For women, adornment with sparkling ornaments is a way of making a delectable fashion statement, though most abhor admitting this openly.
Naturally, the demand for the yellow metal and diamond jewellery has been quite heavy in India with market analysts foreseeing gold's long-term price determinants to remain bullish from investors and jewellery buyers in both India and China. The World Gold Council reckons that India consumes a humongous 746 tonnes of gold every year. India's import of gold during April 2011 to January 2012 was a hefty $50 billion, next only to the import of petroleum, oil and lubricants at $118 billion.
With such an insatiable appetite, the Government has begun beholding the bullion industry and users to pay as gold is mostly imported. It raised the import duty on gold recently.
Even as jewellery is only one component of the industry, the heavily import-dependent gem and jewellery industry has a twin task not only to meet the ever-escalating domestic demand but also to remain a big contributor to the country's export efforts. Over the years, the industry consistently logged a robust growth when exports grew from $28 million in 1966-67 at the time the Government set up the Gem and Jewellery Export Promotion Council (GJEPC) to $43.14 billion in 2010-11. This year would see a 10 per cent growth with exports of gems and jewellery fetching $47-48 billion to the exchequer.
Diamonds account for a lion's share of 65 per cent of the total export basket of the industry with gold jewellery contributing 30 per cent and others contributing two per cent each. Interestingly, Indian diamond industry has truly emerged as the world's largest manufacturing hub for cut and polished diamonds, contributing 60 per cent of the world's supply in terms of value, 85 per cent in terms of volume. Eleven out of every dozen diamond sets in jewellery worldwide are processed in India. GJEPC Chairman Mr Rajiv Jain was in New Delhi to present a pre-budget memorandum to the Finance Minister recently. Following are excerpts from the interview he gave it to The Hindu .
How do you see the prospects of gem and jewellery export this year in the wake of recent duty re-jig of precious metals by the Government?
Well, no doubt exports had gone down in December 2011 and we expect the declining trend to continue for the last quarter in the wake of the recent adjustment in duty structure. But the situation remains under control and we have to safeguard our future if we have to ensure a consistently high growth of 15 to 20 per cent over thelast several years till 2010-11.That is why we have asked the authorities to impose a 2 per cent duty on diamond. We have to protect the domestic industry which is in manufacturing activity. Today, a large chunk of diamond from the world is cut and polished here. We sought a two per cent duty cess for developing diamond industry technologically. Still, the two per centduty on diamond imposed as a revenue-garnering step would not hamper our industry. The two per cent duty on gold, however, would affect domestic markets because a huge amount of gold is traded. But the exporters using duty-paid gold could get drawback reimbursement. Still, amount-based duty on a kilogram is preferable to duty aligned to market price movements as this would be difficult to arrive at duty drawback for exporters.
What facilities is your Council seeking from the Government in the forthcoming budget?
The major issue the industry is facing pertains to the tax system. The Sivaraman Committee in 2006 plumped for a Presumptive Tax for the industry which has been successfully implemented by Belgium and Israel. This tax would goad investment, retain trade, skilled labour and capital within the country and also heighten India's global competitiveness. Instead, a benign assessment procedure was introducedin 2007-08 which lies at the root of the problems plaguing the industry. Unless this tax is withdrawn and the presumptive tax as recommended by an expert committee is in place, mining companies and large trading houses would continue to go to Dubai and Israel instead of coming to India. This has already put paid to India's ambition tobe the world's diamond hub for manufacturing.The industry is also in dire need of reduction of interest in export finance in rupee terms and availability of dollar credit and permission to access overseas commercial borrowings.
What does the industry do for skill upgradation?
Well, the Government set up sector-specific skill development programmes under the National Skill Development Council. The first project it approved was the Gem and Jewellery Institute in Jaipur. The Government has asked the GJEPC to form its own Skill Development Council and will provide requisite funding. geeyes@thehindu.co.in
