Business Standard

Use of gold in diamond jewellery increases

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The unabated depreciation in the rupee has forced manufacturers and exporters to change the content mix of ornaments in favour of gold, to keep the price of finished products within consumers’ reach.

After hitting a lifetime record at 56.225 intra-day, the rupee on Wednesday at 56 against the dollar, the fifth consecutive day’s decline. It has depreciated 24 per cent in the past year and 14 per cent in three months. Analysts forecast it to dip further.

Both, gold and diamonds are imported, but the latter is costlier.

“Whenever the price of raw material increases for whatever the reason, the product mix changes. To adjust for gold price increase, jewellers use lesser caratage of the yellow metal. For diamonds, its size is reduced in order not to raise the overall price of jewellery items,” said Sanjay Kothari, vice-chairman of the Gems & Jewellery Export Promotion Council.

The content mix in the average jewellery item has changed significantly in three years. Three years ago, around 75 per cent of the cost of diamond contributed to the overall price of the ornament, which has reduced to 60 per cent now. Against that, the use of gold content has gone up from 25 per cent three years ago to 40 per cent now.

“The product mix is likely to go further in favour of gold if the current trend continues for some more time,” said Pravin Nanavati, joint secretary, Gujarat Heera Bourse, and a veteran diamond jewellery exporter based in Surat.

According to Rajiv Popley, director, Popley & Sons, a city-based jewellery manufacturer and exporter: “In diamond jewellery, consumers prefer to focus primarily on the diamond piece, which should shine and look bigger. Hence, the use of gold remains immaterial, which gives liberty to the jeweller to tweak the overall product mix.”

Total gem & jewellery exports from India were $42,839 million (Rs 2,04,823 crore) in 2011-12 as compared to $42,995 million (Rs 1,95,735 crore) in 2010-11. Though in dollar terms there is a marginal drop of 0.4 per cent, exports mark an increase of 4.6 per cent in rupee terms. The sector accounted for 14 per cent of India’s total merchandise exports in 2011-12.

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