Rising Re takes sheen off gems & jewellery biz

Gems and jewellery exports may have risen over 20 per cent so far this fiscal, but the rising rupee has cost 150,000 diamond workers their jobs in the last one year, the head of the Gems and Jewellery Export Promotion Council, Sanjay Kothari, said.

"The export growth seen in the sector is not real and has not led to any benefit at the manufacturing level," he told Business Standard.

According to Kothari, the surge in exports is largely a result of the import duty being cut recently on polished diamonds. With the weakening dollar against the rupee, exporters prefer to import polished diamonds rather than source them from within the country.

As a result, local diamond outfits are losing business and are, therefore, axing jobs.

Gems and jewellery accounts for about 12 per cent of India's exports, which is expected to touch $150 billion in 2007-08. Almost 80 per cent of the country's gems and jewellery exports comprise diamonds.

The diamond industry employs about 700,000 people in Gujarat alone. Firms in Surat, Bhavnagar and Navsari point out that many units are yet to become fully operational after the Diwali holidays early last month.

"Usually, units are closed for only 15 days during Diwali but a majority of them are still to start functioning again. Moreover, work hours in the operational units are over by six in the evening. This was never seen in these months," said Kothari whose company Kunal Dimonds has seen a dip of 20 per cent in turnover.

In addition, some diamond firms have decided to diversify into unrelated areas like real estate and stock broking in order to hedge their risks.

"Our company has put on hold its expansion plans due to this slowdown," said Praveen Shankar Pandya, chairman of Diamond India Ltd and managing director of Mumbai-based Reva Shankar Gems Ltd.

With the rupee appreciating almost 15 per cent against the dollar in the last one year, most sectors have reported a slowdown in export growth, including textiles, apparel and leather products. All these sectors have seen a high incidence of lay-offs.

Gems and jewellery as also petroleum products, on the other hand, has registered high growth on account of their high import content.

Gems and jewellery has also benefited from the duty-free import allowed in the last budget. But now it seems this sector too has not been spared the impact of the rising rupee.