 2005-2006 8.24% 54.6 Trends in Import of Rough Diamond by India from 2001-2002 to 2011-2012 Year Import of Rough Diamonds (US$ in Million) Export of Cut & Polished Diamonds (US$ in Million) AAGR of Imports over Previous Year 49.56% 26.994 2011-2012 15132 AAGR: Annual Average Growth Rate.67% 32. 1.17. Such import stoppage will help the industry face the challenge that has arisen out of turmoil in the global financial market. (B) Value Addition and Foreign Exchange Generation by Diamond Processing Industry in India: Table No. GJEPC. Chairman.960 2009-2010 9.77% 7.16% AAGR of Exports over Previous Year 18.08% 29. 39 .73% 0.98% .16% 13.33% Value Addition (US$ in Million) 2001-2002 4.207 2002-2003 6.048 2010-2011 11.77% 21.75% – 18.767 2007-2008 9.75% 13.79% 30. accessed on 21st March 2013.

It should be kept in mind that Indian processors do not necessarily process rough diamonds in the year in which they buy. This proportion gradually came down to 65% in the year 2010-2011. This contribution increased to 16. Liquidity and holding capacity are the other factors that affect the purchase of rough diamonds by processors. The contribution of gems and jewellery sector to the total exports of the economy stood at 14. In the year 2001-2002. 2002-2003.2% of the total exports in the year 1990-91 and further to 16. they buy rough diamonds as and when site holders are allotted quota and rough diamonds are available at cheaper rate. In the year 2001-2002. i. export of cut and polished diamonds contributed almost 80% of the export of gems and jewellery sector. Generally.9% in the year 2010-2011. The exports from gems and jewellery sector could sustain even during the phases of recession in the world economies. In the following year.77%. 4 During last four decades.6% of total exports in the year 2000-2001.total export of the country in the year 1960-61. in absolute terms it has increased. India imported rough diamonds worth US$ 4207 million and exported cut and polished diamonds worth US$ 5982. 40 . import of rough diamonds jumped up by 50% over its previous year while exports remained sluggish registering a growth of 18. 1960-61. the gems and jewellery sector has become one of the most important sector of the economy. thus making a contribution to US$ 1175 to the foreign exchange account of the country. pulling down the net value 4 Government of India. in terms of employment generation and foreign exchange earner. Economic Survey of India.e. there has been increasing trends in favour of gold jewellery rather than cut and polished diamonds. Diamond processing industry is one of the most important segments of the gems and jewellery sector. 1990-91. Thus. The reason being increasing demand for diamond studded gold jewellery from India. Although the share of cut and polished diamonds in total exports of the country fell down from 80% to mere 50% during the last decade. 2000-2001 and 2010-2011.

In the year 2006-2007.additions to mere US$ 832 million. In the year 2011-2012. It further increased to US$ 3515 million in the year 2004-2005.79%). In the following year. In the year 2008. Since then there has been rapid increase in the foreign exchange contribution of the diamond sector. 41 . This led to drastic fall in the value addition by 50% from US$ 16227 million in the year 2010-2011 to US$ 8198 million in the year 2011-2012. The reason for this sudden increase in value addition by diamond industry was fall in the average annual growth rate of imports (from 13. IN 2008-2009. the GJEPC put a ban on import of rough diamonds in India on the ground that India had enough stock of rough diamonds and this decision of GJEPC proved boon to diamond industry pushing net value addition by diamond processing industry to US$ 4408 million in the year 2007-2008. A number of factors are posing challenge to Indian diamond industry. The net value addition by the diamond industry increased to US$ 9196 million in the year 2009-2010 and further to US$ 16227 million in the year 2010-2011 due to the hopes of revival of the US economy and steps taken by the European economies to resolve sub-prime debt crisis in their economies.15%.77% to 7. the average annual growth rate of exports of cut and polished diamonds turned negative (– 7.16%) and increase in exports (from 21. rise in imports and fall in exports pushed down this figure to US$ 3133 million. the export of cut and polished diamonds fell down by 17. The net value addition by diamond processing industry stood at US$ 1466 million in the year 2003-2004.75%. resulting in further fall in value addition to US$ 2143 million.75%) over previous year (2003-2004).33% over its previous year while imports increased by 26.08% to 29. resulting in further rise in value addition to US$ 6844 million. the import of rough diamonds fell down by 18.

However. These factors will collectively contribute to further growth and development of diamond industry. the Indian diamonds industry is proactive and is gearing up to tackle these issues. Even the Indian government is looking for new suppliers for the supply of rough diamonds. (C) Correlation between the Average Annual Growth Rate of Import of Rough Diamonds and Export of Cut and Polished Diamonds from India: X = Average Annual growth Rate of Import of Rough Diamonds Y = Average Annual growth Rate of Exports of Cut and Polished Diamonds Table No. domestic competition. Organized retailing and branded jewellery are two recent trends that are catching up. falling demand for diamonds in the world market and so on. Companies have started to look at diamond branding and retailing to increase margins. 1. Indian diamond processing units have started installing new machines and latest technology to process diamonds. Jewellery retailing a $12 bn market is not new in India and is mainly dominated by the unorganized sector. 1. rising prices of rough diamonds shrinking margins.Some of them are threat from upcoming processing centres such as China and Sri Lanka.7 Correlation between the Average Annual Growth Rate of Import of Rough Diamonds and Export of Cut and Polished Diamonds from India (2001-2002 to 2011-2012) Table No.6 Trends in Import of Rough Diamond by India from 2001-2002 to 2011-2012 Year AAGR of Imports over Previous Year* 49 14 7 AAGR of Exports over Previous Year* 19 21 30 XY X2 Y2 2002-2003 2003-2004 2004-2005 931 294 210 2401 196 49 361 441 900 42 .

Source: Compiled from the annual reports of GJEPC. However.3 55. Indian diamond mines have almost exhausted and thus. purely depends on supply of rough diamonds for processing. Again domestic market for processed diamonds in India is not much developed. being raw material oriented industry. Thus. ΣXY − Karl Pearson’s Coefficient of Correlation = ΣX 2 − ΣXΣY N (ΣX ) 2 (ΣY ) 2 ΣY 2 − N N 151X 163 10 3490 − = 5309 − (151) 2 (163) 2 6561 − 10 10 = = 3490 − 2461. Indian diamond industry is purely dependent on foreign sources for the supply of raw material.7659 = 0. Observation: Indian diamond industry.2991 Interpretation of the results: It can be concluded that there is a weak positive correlation between average annual growth rate of import of rough diamonds and average annual growth rate of export of cut and polished diamonds.0354 X 62. 2001-2002 to 2011-2012. 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 6 –8 30 4 23 55 – 17 163 84 –8 360 – 76 322 1815 – 442 3490 196 1 144 361 196 1089 676 5309 36 64 900 16 529 3025 289 6561 *rounded off to nearest unit. the 43 . most of the imported rough diamonds in India are processed and exported back.14 1 12 – 19 14 33 26 151 AAGR: Annual Average Growth Rate.7 3438.4828 1028.

share of rough diamonds sold has declined to about 40-45% from about 85%. 4. Since then. There are several factors. This agreement will lead to cost 44 .result of correlation analysis shows a weak correlation between the average annual growth rate of import of rough diamonds and average annual growth rate of export of cut and polished diamonds. In a bid to disrupt De Beers’ monopoly in India. Under the deal the mine will directly supply raw material to the local diamond companies. Diamond India. De Beers’ rough distribution arm. The only reason for this is that the export of cut and polished diamonds in a particular year does not depend on the import of rough diamonds of the same year. Some of these factors are: (1) Uncertainty in Supply of Raw Material: The diamond pipeline has been witnessing a change since the early years of this decade. Russian state-owned diamond-giant Alrosa has struck a deal with three major Indian diamond processors. Diamond Trading Company’s (DTC). Indian diamond traders stock diamonds as and when they get them at favourable terms and export them as and when demand for them arises in the world market.4 Challenges for Indian Diamond Industry: It is said that higher you are more are the challenges. De Beers’ monopolistic hold on the supply chain was loosening and suddenly. and Ratilal Becharlal & Sons have announced a USD 490 million deal with Alrosa to supply rough diamonds over the next 3 years. who till recently had to import raw material from Belgium and Israel. This balancing helps them to earn huge profits. Rosy Blue. It is certainly true in the case of Indian diamond industry. which pose a challenge to Indian diamond industry. a host of middlemen had access to an increasing share of rough distribution straight from mines all over the world. both local as well as global.

This has affected the overall cost of jewellery for the end consumer. thereby reducing his purchasing power and demand. Additionally. gold prices have risen almost five-fold. Hong Kong and Belgium. India remains world’s largest gold consumer and this share is expected to grow further. The country is fast becoming a major export destination of gems and jewellery to various developed and developing countries. the Indian gems and jewellery industry will have to set standards and certification. However. According to analysts the industry needs to take initiatives like setting up design centres with the aim to train their employees to compete in the international markets. the UAE. Such a sharp rise is usually associated with risky investment assets such as equities. The recent rise in gold prices may not be the steepest like in the 1980s. During this decade itself. the Indian gems and jewellery exports sustained the positive momentum. growing importance of India in global gems and jewellery market has opened a lot of opportunities for exports. Additionally. Despite recession. (3) Rising Gold Prices: Gold prices have doubled over the past three years.savings of at least 3-4% for the companies. with its consumption pegged at nearly 20%. According to market reports. the trend is set to change in near future with the branded jewellery market growing at an expected CAGR of more than 41% over the next four years. the organized jewellery sector is forecast to account for a significant share in the country's total jewellery market. The sizzling gold price is one of the reasons for drop in jewellery sales. including the US. Going ahead. 45 . (2) Unorganised Market: The Indian gems and jewellery market is dominated by the unorganized sector.

India boasts of one of the lowest per carat diamond cutting and polishing costs (at around USD 10) thereby leading to comparatively low cost jewellery. industrial metals and delivery of infrastructure projects. but is rapidly transforming into an organized sector. Currently the Indian gems and jewellery market remains highly fragmented. gold consumption is also on a rise and India is expected to capture a dominant share in global gold consumption in 2013. However. The country is rapidly becoming a major exporter of gems and jewellery to various developed and developing countries. India is comfortably placed against its competitors in terms of cost of production. The Indian gems and jewellery exports sustained its positive momentum even in the times of recession. the UAE. China is importing rough diamonds from Angola. unsettling many Indian diamond traders. including the US. oils. to build their infrastructure in return for resources including rough diamonds. Going ahead. Additionally.(4) Competition from China: China is rapidly gaining ground in the diamond trade. China is building its diamond cutting and polishing infrastructure. Additionally. the Democratic Republic of Congo and other African countries. The Chinese government has struck multi-billion dollar deals with various African countries. growing importance of India in the global gems and jewellery market has opened a lot of opportunities for exports. Hong Kong and Belgium. apart from diamond jewellery. and hence amplifying the overall consumption. In exchange for medicines. the organized jewellery sector is expected to account for a 46 . With growing domestic demand.

Diamond processing remains highly fragmented in India with over 100. employment as well as foreign exchange earnings of the country. Diamonds are usually distributed to one of the main cutting and trading centres where experts cut and polish rough diamonds into various shapes. 4. There may be hardly any country where an unorganised economic activity makes such a huge contribution to the trade. The diamond processing industry is largely dependent on supply of rough diamonds. Singapore. Thailand. India accounts for approximately 60% of the global polished diamonds in value terms. Botswana. Israel and the U. which is the largest diamond miner in the World. 80% in karatage and 90% in pieces.S.significant share in country's total jewellery market. These are then sold to wholesalers or diamond jewellery manufacturers. Japan and Australia. The production of rough diamonds from mines is presently dominated by De Beers (DTC).000 units. Australia. The natural form of a diamond would determine the shape of the final polished diamond. Belgium. the United States of America (USA). Belgium. Africa. China and Thailand are catching up as centres for diamond cutting and polishing. India mainly exports cut and polished diamonds to the United Arab Emirates (UAE). India’s dominance in the cutting and polishing segment can be attributed to experienced craftsmanship and relatively low cost Indian labour. Lets analyze trends in export of cut and polished diamonds from India to these 47 . Diamond cutting is a great skill.5Direction of Export of Cut and Polished Diamonds from India to Major Markets: Diamond processing takes place in about 30 countries but it is mainly concentrated in five countries – India. the United Kingdom (UK). Polishing follows cutting before diamonds are again classified based on various parameters. S. Russia and South Africa are the major suppliers of rough diamonds. Hong Kong. Israel.

600 1. (C) Trends in Export of Cut and Polished Diamonds to the USA: Export of Cut and Polished Diamonds to the USA from India Year 2001-2002 2002-2003 US $ In Million 1. (B) Trends in Export of Cut and Polished Diamonds to Hong Kong: Export of Cut and Polished Diamonds to Hong Kong from India Year US $ In 1.973 2.042 3.437 3.countries: (A) Trends in Export of Cut and Polished Diamonds to the UAE: Export of Cut and Polished Diamonds to the UAE from India Year US $ In Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million* 2001-2002 344 2002-2003 425 2003-2004 799 2004-2005 1848 2005-2006 985 2006-2007 1145 2007-2008 1914 2008-2009 3357 2009-2010 6167 2010-2011 12432 2011-2012 6016 *Rounded off to the nearest unit.259 Total Exports $ In Million 5982 7105 % Share in Total Exports 48 .432 3439 4881 4784 5745 7893 8177 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.916 2.

297 1. (E) Trends in Export of Cut and Polished Diamonds to Israel: Export of Cut and Polished Diamonds to Israel from India Year US $ In Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.585 2005-2006 2. 8603 11163 11831 10910 14205 14804 18244 28221 23330 (D) Trends in Export of Cut and Polished Diamonds to Belgium: Export of Cut and Polished Diamonds to Belgium from India Year US $ In 842 931 1.858 2006-2007 2899 2007-2008 3294 2008-2009 2793 2009-2010 2634 2010-2011 3224 2011-2012 3220 *Rounded off to the nearest unit.038 1261 1.109 1385 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports 49 . 264 438 576 701 770 860 1019 745 810 1.2003-2004 2.350 1359 1730 1321 1.554 2004-2005 2.683 2058 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.

(H) Trends in Export of Cut and Polished Diamonds to Switzerland: Export of Cut and Polished Diamonds to Switzerland from India Year 2001-2002 2002-2003 US $ In Million 119 133 Total Exports $ In Million 5982 7105 % Share in Total Exports 50 . 215 207 200 263 286 303 349 282 294 379 489 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports (G) Trends in Export of Cut and Polished Diamonds to Japan: Export of Cut and Polished Diamonds to Japan from India Year US $ In 329 354 402 469 443 383 331 249 252 276 302 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.(F) Trends in Export of Cut and Polished Diamonds to Thailand: Export of Cut and Polished Diamonds to Thailand from India Year US $ In Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.

(J) Trends in Export of Cut and Polished Diamonds to Australia: Export of Cut and Polished Diamonds to Australia from India Year US $ In Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.301 2006-2007 117 2007-2008 138 2008-2009 374 2009-2010 437 2010-2011 156 2011-2012 217 *Rounded off to the nearest unit. 236 163 129 130 207 162 103 234 348 8603 11163 11831 10910 14205 14804 18244 28221 23330 (I) Trends in Export of Cut and Polished Diamonds to Singapore: Export of Cut and Polished Diamonds to Singapore from India Year US $ In Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million 2001-2002 96 2002-2003 135 2003-2004 172 2004-2005 581 2005-2006 1. 25 34 49 57 65 76 86 71 95 114 116 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports 51 .

(M) Trends in Export of Cut and Polished Diamonds to Other Countries: Export of Cut and Polished Diamonds to the Other Countries from India Year US $ In Million Total Exports $ In Million % Share in Total Exports 52 . 33 96 75 61 62 75 85 62 61 62 140 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports (L) Trends in Export of Cut and Polished Diamonds to Germany: Export of Cut and Polished Diamonds to Germany from India Year US $ In 29 29 34 44 43 47 54 55 38 43 57 Total Exports $ In Million 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 % Share in Total Exports Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.(K) Trends in Export of Cut and Polished Diamonds to the UK: Export of Cut and Polished Diamonds to the UK from India Year US $ In Million 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit.

Large-sized diamonds (or solitaires) are considerably expensive and thus this segment of diamond jewellery is highly priced. it has always been a key trading partner for India in this sector. Therefore. Israel is evidently the most important source market for all diamond 53 . The US has a two tier market for diamond jewellery which consists of a potentially growing market for (low value) diamond jewellery and the older market for large-diamond jewellery. (N) Trends in Export of Cut and Polished Diamonds to the USA: Table 3 shows a disaggregation of the two segments of the US diamond market.2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 *Rounded off to the nearest unit. 101 155 55 108 133 81 117 550 309 616 830 5982 7105 8603 11163 11831 10910 14205 14804 18244 28221 23330 The US has been the largest importer of diamonds for a long time and accounts for more than 18 percent of world diamond imports.

7 percent in 2005 to 86. The table also reveals that India is the only country which has consistently exported a higher value of diamonds or registered a positive growth every year since 2005.6 percent in 2009.5 percent by 2009. and its share in the US market has steadily risen from 20 percent in 2005 to 24. India has identified the potential in the large diamonds segment and has focused on increasing large diamond exports to the US.9 percent in 2009. In recent years. though its share has declined over the years.6 percent in 2009. Large diamonds comprise a major share of the US market and the concentration has intensified from 82. It is therefore seen that the import of smaller diamonds by the US is increasingly phasing out.7 percent in 2009. India experienced a drop of the least magnitude in 2009 (of 20. the 2008 economic crisis had a severe impact on the imports of diamonds.9 percent in 2005 to 17. This is evident from the fact that its large diamond exports constitute 69. compared to 62. India is the second most important exporter of diamonds for the US.6 percent of its total diamond exports to the US in 2009. In particular.3 percent in 2005 to 49.7 percent in 2005. Though imports from all trading partners fell. relative to Israel or 54 .7 percent in 2005 to 44. Being a luxury good.8 percent in 2009. from 52.4 percent).imports by the US. India’s share in the US market for large diamonds has risen substantially from 9. though imports from India were again least affected. Moreover. India was predominantly an exporter of small diamonds and supplied as much as 59 percent of all small diamonds imports of the US in 2005 and this increased to 69. however. the price sensitive segment of large diamonds experienced a steep fall of over 36 percent in 2009. which has declined from 60. It is also seen that India has succeeded in capturing some of Israel’s market share in this segment.

Indian exports of gems and jewelry (including diamonds) have performed well in the US market. introduction of the Diamond Dollar Account and Green card for exporters of polished diamonds have facilitated trade competitiveness. The overall evidence suggests that India is a considerably strong player in the US diamond market. Figure 12: RCA for India’s Gems and Jewelry exports (to the World) 55 . the relatively small impact of the 2008 crisis on India’s diamond exports suggests that India has a strong foothold in this market and has performed more consistently than its competitors (Israel and Belgium) in recent years. Additionally. The annual growth in India’s gems and jewelry exports to the US has more often been higher than its competitors. This can be attributed partially to India’s growing exports of large-sized diamonds to markets such as the US.40 2.Belgium. Not only has it successfully exported higher volumes ( and values) of large diamonds.4 Competitiveness of Gems and Jewelry exports The RCA for India’s gems and jewelry exports has remained considerably above unity indicating that this is a competitive export item for India.

Belgian and Israeli diamond processors are setting up branches in China. which included an exemption on the 56 .A comparison of India’s RCA with its competitors suggests that Israel and Belgium’s exports are more competitive in the US market. which have invested in developing the domestic (diamond) processing industry. in order to create better employment possibilities. India can possibly face competition from China. as an increasing number of Indian. This could pose a threat for the large-scale processing of diamonds in India.6 Government Initiatives Government policies have been supportive of the gems and jewelry sector. The government introduced the replenishment (REP) license in the sixties under which producers could import the relevant raw materials without an upper limit on foreign exchange. the 1997-2002 Foreign Trade Policy simplified a number of procedures to export diamond jewelry.2. One of the main factors has been the large-scale presence of the unorganized sector in this industry. in the case of gems and jewelry exports to Hong Kong. owing to the fact that over 40 percent of Hong Kong’s gems and jewelry imports are sourced from India. The import tariff on cut and polished diamonds and gemstones was also reduced from 15 percent to 5 percent.43 3. India is more competitive than Israel or Belgium. Further reforms were implemented in 2005.2. In the future. Additionally. to capitalize on cheap labour. as they contribute a larger share to US imports of gems and jewelry.Gems and Jewelry Sector There are some persistent issues that the Indian Gems and Jewelry sector has faced for a long time. However. Branded or partially processed jewelry could now be exported by India. A similar threat can be expected from African countries in the near future.44 3. the customs duty (of 45 percent) on rough gemstones and semi-processed diamonds was abolished by the Union budget of 2003-04.5 Key issues . Further.

(1) Bank through shipments: 57 . which permitted domestic exporters with unsold inventory (in foreign markets) to reimport. jewelry export was allowed on a consignment basis. the Union Budget of 2008-09 reduced the net profit rate from 8 percent to 6 percent for institutions which were engaged in the diamond manufacturing and trading sector (under Benign Assessment procedure). in order to increase the production capacity. for the exploration and mining of gemstones and diamonds. 3.1994 had liberalised the procedures for the exports of Diamonds. and other forms of (gold and other precious metal) jewelry. prior permission from the Reserve Bank of India for exports.02.2 Export of Diamonds from India: (A) General: The Reserve Bank of India (RBI). The EXIM policy (2002-07) reduced value addition norms on exports of plain jewelry from 10 percent to 7 percent and the subsequent policy for the period of 2004-09. More recently.45 The recent National Manufacturing Policy has identified the gems and jewelry sector as one of the thrust areas given its potential for employment creation. is not required. Foreign direct investment up to 74 percent (under the automatic route) was approved by the government. The most recent foreign trade policy (2009-14) has implemented a new facility to permit the import of cut and polished diamonds (on a consignment basis) for the purpose of grading and certification. Hence. even in the absence of letters of credit or advance remittances. 1 dated 12. as per their authorized dealer (banks) circular No. gemstones. Additionally. allowed the import of precious metal scrap and used jewelry for melting. refining and re-export of jewelry.service tax levied on the production related to the manufacturing of cut and polished diamonds. The exports are done in the following two ways.

Year 1990 . 1) The exporter is a regular customer. The advantages of shipping the goods directly to the consignees are: a.In this case the documents are addressed to the consignee's bankers for the account of the importer. As per Reserve Bank of India directives. 2) Direct shipments: In this case.. 2) The authorized dealer is satisfied on the basis of standing and track record of the exporter customer. long standing business relations etc. Delivery charges. as per the terms of the contract. Speedy delivery of the export parcels to the clients. 3) The arrangements made for realization of the export proceeds by the exporter customer are satisfactory to the bankers. Early payments and hence the bank interest is saved. prevalent in the respective countries are avoided and thereby saved. c.32 US $ In Million 58 . with the exporters. the documents are addressed in the name of the consignees. b. including bank commission for issuing delivery order and stamp duty. In Crores 1. if the documents are sent on COD basis or against acceptance of shipping documents by signing the original Bill of Exchange if they are shipped on Usance basis. the bankers should normally accept bank through documents in the cases of clients who are not their regular customers. The consignee gets the delivery of the goods only against payment.497. who have an excellent track record regarding payments. unless the documents are backed by Letters of credit or advance remittances.00 834. The authorized dealers may accede to the request to dispatch the documents directly to the consignee.91 Rs. provided. since the importers need not wait for the full set of bank documents to be received through their bankers.

competition.33 1.94 1994 . In Crores 566. a Belgian national who set up a diamond processing unit in Panyu's Shawan jewellery industrial park 59 . China could be a real threat to us. Investors all over the world are finding it easier to set up diamond processing units in China as compared to other places.35 4.32 3474.68 771. Latest figures from the Shanghai Diamond Exchange (SDE) and the Diamond Administration of China (DAC) indicate that diamond cutting and polishing in China has gone up from six hundred million USD in 2007 to USD2 billion in 2011.02 2002 .553." stated Dinesh Navadia.586.04 2004 . reports The Times of India.584.972.33 10. China.546. “Salaries in other industries are rising faster than in the diamond industry.641.16 783.03 2003 .050.96 1996 . and so it is difficult to employ new-generation diamond polishers.76 Export of Rough Diamonds: Year 2007 – 08 2008 .807.71 3.93 1993 .com Message to Author | Comments: (0) Tags: diamond.80 2.51 9. Chinese.32 1.97 1997 .88 2.44 2.907.715.1991 .99 1999 . making the ever-looming threat from China more prominent than before.611. president.37 11.09 2280. There has been a huge flow of capital investment from diamond companies in Israel and Belgium to Shanghai and surrounding places.84 7.900. as well as the provinces of Guangdong and Shandong.17 11.363. of the Surat Diamond Association (SDA).92 1992 .97 1.55 1.249.2000 2000 . threat The INR80.144.518.01 2001 .000 in 2007 to over 60.58 6. The Surat diamond industry is faced with several challenges.93 Rs.56 10.31 1. an acute shortage of skilled manpower being one of them.00 1.71 2.39 3.98 1998 .18 3.95 1995 .000 in 2011.258.05 1.146.33 9.972. Surat.61 4.46 1.907.931.69 US $ In Million India diamond industry facing threat from China • • • • inShare0 SupportBiz.18 2.365.363. The number of skilled diamond workers has also risen from just 7.702.000-crore worth diamond industry of Surat is under threat from China.048. Nick Weinstock.031.442. If this labour problem continues.91 1.

The Chinese diamond industry is growing at a much faster pace. Sanjay Kothari.stated: "The first is labour costs. especially in Surat. stated: "Unlike many diamond companies in Belgium and Israel." Hong Kong-based diamond trader Vijay Sheth. Gems and Jewellery Export Promotiion Council (GJEPC) stated: "The coming five years are very crucial for the diamond manufacturing sector in India.prevailing in Belgium. denoting a rise of 63 percent as compared to 2010. we have strongly represented to the Central government to introduce presumptive taxation system . Israel and China. Indian companies are also setting up their manufacturing facilities in China because the government offers more tax perks than India. who is planning to establish a factory in Guangdong.71 billion USD in the year 2011. and has introduced a raft of measures to encourage investment." Diamond trade in China has increased toUSD4. which indicates a rise of 56 percent." 60 . and thus. The second is that the local government is very supportive. Diamond imports during the same period have increased to USD2 billion. vice chairman.

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