Financial Daily from THE HINDU group of publications
Tuesday, Apr 08, 2003
Industry & Economy
Gems & Jewellery
War, SARS take sheen off jewellery
MUMBAI, April 7
THE prospect of war continuing beyond mid-April in Iraq and deaths caused by the Severe Acute Respiratory Syndrome in South-East and Far East Asia have combined to ruin prospects for India's diamond and gem and jewellery industry.
Poised for good growth on the back of favourable proposals in the Finance Bill 2003/04, the industry has now been put on a leash, with consumer spending in the US and elsewhere hitting a new low. "We have lost a crucial Mothers' Day buying of jewellery," Mr Praveen Shankar Pandya, Managing Director, Revashankar Gems Ltd, said. Mothers' Day, which falls in early May, accounts for significant buying.
Reports indicated that fatalities on account of SARS could be higher than expected. So far, the death toll has touched 100 across the world. In Hong Kong, health officials were preparing for a rise in the number of patients from 700 to nearly 3,000. Hong Kong is an important market for India's gem and jewellery industry.
"If the war continues indefinitely, there will be a severe impact on the export of diamonds and gems," said Mr Pandya, also the Chairman of the Gem and Jewellery Export Promotion Council (GJEPC). "The market is very slow while overall growth should have been very good," he said, adding that the US accounts for 35 per cent of India's market.
The industry was also expecting the eastern markets to propel growth. With the SARS death toll edging up, demand for diamonds and jewellery is expected to decline, industry representatives said.
On the domestic front, the industry has received what it has been seeking for from the Government. The Finance Ministry has reduced customs duty on imports of rough, coloured gemstones to nil from 5 per cent, and on semi-processed, half-cut or broken diamonds to nil from 15 per cent. Customs duty on import of cut and polished diamonds and gemstones has also been reduced from 15 per cent to 5 per cent.
Further, the industry has been extended the benefits under Sections 10A and 10B of the Income Tax Act in case of cutting and polishing of diamonds and gems. With these measures, the Government has provided the industry a much-needed boost, the exporters said. Industry representatives said the overall thrust of the Finance Bill as well as the Export-Import Policy was to position India as a trading centre in diamonds.
The first quarter of 2003/2004 is expected to be flat. In the event of war continuing, the growth could turn negative, said industry sources. "We do not expect any turn in the current situation until June," said Mr Pandya. In 2002, India's gem and jewellery exports rose by 22 per cent to $8,709.15 million compared to $7,129.99 million in 2001. This increase was attributed to higher exports of gold jewellery and diamonds.
Diamond exports recorded a growth of 21 per cent in dollar terms and 25 per cent in rupee terms. Diamond exports rose to $6,894.53 million (Rs 33,359.38 crore) from $5,688.53 million (Rs 26,689.51 crore).
In volume terms, diamond exports were at 380.96 million carats in 2002 compared to 307.86 million carats in the previous year. Gold jewellery exports recorded a growth of 32.88 per cent in dollar terms at $1,375.52 million from $1,035.16 million in 2001. However, exports of coloured gemstones declined by 2.74 per cent to $185.52 million from $190.75 million.
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