Competitive Analysis of Indian Gems & Jewellery Sector in US Market

A report submitted towards the partial fulfilment of the requirements of the two years full-time Post Graduate Diploma in Management

Submitted By: Prashant Rampuria Roll No.: 2K81/IB/29 (2008-10)

Under The Guidance of Prof. Sushil Kumar

January 14, 2010

ASIA PACIFIC INSTITUTE OF MANAGEMENT 3 & 4, Institutional Area, Jasola, New Delhi-110025


This is to certify that the project work done on “Competitive Analysis of Indian Gems and Jewellery Sector in US Market”, submitted to Asia-Pacific Institute of Management, Jasola, New Delhi by Prashant Rampuria in partial fulfilment of the requirement for the award of PG Diploma in International Business is a bonafide work carried out by him under my supervision and guidance.

PROF. SUSHIL KUMAR (Project Guide)

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I hereby declare that the project report prepared on “Competitive Analysis of Indian Gems and Jewellery Sector in US Market” is my original work and the same has not been submitted for the award of any Degree/Diploma/Fellowship or other similar titles or prizes. The report is made under the guidance of Prof. Sushil Kumar and is submitted in partial fulfilment of the requirements for the PG Diploma in International Business in Asia-Pacific Institute of Management.

Prashant Rampuria 2K81/IB/29 2008-10

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A project report seems to be an individual effort is in fact teamwork. I am indebted to all those individuals who helped me in gaining knowledge & insight into various aspects of Indian Gems & Jewellery Sector. The source of learning have been one too many & a complete list of individual references would become encyclopedic. I want to express my deepest gratitude to Mr. Manish Dharmawat, owner of Silver Art Craft, Udaipur, for giving an insight into this sector. I am grateful to Mr. Asid Doita, owner of Asid Gems, Mumbai, for sharing his experience & knowledge and without whose help the project would not have got any shape. My deepest appreciation also extends to Mr. Vishal Doita, owner G.K. International, Surat, who gave an insight of US markets for Gems & Jewellery. It is with profound sense of gratitude that I wish to reveal my overwhelming thanks to Prof. Sushil Kumar my project guide who has rendered his valuable counsel and guidance in completing this project. I also owe deep sense of gratitude to my beloved institution, Asia-Pacific Institute of Management, for molding me into a real management student. Lastly, I put forth my due thanks to my parents, friends and all well wishers for their full fledged and tremendous support in completing this project work successfully.

Prashant Rampuria 2K81/IB/29 2008-10

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Executive Summary
This project is aimed at understanding the Competitive Advantage of India‟s Gems and Jewellery Sector in US Market. It begins with the Evolution of Jewellery Industry in India. This part includes how the industry evolved in India from Indus Valley Civilization dated back in 1500 B.C. Chapter 2 discusses the project objectives, scope and rationale of the study. Further research methodology used & its limitations are discussed. Chapter 3 discusses the Introduction to Indian Gems and Jewellery Industry. In this different category of goods are enlisted. Further changing scenario, Industry profile and Key markets in India are discussed. Chapter 4 provides the detail on the first objective: The Industry Structure. It is explained through a diagram. The three major components of this sector are Gemstone, Jewellery and Pearl. They are further classified as diamond and other gems stones in Gems, gold, diamond studded and silver in Jewellery. Chapter 5 discusses second objective: India‟s Exports of Gems and Jewellery Sector for 5 years, with particular focus on US market. Here, item wise exports to US are tabulated and data regarding that from 2004 to 2009 are shown. Further graphs are made for analyzing the data. Chapter 6 gives a brief idea on the third objective: Market share of India in US market as compared to other competing countries. A comparison is made between India and its competitors in US market on the basis of their share in US imports. Further trends of India‟s share in US imports are discussed for a period of time. Chapter 7 gives a brief summary on the fourth objective: Initiatives and measures undertaken by the Government of India for Gems and Jewellery sector. Further Highlights of Foreign Trade Policy 2009-14 are discussed related to this sector. Chapter 8 discusses the fifth and the last objective: Strategy for enhancing exports to US market. Strategy is devised and represented through Ansoff Matrix. The last chapters 9 and 10 discuss the Future outlook of the Industry and Conclusion.
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Table of Contents
Chapter 1 Introduction ........................................................................................................................9 Background of the problem task undertaken ....................................................................9 Project Objectives ............................................................................................................9 Research Methodology ...................................................................................................10 Limitations of the Methodology .....................................................................................11 Chapter 2 Evolution of Jewellery Industry in India .......................................................................12 Chapter 3 Introduction to Indian Gems and Jewellery Industry ..................................................13 Changing Scenario .........................................................................................................14 Indian Gems & Jewellery Industry Profile .....................................................................14 Key Indian Markets ........................................................................................................15 Chapter 4 The Industry Structure....................................................................................................16 Diamond Processing .......................................................................................................18 Retail Jewellery ..............................................................................................................19 ITC HS Code wise detail of the Commodity being Exported ........................................20 Chapter 5 India’s Exports of G&J Sector for Latest 5 Years, With Particular Focus on US Market... ............................................................................................................................22 Chapter 6 Market Share of India in US Market as Compared to other Competing Countries….. ............................................................................................................................................40 Trends in India's Share of CPD Imports in US Gems & Jewellery Market ...................42 Chapter 7 Government Policy...........................................................................................................44

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Chapter 8 Recommendation & Strategy for Enhancing Exports to Us Market ..........................47 Ansoff‟s Model ..............................................................................................................47 Key areas to focus for developing a strategy for Exports to US ....................................47

Chapter 9 Future Outlook .................................................................................................................49 Chapter 10 Conclusion ........................................................................................................................52 Appendix A .......................................................................................................................53 Annexure I ........................................................................................................................54 Bibliography .....................................................................................................................60

List of Illustrations
Figure 1: Key Indian Markets........................................................................................15 Figure 2: Diamond processing & Value chain ..............................................................19

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List of Tables
Details Table 1: HS 7101 Table 2: HS 7112 Table 3: HS 7113 Table 4: HS 7114 Table 5: HS 7115 Table 6: HS 7116 Table 7: HS 7117 Table 8: HS 7118 Table 9: HS 7119 Table 10: HS 7110 Table 11: HS 7111 Table 12: HS 7112 Table 13: HS 7113 Table 14: HS 7114 Table 15: HS 7115 Table 16: HS 7116 Table 17: HS 7117 Table 18: HS 7118 Table 19: US imports of Gems and Jewellery Table 20: Share of countries in US imports Page No. 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

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1. Introduction
Background of the Problem Task Undertaken It is an opportunity to do the winter project on Gems and Jewellery Sector of India which is the second largest earner of foreign exchange only next to Textile sector. Project on Gems and Jewellery Sector of India is uncommon & that on its export to US Market is rare. As we know, US, the largest consumer in the world and hence is a lucrative market. Thus exports to US are everyone‟s priority. There are many countries exporting to US and are in direct competition with India. Thus every move of India shall be a strategic move and shall have a long term benefit out it. Hence there is a requirement of devising a strategy for the Indian Gems and Jewellery Sector for exports to US. This strategy will help all the players in this sector to incorporate this strategy in its core activities and get a competitive advantage over the other countries exporting to US. So, selecting a project on “Competitive Analysis of Indian Gems & Jewellery Sector in US Market” is an obvious & important decision. Project Objective   To study the structure of the Gems & jewellery industry in India. To analyse India‟s exports of G&J sector for latest 5 years, with particular focus on US market.  To analyse the market share of India in US market as compared to other competing countries.   To study Government Policy regarding promotion of exports of G&J sector. To develop strategy for enhancing exports to US market.

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Research Methodology The primary objective of doing this project is to get an insight of Indian Gems and Jewellery Sector and devise a strategy for exports to US Market. Since we are not comparing two different countries on the basis of their export value, rather we are analyzing the sector on the basis of its past performance in order to devise a strategy which will give Indian Gems and Jewellery Sector a competitive advantage over other countries exporting to US. Hence Exploratory Research Design is the need of the hour. Further there are few reasons which made me to use Exploratory Qualitative research:  It is not always desirable or possible to use fully structured or formal methods to obtain information from respondents.  People may be unable & unwilling to answer certain questions or unable to give truthful answers.  People may be unable to provide accurate answer to question that tap their sub consciousness. Thus, project research methodology is as follows:  In Primary data, Qualitative research through In-Depth Interviews has been adopted. For interviews non–structured open-ended questions were used. (See Annexure 1) Few Exporters were consulted in order to get an insight of the industry based in Surat, Mumbai & Udaipur. They are: o Vishal Dotia G.K. International, 204, Ashok Chamber, Daliya Sheri, Mahindra Pura, Surat, Gujarat Ph – 09374538226 o Manish Dharmawat Silver Art Craft, 34, Bapu Bazar, Udaipur, Rajasthan Ph – 09214658911 o Asid Dotia Asid Gems, 4-A1 Ratan House, Opposite central plaza Cinema, Raja Rammohan Roy Road, Mumbai, Maharashtra. Ph – 09322644531
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In Secondary data external research was done. For external research Internet website, journals, magazines & published books were consulted.

Limitations of the Methodology 1. Concern about the validity: the issue arises from the fact that qualitative research does not rely on tests for reliability & credibility that are external to data collection & analysis. 2. Labour intensive data collection: it can be extremely time consuming. Data collection is the labour intensive process the researcher immerses himself or herself to build an understanding of the organization, through contact with the employees, exposure to the norms & familiarity with their practices. 3. Conclusion & interpretation of qualitative research: they are primarily communicated in the form of case studies. The case study is written after an extensive process of data collection through interviewing & participant observation. 4. Need for training in qualitative research: There is a need of training in qualitative research methodology. Persons having low knowledge in this field don‟t go for such methodology.

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The Indian subcontinent has the longest continuous legacy of jewellery making anywhere since Ramayana and Mahabharata times. While Western traditions were heavily influenced by waxing and waning empires, India enjoyed a continuous development of art forms for some 5000 years. One of the first to start jewellery making were the peoples of the Indus Valley Civilization. By 1,500 BC the peoples of the Indus Valley were creating gold earrings and necklaces, bead necklaces and metallic bangles. Before 2,100 BC, prior to the period when metals were widely used, the largest jewellery trade in the Indus Valley region was the bead trade. Beads in the Indus Valley were made using simple techniques. First, a bead maker would need a rough stone, which would be bought from an eastern stone trader. The stone would then be placed into a hot oven where it would be heated until it turned deep red, a colour highly prized by people of the Indus Valley. The red stone would then be chipped to the right size and a hole drilled through it with primitive drills. The beads were then polished. Some beads were also painted with designs. This art form was often passed down through family; children of bead makers often learnt how to work beads from a young age. Jewellery in the Indus Valley was worn predominantly by females, who wore numerous clay or shell bracelets on their wrists. They were often shaped like doughnuts and painted black. Over time, clay bangles were discarded for more durable ones. In India today, bangles are made out of metal or glass. Other pieces that women frequently wore were thin bands of gold that would be worn on the forehead, earrings, primitive brooches, chokers and gold rings. Although women wore jewellery the most, some men in the Indus Valley wore beads. Small beads were often crafted to be placed in men and women‟s hair. The beads were about one millimetre long. A female skeleton (presently on display at the National Museum, New Delhi, India) wears a carlinean bangle (a bracelet) on her left hand. India was the first country to mine diamonds, with some mines dating back to 296 BC. India traded the diamonds, realizing their valuable qualities. This trade almost vanished 1,000 years after Christianity grew as a religion, as Christians rejected the diamonds which were used in Indian religious amulets. Along with Arabians from the Middle East restricting the trade, India‟s diamond jewellery trade lulled. Today, many of the jewellery designs and traditions are still used and jewellery is commonplace in Indian ceremonies and weddings.
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India is a leading player in the global gems and jewellery market. The gems and jewellery industry occupies an important position in the Indian economy. It is a leading foreign exchange earner, as well as one of the fastest growing industries in the country. The GJ sector may be further categorised into the following sub-sectors based on characteristics, processing techniques, preciousness in terms of price range and marketability.  Gemstones o Diamonds o Coloured Stones-precious, semi-precious, synthetic  Jewellery o Plain gold Jewellery o Studded Jewellery o Silver Jewellery o Costume Jewellery  Pearls

The two major segments of the GJ business in India are gold jewellery 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 in the form of either polished diamonds or finished diamond jewellery is exported. Gold jewellery forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond studded as well as gemstone studded jewellery. Preference for gold dominates the domestic jewellery demand. The domestic demand for gold jewellery is estimated at Rs. 390 billion in 2005, accounting for an estimated 80% of the Indian jewellery market of Rs. 490 billion. The balance comprises diamond jewellery (Rs. 80 billion), and other fabricated jewellery (Rs. 20 billion). The Indian gems and jewellery industry is competitive in the world market due to its low cost of production and the availability of skilled labor. In addition, the industry has set up a worldwide distribution network, of more than 3,000 offices for the promotion and marketing of Indian diamonds.

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3.1) Changing Scenario

YESTERDAY Unbranded Silver & Gold jewellery Investment Traditional design Marriage & festival is peak season

TODAY Branded Gold & Diamond jewellery Investment + Fashion Fashionable & innovative design Wearability and gifts

3.2) Indian Gems & Jewellery Industry Profile Parameters Domestic Industry Size – 2008 Expected size of industry (2015) Exports (2008) Export of cut and polished diamonds (2008) Export of gold jewellery (2008) Export of coloured gemstones (2008) Source: KPMG Analysis Statistics US $ 16.1 billion US $ 30 billion US $ 20.8 billion US $ 14.2 billion US $ 5.6 billion US $ 276.4 million

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3.3) Key Indian Markets

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The Gems and Jewellery (G&J) market essentially comprises of sourcing, processing, manufacturing and selling of precious metals and gemstones, such as, Gold, Platinum, Silver, Diamond, Ruby, and Sapphire etc. The G&J market is a significant contributor to the Indian economy, based on the size of the domestic market and through its contribution to the country‟s exports. The GJ industry has registered a remarkable growth with exports having grown from US $29.35 million in 1966-67 to US $ 21.11 billion in 2008-09 accounting for 19.1 percent of total Indian exports. Export of cut and polished diamonds (CPD) accounts for 67% of the export basket of Indian Gems and Jewellery and is therefore a leading foreign exchange earner for India. India is the largest consumer of gold (around 20 percent of global consumption) and also the largest diamond processor (around 90 percent by pieces and 55 percent by value) of the global market.

India’s G&J industry is highly unorganized and fragmented with 96 percent of the total players being family owned businesses. The gold processing industry has around 15,000 players, with only 80 having revenues over USD 5 million. India is also home to around 450,000 goldsmiths, 100,000 gold jewellers along with 6,000 diamond processing players and 8,000 diamond jewellers. The value chain of the industry starts from sourcing and mining of the metals and extends to jewellery retail. While India is not a major miner of previous metals and stones, the country‟s inexpensive and well skilled workforce makes it a
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world leader in processing of diamonds. The country‟s jewellery retail sector is also expected to evolve with a shift among consumers towards branded jewellery, driven by greater quality consciousness. However, the Indian diamond industry has traditionally been claimed to be a part of the unorganized sector of the economy. A majority of India‟s skilled diamond workforce is employed by small family owned firms or CPD units that process diamonds on a job-lot basis. In the 80s and 90s, the diamond industry was largely criticized for the poor working conditions of the hundreds of one and two room units mushrooming in Surat and nearby places. Even today, there exists a huge network of traders, manufacturers, artisans and brokers engaging perhaps more than a million people. Also, it appears to be difficult for anyone to predict the actual number of diamond manufacturing units or the actual number of people employed, as processing is done in large, medium and small units spread across the state and reaches many villages and even homes for which there are no records. As in any other industry, some CPD units have performed better and have grown faster. As a result different sizes of units exist which can be categorized as small, medium and large depending on the number of diamond pieces, the size of individual diamond piece and the quality or grade of diamond being polished. The large-sized diamond units are few in numbers but have risen to be centres of excellence in various aspects of management of resources, human and material, and of doing business, both within and outside the country. Some of these Indian diamond polishing factories are today, at par with the world‟s best and make use of laser machines, computerized yield planning machines, advanced bruiting lathes, diamond impregnated scaives, etc. According to a survey conducted by GJEPC, the percentage share of the organized sector increased from 9 % in 1995 to 45 % in 1998. What we witness today is that the industry is becoming increasingly organized. The recent recession has also paved the way for consolidation. The Indian Gems and Jewellery (GJ) industry is one example of a labor-intensive, unorganized sector which has witnessed phenomenal growth in the last few decades. Within the Gems and Jewellery Industry, the Indian CPD (cut and polished diamond) sector contributes more than 80% to the Gems and Jewellery industry and is comprised of a large unorganized sector in excess of 100,000 small to medium-sized family run firms, which rely on the craftsmanship of their mostly uneducated employees to produce the lion‟s share of the
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world‟s market in cut and polished diamonds (personal conversation, 2006). This industry and this sector provide an ideal setting to study the criteria for success for such new organizational forms. These unorganized, globally dispersed companies appear to gel or „fit‟ into a more „organized‟ framework later in the value. The Gems and Jewellery Export Promotion Council (GJEPC) is the apex governing body of the Indian Gems and Jewellery industry and was set up by the Ministry of Commerce and Industry, Government of India, in 1966 with a purpose to effectively mould the scattered efforts of individual exporters towards evolution of the industry and to undertake various activities as trade facilitator and as an advisory. There are a few major players in the G&J segment, with Rajesh Exports being the most dominant name. Other key players in the field include Gitanjali Gems, Suhashish Diamonds, Su-Raj Diamonds, Vaibhav Diamonds and Tanishq. Many of these players are focused on developing strong brands, large retail operations, strengthening their core manufacturing operations and building a strong international presence. India‟s large population and rapid economic growth offer significant opportunities for growth of the industry. The emergence of jewellery retail chains provide customers with convenience and assurance of quality. The entry of foreign players is also likely to increase competition and provide consumers with greater choice. Apart from the above, there are other factors that contribute to a favourable outlook for the industry. 4.1) Diamond Processing Diamond processing takes place in about 30 countries but is concentrated in five countries: India, Belgium, S Africa, Israel and U.S. India accounts for approximately 60% of the global polished diamonds in value terms, 80% in karatage and 90% in pieces. China and Thailand are catching up as centres for diamond cutting and polishing. The diamond processing industry is largely dependent on supply of rough diamonds. Australia, Botswana, Russia and South Africa are the major suppliers of rough diamonds. The production of rough diamonds from mines is presently dominated by De Beers (DTC), which is the largest diamond miner in the World. Diamond cutting is a great skill. The natural form of a diamond would determine the shape of the final polished diamond. Diamonds are usually distributed to one of the main cutting and trading centres where experts cut and polish rough diamonds into various shapes. Polishing follows cutting
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before diamonds are again classified based on various parameters. These are then sold to wholesalers or diamond jewellery manufacturers. India‟s dominance in the cutting and polishing segment can be attributed to experienced craftsmanship and relatively low cost Indian labour. Diamond processing remains highly fragmented in India with over 100,000 units. 4.1.1) Diamond processing & Value chain

While diamond processing is one of the major components in the value chain, it yields thin margins as cost of the raw material comprises 85-95% of the selling price. The diamond processing industry is presently working at a margin of 2-2.5%. Companies have started to look at downstream aspects where manufacturer/exporter of diamonds and jewellery are shifting focus to branding and retailing. Profitability in the branding and retail business is much higher. 4.2) Retail Jewellery The size of India’s retail jewellery industry is USD 12bn, 80% of which is gold jewellery. The Indian retail jewellery sector is dominated by the unorganized sector (9596%). The industry is highly fragmented with about 400,000 retail units and about 800,000 goldsmiths. No single pan India retail format has emerged yet. However, the share of organized retail has been slowly but increasingly catching up from 1.9% in 2004 to 4% at present. It is estimated that the share of organized sector is growing at 30-40% yearly. Globally, organized retailing comprises of 30% of total jewellery sales.

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India has been the largest consumer of gold jewellery in the world and has a natural and cultural affinity toward jewellery. It is expected that branded jewellery market in India is set to grow at a much faster rate because of various factors like:      High and growing disposable income in India Growing perception of jewellery as a fashion accessory rather than investment Growing brand awareness amongst young Indians Retail revolution Increasing advertising and promotional campaigns

4.3) ITC HS Code wise detail of the Commodity being Exported HS Code 71: Natural Or Cultured Pearls, Precious Or Semiprecious Stones, Precious Metals, Clad With Precious Metal And Articles Thereof; Imitation Jewellery; Coin HS Code 7101 7102 7103 Commodity Description Natural Cultured Pearls WHETHER OR NOT Worked/Grade Not Strong Ungraded Pearls Temporarily Strung For Transport Diamonds, Whether or not Worked, But not Mounted or Set Precious(Excl Diamonds)& Semi Precious Stones Whether or not Worked/Grade Not Strong Mounted/Set Ungraded Precious/Semi Precious Stones Temporarily Strung For Transport Synthetic Precious/Semi Precious Stones Whether or not Worked Graded Not Strung Mounted/Set Ungraded Synthetic Etc Precious/Semi Precious Stone Temporarily Strung Dust And Powder Of Natural Or Synthetic Precious Or Semi Precious Stones Silver (Include Silver Plated With Gold/Platinum) Unwrought/In Semi Manufactured Form/In Powder Form Base Metal Clad With Silver Only Semi Manufactured Gold(Include Gold Plated With Platinum)Unwrought Or In Semi manufactured Forms/In Powder Form Semi Manufactured Base Metals/Silver Clad With Gold Platinum Unwrought/Semi Manufactured/Pwdr Forms Smi Manufactured Bs Metals; Silver/Gold, Clad With Platinum Waste & Scrap Of Precious Metals/Metals Clad With Precious Metal Waste & Scrap Containing Precious Metals/Metals Compound Used Principally For The Recovery Of Precious Metals
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7104 7105 7106 7107 7108 7109 7110 7111 7112

7113 7114 7115 7116 7117 7118

Articles Of Jewellery & Parts Thereof; Of Precious Metals/Of Metals Clad With Precious Metal Articles Of Goldsmith‟s/Silversmith‟s Wares & Parts Of Precious Metals/Metals Clad With Precious Metals Other Articles Of Precious Metal Or Of Metal Clad With Precious Metal Articles Of Natural/Cultured Pearls Precious/Semi Precious Stones(Natural Synthetic/Reconstructed) Imitation Jewellery Coin

HS code is a standardized multi-functional system to classify goods, universally applied by governments of all countries, international organizations and individuals in many other fields, such as domestic tax, trade policy, price control, quota control, budgeting, and economic research and analysis. Therefore HS Code becomes a universally recognized classification standard and economic language.

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Table 1: 7101

Data Showing Exports of India's Gems & Jewellery Sector to US for 5 Years Ending 2008-09 Comparision by % of Growth for Commodities: HS 7101 to 7118
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2,302.11 856.98 6,679.27 299.68 34.47 61,85,157.26 17.15 0.04 2005-2006 445.59 -80.64 1,035.45 -84.5 43.03 76,82,808.22 24.21 0.01 2006-2007 138.11 -69.01 880.7 -14.95 15.68 85,36,848.47 11.12 0 2007-2008 163.05 18.06 1,141.13 29.57 14.29 83,38,806.90 -2.32 0 2008-2009 552.47 238.83 960.98 -15.79 57.49 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Nov 5, 2009

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Table 2: 7102

2) Commodity: 7102 Diamonds, Whether or not Worked, But not Mounted or Set
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 11,06,998.25 -4.58 46,60,651.67 22.16 23.75 61,85,157.26 17.15 17.9 2005-2006 11,57,297.74 4.54 51,41,052.74 10.31 22.51 76,82,808.22 24.21 15.06 2006-2007 11,31,650.09 -2.22 47,93,544.32 -6.76 23.61 85,36,848.47 11.12 13.26 2007-2008 2008-2009 12,39,634.72 9,73,858.97 9.54 57,18,808.32 19.3 21.68 83,38,806.90 -2.32 14.87 -21.44 47,90,652.07 -16.23 20.33 70,28,392.75 -15.71 13.86

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 3: 7103 3) Commodity: 7103 Precious Stones & Semi-precious Stones, not strung or temporarily strung, not Mounted or Set (Excluding Diamond)

Country: U S A S.No. 1 Values in Rs. Lacs 2 3 4 5 6 7 8 %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6)


2004-2005 40,577.56 -17.18 1,08,153.27 11.21 37.52 61,85,157.26 17.15 0.66

2005-2006 2006-2007 51,046.65 43,993.64 25.8 1,18,772.94 9.82 42.98 76,82,808.22 24.21 0.66 -13.82 1,19,224.31 0.38 36.9 85,36,848.47 11.12 0.52

2007-2008 36,462.09 -17.12 1,12,855.22 -5.34 32.31 83,38,806.90 -2.32 0.44

2008-2009 29,368.48 -19.45 95,580.44 -15.31 30.73 70,28,392.75 -15.71 0.42

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 4: 7104

4) Commodity: 7104 Synthetic Precious & Semi Precious Stone
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 169.02 -1.37 1,898.94 24.86 8.9 61,85,157.26 17.15 0 2005-2006 138.64 -17.97 1,035.79 -45.45 13.39 76,82,808.22 24.21 0 2006-2007 193.5 39.57 1,083.47 4.6 17.86 85,36,848.47 11.12 0 2007-2008 98.05 -49.33 1,018.65 -5.98 9.63 83,38,806.90 -2.32 0 2008-2009 73.55 -24.99 6,991.41 586.34 1.05 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 5: 7105

5) Commodity: 7105 Dust & Powder OF Natural or Synthetic Precious or Semi Precious Stones
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 1,438.17 220.46 11,773.80 468.11 12.22 61,85,157.26 17.15 0.02 2005-2006 314.58 -78.13 6,996.81 -40.57 4.5 76,82,808.22 24.21 0 2006-2007 328.06 4.29 3,933.20 -43.79 8.34 85,36,848.47 11.12 0 2007-2008 855.52 160.79 5,341.23 35.8 16.02 83,38,806.90 -2.32 0.01 2008-2009 545.71 -36.21 1,420.23 -73.41 38.42 70,28,392.75 -15.71 0.01

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 6: 7106
6) Commodity: 7106 Silver (Including Silver Plated with Gold or Platinum), Unwrought or in Semi-Manufactured Forms, or in Powder Form

Country: U S A S.No. 1 Values in Rs. Lacs 2 3 4 5 6 7 8 %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6)

Year 2004-2005 85.52 246.1 2,312.55 327.68 3.7 61,85,157.26 17.15 0

2005-2006 2006-2007 98.74 428.67 15.47 1,990.24 -13.94 4.96 76,82,808.22 24.21 0 334.13 8,141.76 309.08 5.27 85,36,848.47 11.12 0.01

2007-2008 2008-2009 1,645.20 1,192.83 283.79 4,664.86 -42.7 35.27 83,38,806.90 -2.32 0.02 -27.50 4,298.99 -7.84 27.75 70,28,392.75 -15.71 0.02

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 7: 7107

7) Commodity: 7107 Base Metals Clad with Silver, not Further Worked than Semi-Manufactured
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Exports to US (in Rs. Lacs) %Growth (US) Total export of commodity (World) %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 0 6.65 37.98 61,85,157.26 17.15 2005-2006 4.03 15.72 136.43 25.66 76,82,808.22 24.21 0 2006-2007 0.98 -75.75 8.87 -43.54 11.02 85,36,848.47 11.12 0 2007-2008 6.66 580.81 31.96 260.17 20.83 83,38,806.90 -2.32 0 2008-2009 7.22 8.41 11.93 -62.67 60.52 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 8: 7108

8) Commodity: 7108 Gold(Including Gold Plated With Platinum)Unwrought or In Semi Manufactured Form/In Powder Form
Country: U S A S.No. Year 1 Exports to US (in Rs. Lacs) 2 3 4 5 6 7 8 %Growth Total export of commodity (World) %Growth %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) 2004-2005 0 35.77 700.04 61,85,157.26 17.15 2005-2006 127.23 132.36 270.07 96.12 76,82,808.22 24.21 0 2006-2007 137.85 8.35 454.5 243.37 30.33 85,36,848.47 11.12 0 2007-2008 2008-2009 185.98 22.39 34.91 1,876.15 312.8 9.91 83,38,806.90 -2.32 0 -87.96 595.85 -68.24 3.76 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 9: 7109

9) Commodity: 7109 Base Metals or Silver, Clad with Gold, not further Worked than Semi-Manufactured
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Exports to US (in Rs. Lacs) %Growth Total export of commodity (World) %Growth %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2005-2006 2006-2007 2007-2008 0 2.9 15.65 0.21 439.58 2.26 -95.59 61,85,157.26 17.15 6.61 192.87 43.88 24.21 0 29.91 352.6 52.31 11.12 0 -98.67 4.41 -85.25 4.71 -2.32 0 2008-2009 0.04 -80.95 6.78 53.74 0.59 70,28,392.75 -15.71 0

76,82,808.22 85,36,848.47 83,38,806.90

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 10: 7110

Commodity: 7110 Platinum Unwrought/Semi Manufactured/Powder Form
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 192.98 -35.46 1,990.57 22.81 9.69 61,85,157.26 17.15 0 2005-2006 431.34 123.52 4,752.89 138.77 9.08 76,82,808.22 24.21 0.01 2006-2007 2007-2008 2008-2009 604.51 662.87 1,424.55 40.15 6,381.45 34.26 9.47 85,36,848.47 11.12 0.01 9.65 8,700.91 36.35 7.62 83,38,806.90 -2.32 0.01 114.91 2,870.23 -67.01 49.63 70,28,392.75 -15.71 0.02

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 11: 7111

11) Commodity: 7111 Semi Manufactured Base Metals;Silver/Gold,Clad With Platinum
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Year 2004-2005 Export to US (in Rs. Lacs) 0.22 %Growth Total export of commodity (World) %Growth %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) 132.88 3.15 -77.8 7.13 61,85,157.26 17.15 0 2005-2006 27.57 12,181.69 154.66 4,814.73 17.83 76,82,808.22 24.21 0 85,36,848.47 11.12 0 83,38,806.90 -2.32 0 2006-2007 0 -100 1,028.32 564.89 20.69 -97.99 7.49 -63.80 22.56 70,28,392.75 -15.71 0 2007-2008 2008-2009 0 1.69

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 12: 7112 12) 7112: Waste & Scrap of Precious Metals/Metals Clad With Precious Metal Waste & Scrap Containing Precious Metals/Metals Compound Used Principally For The Recovery Of Precious Metals

Country: U S A S.No. 1 Values in Rs. Lacs 2 3 4 5 6 7 8

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 318.09 465.85 11.38 83.99 54.06 -77.16 1,774.37 -20.68 17.93 61,85,157.26 17.15 0.01 46.45 21,016.85 1,084.47 2.22 24.21 0.01 -97.56 46,913.60 123.22 0.02 11.12 0 638.27 73,306.45 56.26 0.11 -2.32 0 -35.64 39,147.67 -46.60 0.14 70,28,392.75 -15.71 0

%Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6)

76,82,808.22 85,36,848.47 83,38,806.90

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 13: 7113

13) Commodity: 7113 Articles Of Jewellery & Part Thereof; Of Precious Metal/Of Metal Clad With Precious Metal
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 6,62,256.56 7,18,729.67 9,67,833.48 7,17,064.43 4,76,173.33 36.98 49.14 48.99 17.15 10.71 8.53 12.04 47.45 24.21 9.36 34.66 40.33 45.53 11.12 11.34 -25.91 19,67,108.86 -7.45 36.45 83,38,806.90 -2.32 8.6 -33.59 16,13,175.91 -17.99 29.52 70,28,392.75 -15.71 6.77 13,51,942.23 15,14,660.14 21,25,523.31

61,85,157.26 76,82,808.22 85,36,848.47

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 14: 7114 14) Commodity: 7114 Articles of goldsmith's or silversmith's wares and parts thereof, of precious metal or of metal clad with precious metal

Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs Year 2004-2005 2005-2006 2006-2007 2007-2008 3,234.47 5,508.55 6,311.30 4,902.39 -2.25 12,813.53 -10.6 25.24 61,85,157.26 17.15 0.05 70.31 23,605.53 84.22 23.34 76,82,808.22 24.21 0.07 14.57 1,17,397.22 397.33 5.38 85,36,848.47 11.12 0.07 -22.32 22,640.61 -80.71 21.65 83,38,806.90 -2.32 0.06 2008-2009 2,401.32 -51.02 9,572.56 -57.72 25.09 70,28,392.75 -15.71 0.03

%Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6)

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 15: 7115

15) Commodity: 7115 Other articles of precious metal or of metal clad with precious metal
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2005-2006 2006-2007 2007-2008 6.55 39.73 15.2 14.99 147.38 245.33 -12.62 2.67 61,85,157.26 17.15 0 506.53 193.94 -20.95 20.48 76,82,808.22 24.21 0 -61.74 1,204.02 520.82 1.26 85,36,848.47 11.12 0 -1.39 3,217.09 167.2 0.47 83,38,806.90 -2.32 0 2008-2009 12.14 -19.01 2,440.98 -24.12 0.50 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 16: 7116

16) Commodity: 7116 Articles of natural or cultured pearls, precious or semi-precious stones(natural, synthetic or reconstructed) Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 586.12 777.21 62.03 43 114.39 -59.84 4,059.82 -4 14.44 61,85,157.26 17.15 0.01 32.6 1,355.72 -66.61 57.33 76,82,808.22 24.21 0.01 -92.02 186.06 -86.28 33.34 85,36,848.47 11.12 0 -30.68 150.22 -19.27 28.63 83,38,806.90 -2.32 0 166.02 216.85 44.35 52.75 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 17: 7117

17) Commodity: 7117 Imitation jewellery
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 2005-2006 2006-2007 7,073.95 15,189.55 10,016.10 40.99 3,03,038.77 250.18 2.33 61,85,157.26 17.15 0.11 114.73 1,45,614.41 -51.95 10.43 76,82,808.22 24.21 0.2 -34.06 48,898.66 -66.42 20.48 85,36,848.47 11.12 0.12 2007-2008 8,973.08 -10.41 53,538.77 9.49 16.76 83,38,806.90 -2.32 0.11 2008-2009 9,236.40 2.93 51,787.16 -3.27 17.84 70,28,392.75 -15.71 0.13

Source: DGCI&S, Kolkata Dated: Nov 5, 2009

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Table 18: 7118

18) Commodity: 7118 Coin
Country: U S A
S.No. 1 2 3 4 5 6 7 8 Values in Rs. Lacs %Growth (US) Total export of commodity %Growth (World) %Share of country (1 of 3) Total export to country %Growth %Share of commodity (1 of 6) Year 2004-2005 16.65 -62.56 19,027.66 73.4 0.09 61,85,157.26 17.15 0 2005-2006 7.87 -52.7 38,480.01 102.23 0.02 76,82,808.22 24.21 0 2006-2007 29.84 278.95 3,582.38 -90.69 0.83 85,36,848.47 11.12 0 2007-2008 43.01 44.14 1,883.88 -47.41 2.28 83,38,806.90 -2.32 0 2008-2009 1.4 -96.74 13,009.34 590.56 0.01 70,28,392.75 -15.71 0

Source: DGCI&S, Kolkata Dated: Nov 5, 2009


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Table 19

6.1) US Imports of Gems & Jewellery (In thousands of Dollars) Country 2004 2005 2006
Belgium China Israel Italy India South Africa Switzerland Thailand Other Countries Total 27,44,915 28,40,542 28,30,255 21,86,767 25,53,432 28,81,018 49,33,686 53,95,979 57,13,279 10,57,431 9,96,858 9,90,488 45,15,517 50,29,779 58,60,865 8,14,786 8,09,309 10,30,622 19,51,788 22,29,718 24,10,119 12,90,282 13,00,943 14,92,624 79,72,583 93,44,343 98,25,407 2,74,67,755 3,05,00,903 3,30,34,677

2007 2008 % Share in 2008 30,24,194 32,73,815 9.67 30,99,197 29,48,644 8.71 61,25,398 62,24,467 18.39 9,57,901 7,43,535 2.20 61,89,775 55,86,749 16.51 11,40,557 11,17,791 3.30 26,90,258 29,87,214 8.83 15,50,298 12,49,133 3.69 1,04,07,145 97,16,708 28.71 3,51,84,723 3,38,48,056 100.00

Source: US Census Bureau, 2008 Note: Gems & Jewellery includes – Jewellery (watches, rings, etc.), Gem diamonds-uncut or unset & other gem stones-precious, semiprecious, and imitation jewellery.

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Table 20

6.2) Share of Countries in US Imports of Gems & Jewellery (In thousands of Dollars) Country % Share in 2008 % Share in 2007 % Share in 2006 % Share in 2005 % Share in 2004
Belgium China Israel Italy India South Africa Switzerland Thailand Other Countries Total
Source: US Census Bureau, 2008

9.67 8.71 18.39 2.20 16.51 3.30 8.83 3.69 28.71 100.00

8.60 8.81 17.41 2.72 17.59 3.24 7.65 4.41 29.58 100.00

8.57 8.72 17.29 3.00 17.74 3.12 7.30 4.52 29.74 100.00

9.31 8.37 17.69 3.27 16.49 2.65 7.31 4.27 30.64 100.00

9.99 7.96 17.96 3.85 16.44 2.97 7.11 4.70 29.03 100.00

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6.3) Trends in India's Share of CPD Imports in US Gems & Jewellery Market Trends in the world's largest diamond jewellery market, the US, highlight the growing presence of India in the cutting and polishing of lower-sized diamonds. Although the US accounts for less than 1% of the world diamond production, it is the largest gemstone and diamond market in the world, accounting for 51% of world retail diamond jewellery sales of US$62.5 billion in 2005. Polls conducted by US jewellery retailers' associations indicate that around two-thirds of domestic consumers designate diamond as their favourite gemstone. After a decline in 2001 following the economic slowdown of the first half of 2001 and the economic effects of the terrorist attacks, US diamond sales recovered to US$27.2 billion in 2002, and to US$32 billion in 2005. After a 10.8% decline in imports of CPD into the US during 2001 (caused by the terrorist attacks), imports of CPD into the US have increased during 2002-05. The average price also increased from US$619.2 p/c in 2001 to US$907 in 2005. There is a two-tier market in the US: a potentially growing market of diamond jewellery with little or no diamond value, and a market of expensive goods with diamond values of US$1,000 and more. During 2005, Israel supplied 52.7% of all imports of CPD by value into the US, followed by India (20%), and Belgium (18.3%). However, India's market share has marginally declined from 22.9% during 2002, mainly because of a shift in the US market towards higher-sized diamonds. The reduced market share for India is also because of lower market share in the lower-priced diamonds. The market share loss was to Israel. As the table below indicates, while Israel dominates the US market for larger-sizes with a market share of 60.3% in value terms during 2005, India controlled 68.6% of the US market for lower-sizes. India's overall market share in value terms increased from 22.9% during 2002 to 20% during 2005. The reduced market share of India is reflective of the shift in the US market during recent years, with a shift in the price ranges of retail jewellery purchases from the under US$500 price range to the US$500-2,000 price range, caused by economic growth. Significantly, while India's market share in small-sizes increased from 62.9% in 2001 to 68.6% in 2005, its share of large-sizes increased from 5.3% in 2001 to 9.9% in 2005, and to 10.7% in January-April 2006. The increased market share in larger-sizes, alongwith dominant position in lower sizes, has resulted in an increase in p/c realisation of Indian exports to the US-from US$197.5 in 2001 to US$304.3 in 2005. Though in terms of overall value India is still a small player when compared with the traditional centres, the rate
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of growth is increasingly significant. This implies that apart from dominating the smallersized segment, India has been consolidating its position in the larger-size segment.

However, trend in US imports of Gems & Jewellery has not change much as India’s share in US imports of Big Diamonds still hover around 20%, whereas, Israel hovers around 50% in 2008. The fall of Israel‟s Share is because of change in perception of other countries towards big diamonds. Moreover, the overall share of India in US imports of GJ hovers around 17% and its rival Israel holds around 18% in 2008, which is a close competition. There are other countries such as Belgium, China & Switzerland which holds 10%, 9% & 9% in 2008 respectively in US imports and are threats to India. Especially from China which has joined this sector very late but is growing steadily. Other countries which exports gems & jewellery to US are Italy, South Africa & Thailand which holds around 4%, 3% & 5% respectively in 2008. All above are the major exporting countries exporting gems & jewellery to US.
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Major measures undertaken by the government for Gems and Jewellery sector (in 2007) include:  Reducing the value addition norms for gold and silver jewellery exports from 7 per cent to 4.5 per cent  Allowing 100 per cent FDI in the gems and jewellery sector through the automatic route  Abolishing duty on polished diamonds in May 2007.  Setting up Gems and Jewellery Parks and SEZs to promote sectoral investments. Fiscal Stimulus Package (as on December 2008) Some of the measures announced in the stimulus package for the benefit the gems and jewellery sector include:  Increasing the Post Shipment Rupee Export Credit Period from 90 days to 180 days with effect from November 28, 2008.  Increasing the Pre-Shipment Rupee Export Credit Period from 180 days to 270 days with effect from November 15, 2008.  Providing an interest subvention of 2 percent up to March 31, 2009 subject to minimum rate of interest of 7 percent per annum, to make pre and postshipment export credit for labour intensive exports, such as gems & jewellery, more attractive.  Allowing exporters to avail refund of service tax on foreign agent commissions of up to 10 percent of FOB value of exports. They will also be allowed refund of service tax on output services while availing of benefits under Duty Drawback Scheme.  Extending the prescribed interest rate as applicable to Post Shipment rupee export credit period (not exceeding BPLR minus 2.5 percentage points) to overdue bills up to 180 days from the date of advance till further notice.

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Export facilitation measures by the Ministry of Commerce & Industry (as on 26th February 2009)  Gems and Jewellery, diamonds and precious metals have been given a special boost by the the Ministry of Commerce & Industry, the Export Promotion Council for Gems and Jewellery and Star Trading Houses (in the Gems and Jewellery sector), besides Diamond India Limited, MSTC Limited and STCL Limited have now been added under the list of nominated agencies notified under para 4 A.4 of foreign trade policy for the purpose of import of precious metals.  Surat in Gujarat, which is home to thousands of diamond units with lakhs of diamond workers, has been recognized as “Town of Export Excellence”.  The authorized persons of Gems and Jewellery units in Export Oriented Units shall be allowed personal carriage of gold in primary form up to 10 kg. in a financial year subject to RBI and customs guidelines.

Highlights of New Foreign Trade Policy for the year 2009-2014 The following measures have been announced for gem & jewellery sector:  Import of gold of 8 k and above is allowed under o Replenishment scheme subject to import being o Accompanied by an Assay Certificate specifying o Purity, weight and alloy content.  Duty Free Import Entitlement (based on FOB value of exports during previous financial year) of Consumables and Tools, for: o Jewellery made out of:  Precious metals (other than Gold & Platinum)– 2%
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 

Gold and Platinum – 1% Rhodium finished Silver – 3%

o Cut and Polished Diamonds – 1%   Duty free import entitlement of commercial samples shall be Rs. 300,000. Duty free re-import entitlement for rejected jewellery shall be 2% of FOB value of exports.  Import of Diamonds on consignment basis for Certification/ Grading & re-export by the authorized offices/agencies of Gemmological Institute of America (GIA) in India or other approved agencies will be permitted.  Personal carriage of Gems & Jewellery products in case of holding/participating in overseas exhibitions increased to US$ 5 million and to US$ 1 million in case of export promotion tours.  Extension in number of days for re-import of unsold items in case of participation in an exhibition in USA increased to 90 days.  In an endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse (s)”.  With an objective to meet the Dollar Credit needs of exporters, a Committee has been constituted with Finance Secretary, Commerce Secretary and Chairman IBA.

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8.1) Ansoff’s Model Market Penetration (Present product-Present market)  Provide EMI by tying up with banks in order to deliver the goods on time & have low pressure on repaying the credit.  Low cost and quality manufacturing.

Product Development (New product-Present market)  Find new applications to current users: Increasing the versatility of the product in terms of usage. For example, provision for using pendant as earrings, finger rings and vice versa. Market Development (Present Product- New Market)  Expand geographically: Opening new outlets in US and increasing the number of outlets in the existing cities. Diversification (New Product- New market)  Related: Gold and diamond studded buckles in belts and footwear.

8.2) Key areas to focus for developing a strategy for Exports to US Action Programmes for the Industry:   Develop demand for jewellery as a category Promote jewellery as a category instead of distinct metals and stones: „Unified Jewellery Marketing‟  Identify new product and consumer segments

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Manage the portfolio of markets:    Re-establish value proposition in developed markets Maximise potential of emerging markets Identify markets of the future

Enhance image of the industry in the eyes of governments, regulators and consumers:       Publish information Promote transparency in business Professionalize and transform family-owned businesses Attract talent from luxury goods industries Reduce the cost of financing Players to select strategic position and enhance individual capabilities

Compete on one of the four strategic positions:     Big brother (presence across the value chain) Volume player (large scale operations in a single segment) Specialist (possession of skills) Straddler (presence in adjacent segments)

Critical capabilities for segments:    Mining Sourcing and processing Jewellery fabrication

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Future growth in gold jewellery business is likely to driven by increased exports to US and other markets, and domestic consumption. Although domestic consumption has increased in 2005-08, consumption per capita is still very low, reflecting the high proportion of the rural population and the social infrastructure of the country (the rural population accounts for approximately 65-70% of domestic gold demand). The export business has been constrained by an inability to compete in global markets on basis of price and superior design capabilities. Historically, Indian gold jewellery designs have not found much favour in global markets because of their local and chunky designs. India has not adapted its designs to meet the occidental tastes. Thus, the Indian industry and WGC has introduced international jewellery designing competitions among the Indian artisans to create greater awareness about Indian artisans in the global market and also to expose Indian artisans to global design developments. There has also been an initiative by Gems and Jewellery Export Promotion Council (GJEPC) and the WGC to set up a number of design centres, targeted at training Indian jewellers in international manufacturing and designing skills. Such initiatives are likely to enhance the prospects of Indian gold and GJ jewellery exports business. The Indian diamond cutting and polishing industry has thrived because of increased exports. At present, India is the world's leading diamond cutting and polishing centre. The sharp increase in the exports of GJ during recent years is primarily attributable to pick-up in demand in major markets like the US, Belgium, Israel, and Hong Kong. GJ exports have also benefited from the supportive policy measures of the Government of India. Reflecting a pickup in demand in global market since 2002, Indian exports of cut and polished diamonds have increased at a 3-year CAGR of 16% during FY2004-08. The structure of the diamond-processing industry will change considerably and India‟s share of the processing pie will drop from 57 per cent today to around 49 per cent (in value terms) by 2015. China will emerge as a strong player with 21.3 per cent of the diamond processing share. By 2015, around nine per cent of the world's diamonds, in volume terms, will be processed locally by mining countries, with Angola, Namibia, and Botswana emerging as profitable CPD centres in Africa. Fragmentation of supply sources and slow diamond jewellery growth will make the rough diamond industry more demand sensitive.
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The rough diamond industry has seen trends such as increased fragmentation of rough diamond supply, emergence of new mines, local beneficiation movement in mining countries and a bull-run in precious metal prices. Jewellery fabrication has been affected by accelerating fashion cycles, relative factor costs between manufacturing and consuming nations, and volatile metal prices have fuelled a drive towards moving fabrication to low cost countries. The eight key scenarios that are likely to impact the industry are:         Mining countries encourage local beneficiation and capture a share of the polishing industry. Supply sources get fragmented and rough supply increases. Consolidation occurs across the jewellery value chain. Existing centres of the industry lose out in favour of new ones. Substitutes such as synthetic diamonds and non-precious metals capture a share of the precious jewellery market. Demand for plain gold jewellery declines. Large emerging retail markets such as China and India organise and consolidate. Jewellery loses out to competing luxury goods.

The industry has the potential to grow beyond USD 230 billion. The study estimates the range of impact to be around USD 50 billion, taking the industry size to USD 280 billion by 2015. In such a situation, the industry would be growing at a CAGR of 6.7 per cent, an increment of 2.1 per cent over the realistic case. At this rate, the industry would be growing faster than the Gross Domestic Product (GDP) per capita and would be claiming a share of the market from other luxury goods. Diamond and plain gold jewellery (product segments) and India and China (markets) will contribute the bulk of this incremental growth. This additional growth will also have a salutary impact on other parameters of industry health – inventory levels (will decrease from 19 per cent to 7.5 per cent), value addition will increase in the intermediate stages of the value chain (for example, in polishing from 29 per cent to 34 per cent). The Indian GJ industry has been built on polishing lower size and quality stones. Looking forward, since India already enjoys domination in the world cut and polished diamond market in general, and for smaller-sized diamonds in particular, the scope for significant increase in
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market share and growth in the traditional small size diamond exports is limited. Industry leaders are now seeking further growth through processing of larger size stones, and manufacture of diamond jewellery. Indian industry can now increasingly process the full range of sizes and qualities of stones utilising not only a cheap and abundant workforce, but also advanced technologies. Future growth is likely to be largely driven by the cutting and polishing of medium and large stones (currently dominated by Belgium and Israel), with higher realisations. The Indian GJ industry is already reporting increased growth in the larger-size segment. Export data from the GJEPC also report a gradual shift in Indian exports to higher value segments, reflected in higher p/c. Larger-sizes command higher p/c realisations and profits. Bulk buyers from the US and the European Union are increasingly buying Indian diamond studded jewellery, because of its affordability. Significant domestic and export opportunities for Indian industry could also arise because of a major promotional programme launched by DTC for leading Indian diamond and Jewellery manufacturers and exporters to boost the marketing of their products in India and abroad. Under this programme, which is known as supplier of choice, the DTC takes marketing initiative, targeted at creating incremental demand for diamonds and jewellery through direct partnerships with sight holders and retailers. The diamond industry is optimistic that the recent healthy growth in world GDP, and increased marketing expenditure could result in increased demand growth. Both China and India represent potential new sources of demand for diamonds. China has the potential to become a leading consumer of diamond jewellery. China's retail sales in recent years have shown strong growth relative to other centres. In India, diamonds are an established consumer product, but the potential size of the market is only just being recognised, especially in comparison with annual gold demand. The long-term outlook for the Indian diamond and jewellery industry continues to be positive. India's competitive advantage is likely to centre on its skilled labour combined with a ready adoption of leading-edge technology and an increasing degree of vertical integration.

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Today India is the largest manufacturer of diamonds in the world. It makes use of the latest automated machines, technology and tools. Government has realized the importance of technology in the diamond trade and has upgraded their facilities to a great extent. There cannot be a control on the amount of rough coming into our country. The polishing and marketing of diamonds has gained more importance. New markets and centers have started emerging and stones similar to small traditional Indian goods types are being polished in China and even in Thailand and Sri Lanka. India has 55 percent by value, 80 percent by volume and 90 percent by way of pieces. Though this being the current situation. It will not be difficult for the industry to grow by five to ten percent in terms of value because of our sizes of firms and our labor force. But a share of larger than seventy five percent will be difficult because of competition from other new markets, the mining companies themselves setting up manufacturing and polishing facilities and the rest of the market consists of high quality and colored diamonds. Though the Indian diamond market has a large share when compared to other markets, they will have to work hard for maintaining this position and will have to make continuous changes and innovations. The government will have to take steps in stopping illegal activities and threat of terrorism. The diamond industry should also look more into fancy and colored diamonds, which is the latest trend. They should also look into the new shaped diamonds that have been discovered.

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Appendix A Interview Questions

What was the impact of Global Financial Crisis on the exports of Gems and Jewellery Sector?

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How your company got affected? What was your strategy to tackle the declining exports? What should be the strategy to enhance the exports to US? What initiatives the sector has taken so far to achieve the competitive advantage over the other countries in this trade?

What according to you should be the core of having a competitive advantage over the competing countries and how to achieve it?

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What benefits you are expecting from the government? What according to you should be the Future Outlook of this sector?

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Annexure I Interview with Shreyas K Doshi, Chairman & Managing Director, Shrenuj & Company Limited, Anil Mascarenhas / 04:11 pm., Nov 09, 2009 Shrenuj is a global diamond and jewellery group established in 1906. Its core business is the manufacture of rough diamonds into premium polished diamonds and subsequent distribution through downstream channels. The group is vertically integrated, with sizeable jewellery manufacturing operations, branding programmes and, most recently, its own retailing activities, with operations spanning across 14 countries, employing over 2000 employees. Speaking with Anil Mascarenhas of India Infoline, Shreyas Doshi says, "The recession was a golden period for Shrenuj." What impact have you seen with the economic slowdown in most parts of the world? Like all other industries, the diamond-jewellery industry too was affected. However, the recession was a golden period for us as Shrenuj was able to set up shop in Botswana as DTC Botswana Sight holders. We replaced a sight holder that collapsed in the wake of the global credit crunch. This came as a strategic advantage to us on account of the recession. We have been a DTC sight holder since 1982. DTC Botswana made an exception under extraordinary circumstances by adding us as a sight holder in the middle of the contract period. Shrenuj Botswana met the rigorous sight holder eligibility criteria required to be a DTC Botswana sight holder. We were separately been granted an operating license by the Government of Botswana. Recession has also helped us gain market shares in existing markets. We have set up distribution hubs across the globe and these hubs were able to capture the demand locally. Now, with disposable income increasing again, purchases by first-time diamond buyers are on the rise. Diamond is not a commodity where buyers will choose the high-end diamonds in the early stage. This happens over a period of time. They graduate from multi-stones to solitaires over a period of time. In the recent times, the certification of diamonds by third parties has also spurred demand.

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There have been concerns that despite certification, when a diamond is brought back to sell, the price offered is much lesser. If the diamond is chipped somewhere or there is some damage while extraction, to that extent the price offered may be less. But as an asset class, the prices of diamonds have been steadily moving up; though not at the same pace as gold. Under normal circumstances, the customer or the investor would definitely get an appreciation if the diamond is held for a certain period of time. This is even truer for larger sizes of diamonds that can be classified in asset class. There are constraints in buying back of very small sized or un-certificated diamonds. The accounting practices of the diamond industry have often been a reason for lesser investor interest. What is your view? I would say other industries have more innovative ways of accounting while in the diamond industry, the incidents, which used to happen decades ago have reduced considerably. Most of the buying and selling is done in dollars so there is a huge accountability with the receipts. A few incidents should not be construed as a trade practice. We, at Shrenuj, retained KPMG as advisors for our corporate restructuring about five years ago. Since then, we have merged all our global entities under the flagship Shrenuj & Company Limited and now operate under sole ownership. Our endeavour to adhere to the best corporate standards is evident in our board composition of respected people, including Mr. Keki Mistry, Mr. S S Thakur, Mr. S N Talwar, amongst others. We are also audited each year by SGS for adhering to best practices principles of DTC. How do you manage your forex fluctuations? Our international trade for gems and jewellery is dollar denominated. Imports as well as export are both in dollars. So there is a natural hedge. Additionally, we hedge the local expenses. We have wiped out all MTM losses and currently have a net gain. Our net worth has also been restored. Last year, the movements were exceptional, but this year, we are expecting the volatility to subside. With Gold prices moving higher, what impact does it have on your jewellery business? It has augured well for us since we are only in studded jewellery segment. With the increase in gold prices and relatively stable diamond prices, the consumers shifted towards higher
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diamond content in their jewellery, maintaining same price points. There was a marked shift from plain gold jewellery to diamond studded jewellery, including many first time buyers. Diamonds are attracting more consumers based on the awareness that diamond prices will move upwards in the years to come as the demand-supply gap increases. This has led to a double-digit increase in demand for diamonds in India while America has witnessed some slackening. You’ve been known for larger size diamonds. Is there a market in India for the same? In India, there is huge demand for larger diamonds. In places like Delhi, some may prefer smaller size diamonds. However, in Kolkata and even Mumbai, there is a trend favouring larger size diamonds. The demand for these diamonds has grown significantly over the past 10 years. Arisia, Sveni and Bhavya, our three solitaire brands with large diamonds have grown in double digits over the past 3-4 years. How has your retail experience been? Why have you chosen only the shop-in-shop model and not shop-in-mall? Our Shop-in-Shop approach is a strategy to enter the Indian retail market. This model requires lower capex as compared to high street shops or shop in mall. The other advantage is derived from the footfalls in the existing shops. Yet we have been able to create a unique differentiation amongst the clutter through opening India‟s only exclusive platinum jewellery counters. Our retail operation Diti is a chain of shop-in-shop outlets launched in 2007. We sell affordable luxury products in the mid-sized range between Rs8,000 to Rs50,000 to the upwardly mobile middle-class. We plan to grow or retail presence aggressively over the next three years, marking presence in 29 top Indian cities with over 150 points of sales. How has your branding strategy evolved over the years? Our branding is different for different markets. We engage customers through emotionally appealing marketing, which allow us to command a premium. We have, Caro74 and Valina in US, Fiana in France, Amante88 in Hong Kong and Master Cut and Syntilla in Australia. We have the Trapz product line of fancy-shaped side stones, which are manufactured in Israel and India.
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In India we have Arisia for the high-end customers followed by Sveni and Bhavya. For our international distribution, we have a luxury brand Lume with a catch line „Touch The Stars.‟ This brand has been developed by a German team and is positioned to attract modern independent women. Tell us about your retail acquisitions and to what extent have you integrated the business? We acquired a Hong Kong retailer Daily Jewellery in 2003, which was a discount jewellery chain. We took over and changed it into a contemporary and elegant shopping spot for the fashion-conscious women and rechristened it as Joliesse. From a discount store it is now regarded as a high-end fashion brand. We have 10 Joliesse stores in Hong Kong and two more will be opened shortly. We also plan to take this brand to China. Tell us more about your capacity Over the last few years, we have built up capacity in manufacturing as well as distribution. We are operating in single shifts and by merely changing to a double shift will double our throughput. Last July, we commissioned a 35,000 sq. ft jewelry unit. Capacity in jewelry is a million pieces per annum on a single shift basis. In diamond too we have built up enough capacities and there may be no capex required for the next five to six years. Here again, we can double capacity by operating two shifts. In diamond, our current utilization is ~80% while in jewellery, the utilisation is over 60%. What are the opportunities you see for the industry? The opportunities are untapped. India has a dismal share of the market in diamond jewelry globally. While we have over 90% share in diamond output, our share in jewellery segment is only about 3%. This is despite having the required skills and technology. The retail business in diamond jewellery is increasing every year on a sustainable basis by 25%. It is currently US$70bn and is expected to increase to ~US73-75bn. We have set up our facilities and readied ourselves to reap all the benefits in the entire value chain. It‟s only a matter of time before the economies pick up and businesses take off. The current scenario regarding availability of raw materials indicates that prices for polished diamonds are set to move northward for long.
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What then would be the challenges? In the smaller sizes and certain grades, there is tremendous competition. Jewellers have no choice but to face the competition and emerge successful. On the regulatory front, there is not much hassle as our regulators are well aware of the needs of the industry and have taken appropriate measures. Tell us more about synthetic diamonds? What kind of threat do they pose? The natural diamond is created in geological processes whereas a synthetic diamond is produced in a technological process. The production methods for synthetic diamonds are high-pressure high-temperature synthesis (HPHT) and chemical vapour deposition (CVD). DeBeers has the required patents in most places except USA to ensure that synthetic diamonds do not harm the trade. Moreover, synthetic diamonds finds their way more into industrial tools rather than jewellery. The technology to identify synthetics is already available. Brief us on your latest financials and outlook? We have achieved 6% increase in our sales revenue (consolidated) in H1-FY10 to Rs7.22bn while the net profit registered a growth of 16.7% to Rs230.3mn up from Rs197.3mn (H1FY09). EPS stood at Rs3.32 as against Rs2.85 in the corresponding period last year. For the quarter ended September 30, 2009, we have posted a PAT of Rs129.7mn, recording an increase of 120% over corresponding period last year. Net Sales in the same period recorded an increase of 16 %, from Rs3.42bn to Rs3.96bn. The results are remarkable in view of the sluggish growth in western markets and Far East. We are witnessing high growth in our operations in India and China. We are optimistic about the approaching Christmas season as well as the wedding season in India. I am happy that our order books are already full for entire season. Consumer interest in jewellery has been renewed worldwide, which augurs well for us.

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You have been pioneers in introducing laser technology in diamond cutting in India. Has there been any innovation led by you in the recent years? We have continued our innovative spirit alive over the past four decades. Very recently, we have introduced a new patented diamond setting in jewellery, called "Embrace" set. This setting solves the problem of falling or loose diamonds in traditional invisible setting. We have adapted equipment from aero-space technology to achieve this. As a result, we are providing a guarantee that the Embrace set diamonds will not fall even after rugged use for a minimum of 10 years!

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Reference Site As retrieved on November 10, 2009 As retrieved on November 10, 2009 As retrieved on November 5, 2009 As retrieved on November 5, 2009 As retrieved on November 5, 2009 As retrieved on November 5, 2009

Reference Book GJEPC (May-October, 2008). Ideal Cut, 19, 20 & 21 Ministry of Commerce and Industry. DGFT. Foreign Trade Policy (2004-2009). Government of India Ministry of Commerce and Industry. DGFT. Foreign Trade Policy (2009-20014). Government of India

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