Trump's duty hike threat disastrous for Indian diamond jewellery sector

US consumes 40% of India's annual jewellery exports, sets the tone for rest of the world too; the impact would be huge if the hike is country-specific

United States President Donald Trump's latest threat to increase import duty on industrial and consumable commodities could have a disastrous impact on India's $40 billion diamond jewellery exports, in case the hike is country-specific.

The US alone consumes around 40 per cent of India's annual jewellery exports. Besides, the jewellery demand scenario in the United States sets the tone for the rest of the world. So, apart from the direct consumption of 40 per cent in India's diamond and jewellery exports, the US contributes a lot indirectly in India's overall export growth in jewellery sector.

"Trump has not talked anything about jewellery. But, any country-specific import duty levy or increase in the existing tax could be disastrous for India's diamond jewellery exports, " said Praveen Shankar Pandya, former Chairman of Gems and Jewellery Export Promotion Council.

Currently, processed non-industrial diamonds, for which the US is the largest overseas market, attracts nil duty there. India's processed diamond exports to the United States were valued $7.36 billion during FY2016-17, or about 40 per cent of overall diamond exports that year. India's export of diamond studded gold jewellery worth $1.42 billion for 2016-17 attracted 5.8 per cent of import duty in the United States.

"No country in the world today takes a country-specific decision on import duty, unless the exporting nation indulges in unfair trade practices. Hence, Trump is unlikely to take any such decision either. In case he does, the impact would be severe on the Indian diamond processing industry," said Pandya.

Meanwhile, some under-developed countries have been given preferential treatment under World Trade Organisation (WTO) guidelines. India being the fastest growing economy, however, does not fall in this category.

A prominent jewellery exporter believes that uniform duty increase by the United States would have a marginal impact on India's jewellery sector.
 

India processes 11 out of 13 rough diamonds mined across the world, making it the leader in the global diamond processing sector.