Gems & Jewellery Industry in India – Business Opportunities & Advantages

India's gems and jewellery industry plays a vital role in the country's economy, contributing approximately 7.5% of the GDP and constituting 14% of merchandise exports in February 2021. It displayed significant potential for employment generation, with expectations of employing 8.23 million individuals by 2022. During April to March 2023, the sector saw substantial imports of USD 25.89 billion, with a single month import of USD 2.08 million in March 2023. India's gems and jewellery market size reached USD 78.50 billion in FY21, and the global sector is projected to grow to USD 103.06 billion by 2023. Diamond exports in the same period reached USD 22.04 billion, with a significant USD 1.60 billion in cut and polished diamonds in March 2023. India's ambitious target is to achieve USD 100 billion in jewellery exports by 2027, as reflected by the USD 37.46 billion exports recorded in April to March 2023, including USD 2.61 billion in March 2023, highlighting the sector's robust performance and potential for further expansion.

Market Insight

In fiscal year 2023, India's gems and jewellery exports featured a diverse range of items, with cut and polished diamonds leading at 58.83%, followed by gold jewellery at 25.14% and silver jewellery at 7.82%. Rough diamonds also contributed 1.94% to overall exports, showcasing the industry's breadth. Specifically, cut and polished diamond exports in FY23 amounted to an impressive USD 25.04 billion, with March 2023 alone seeing exports of USD 1.60 billion. Gold jewellery exports thrived, reaching USD 9.42 billion from April 2022 to March 2023, emphasizing the significant role of these commodities in India's international trade.

Why Invest in India?

The gems and jewellery sector in India has witnessed substantial investment, with total FDI reaching USD 58.77 billion in the fiscal year 2021-22, signifying growing confidence and interest in the industry. Export demand has surged, reaching USD 39.45 billion in 2021-22, marking a 54.68% increase, and India has gained prominence globally, ranking first in cut & polished diamonds and second in various categories. Favourable policies, such as 100% FDI, reduced customs duties, SEZs, and trade agreements, have fostered industry growth. Additionally, India's gold demand is expected to exceed 800 tonnes in 2023, and a substantial 60.78% increase in FDI inflows in FY22 highlights the sector's promising opportunities and appeal.

Strategies to Bring boost in the Industry

• Omni-channel Approach: Indian jewellery retailers are shifting towards online sales to embrace digital strategies, driven by the growth of the online gold market, which is gaining momentum both among digital players and established jewellers.
• Diversification into New Categories: Retailers like Reliance are expanding their offerings to include new jewellery categories, such as silver and gold coins, to tap into urban consumer segments and evolving preferences.
• Customized Jewellery: Companies like Malabar Gold are offering customized jewellery to cater to customers seeking personalized alterations to their pieces.
• Rise of MSEs: Micro and small enterprises (MSEs) in the gems & jewellery sector, particularly those specializing in non-precious, stone-studded, and imitation jewellery, have witnessed significant growth, especially in digital distribution platforms.
• Antimicrobial Jewellery: Tanishq introduced antimicrobial jewellery with specialized coatings for self-disinfection, prioritizing hygiene and safety alongside aesthetics.
• Virtual Reality (VR): Companies like PC Jewellers, PNG Jewellers, and Popley and Sons are enhancing the customer experience by offering VR headsets for an immersive and interactive jewellery shopping experience.
• Partnerships: Collaborations and agreements, such as India-UAE CEPA, India-Thailand bilateral trade, and partnerships like the World Gold Council and GJEPC, reflect efforts to boost trade and promote gold jewellery awareness among consumers.
• Expansion Plans: Malabar Gold & Diamonds committed to substantial investments for opening new stores in India and globally, highlighting the industry's dynamic growth.
• Knowledge Webinars: GIA India has conducted numerous knowledge webinars to educate industry professionals on gemmology topics, fostering confidence in the trade.

Growth Drivers

The Indian gems and jewellery industry continues to thrive, with robust demand for gold, driven by the expanding middle-class and affluent populations. Gold imports remain significant, and the industry adapted well to market changes, with increasing jewellery demand in the latter half of 2022. Demographically, India is witnessing substantial growth in the middle-class and wealthy segments, presenting opportunities across various sectors. Government initiatives like the Gold Monetisation Scheme and plans for a jewellery park reflect efforts to reduce gold imports and enhance domestic supply, reinforcing the industry's resilience and potential for further growth.

Clusters in the Indian Gems & Jewellery Industry

Various cities in India play pivotal roles in the country's diverse gems and jewellery industry. Mumbai is a major hub for diamond trading, while Jaipur specializes in coloured gemstones. Surat is renowned for diamond cutting and polishing, Kolkata excels in artistic gold jewellery, and Rajkot focuses on gold and silver craftsmanship. Thrissur is famous for temple jewellery, Hyderabad for pearls, Chennai for traditional gold jewellery, and Ahmedabad for innovative diamond designs. Other cities like Thane, Bengaluru, Chandigarh, Pune, Coimbatore, Salem, Bhavnagar, Vijayawada, and Jodhpur contribute significantly to the industry with their unique expertise and specialties.

Foreign Direct Investment

The gems and jewellery sector in India has witnessed a substantial influx of foreign direct investment (FDI), amounting to an impressive USD 58.77 billion during the fiscal year 2021-22. This robust investment influx signifies the sector's attractiveness to global investors. Furthermore, the Government of India has taken a significant step by permitting 100% FDI in the gems and jewellery sector through an automatic route. This move simplifies the process for foreign investors, facilitating their participation and engagement in the Indian market. In addition to the FDI surge, the domestic household jewellery industry, valued at an impressive USD 35.77 billion (equivalent to INR 250,000 crore), is poised to experience a substantial boost thanks to the government's decision to allow FDI in retail. This decision holds the potential to significantly elevate the industry by promoting growth, encouraging investment, and expanding the market for household jewelry products. These developments underline the sector's potential for growth and its strategic importance in India's economy.

Government Support and Policies

• FDI Policy: India now allows 100% FDI in the gems and jewellery sector through the automatic route, simplifying investment procedures and encouraging growth.
• Duties and Taxes: The import duty on silver dore and bars has been raised to 10% to align with gold and platinum, impacting the taxation of these precious metals.
• Gold Spot Exchange: India is establishing a gold spot exchange to actively influence global gold prices and enhance its role in the global precious metals market.
• Demonetization: Electronic payments for jewelry purchases are encouraged due to demonetization, promoting transparency and reporting thresholds to curb illicit wealth parking.
• Gold Monetisation Scheme: Expanded to include charitable institutions and government entities, this scheme encourages gold deposits, broadening participation.
• BIS Hallmarking Scheme: Gold jewelry now bears a BIS mark for purity and quality, ensuring strict quality standards and efficiency through online registration.
• Mandatory Hallmarking: Initially set for June 1, 2021, mandatory hallmarking began on June 15, 2021, with a phased approach supported by industry stakeholders.
• Prevention of Money Laundering Act: Dealers in precious metals and stones must record cash transactions over INR 10 lakh to enhance transparency and regulatory oversight.
• Special Group: A special group formed in August 2020 addresses industry challenges, highlighting the government's commitment to sector growth.
• Suspension on Additional Tariffs: The U.S. temporarily suspended additional tariffs on India, providing relief to the gems and jewellery sector amid the COVID-19 pandemic.
• EDI Connectivity: The industry requested EDI connectivity between postal services and customs in the e-commerce policy, aiming to streamline export transactions and promote reforms.

Regulatory Framework

The regulatory framework for the gems and jewellery industry in India encompasses various laws, regulations, and government bodies that govern different aspects of the sector. Some key elements of this regulatory framework include:

• Bureau of Indian Standards (BIS)
• Foreign Exchange Management Act (FEMA)
• Prevention of Money Laundering Act (PMLA)
• Customs and Excise Duties
• Goods and Services Tax (GST)
• Income Tax Act
• Gems and Jewellery Export Promotion Council (GJEPC)
• Hallmarking Regulations
• E-commerce Regulations

Conclusion

In summary, India's gems and jewellery industry stands as a beacon in the nation's economy, renowned for its heritage, craftsmanship, and adaptability. With strong growth in exports, FDI, and market size, supported by a skilled workforce and government initiatives, the industry is well-positioned for the future. It has embraced modern trends like e-commerce and customization, catering to diverse customer preferences. As India's middle-class population grows, so does the demand for jewellery, offering lucrative prospects. Yet, challenges like gold price fluctuations and global competition require ongoing innovation and ethical practices. In conclusion, this industry represents both economic significance and cultural heritage, poised for continued growth and global recognition.


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