Gems & jewellery exports likely to be lowest in six years

This year's gems and jewellery (G&J) exports from India are likely to be the lowest in six years because of weak overseas demand following a sharp cut in luxury spending by global consumers.

Data compiled by Gems and Jewellery Export Promotion Council (GJEPC), the apex industry body, showed a 14.49 per cent decline between April 2015 and January 2016 to $25.95 billion from the corresponding period last year.

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On annualised basis, India's G&J exports are unlikely to surpass $31.14 billion in 2015-16, the lowest in five years. During 2014-15, overall G&J exports were at $36.26 billion, slightly higher than the previous year.

The sharp fall in G&J exports assumes significance as this segment contributes nearly 13 per cent of total merchandised exports from India, employing around one million workers. Unrecoverable job losses are feared in India's diamond cutting and processing sector which processes 11 out of every 13 rough diamonds mined across the world.

"The volatility in the world economy has not yet stabilised. Therefore, we expect the falling export trend to continue for the remaining period of 2015-16," said Praveen Shankar Pandya, chairman, GJEPC.

In fact, January 2016 was one of the worst months in terms of G&J exports from India, witnessing over 20 per cent decline in shipment. Earlier, G&J exports had nosedived by a sharp 35 per cent in September amid uncertainty over the interest rate hike by the United States Federal Reserve.

In the past few months, India's jewellery exports remained highly volatile. Although the trend has begun to stabilise, volatility might return, given the ongoing uncertainty in global economy.

"We might see some volatility in India's G&J exports in coming months. But, for the time being, the volatility has stabilised with an upward bias," said Pandya.

Gold jewellery exports plunged by around 42 per cent to $3225.48 million during April 2015-January 2016 from the corresponding period last year. Adjusting the demand trend, India's rough diamond processors have reduced fresh purchases from suppliers. Consequently, rough diamond imports fell by 22 per cent to $11.11 billion during the same period.

Imports of cut and polished diamond and gold bar fell by 60 per cent and 32 per cent respectively to $2.29 billion and $3.09 billion in the first 10 months of 2015-16.

Vipul Shah, managing director of Asian Star Company Ltd, an export-oriented jewellery manufacturer, said, "Because of the global economic slowdown, many jewellery retailers across the world had to cut down their procurement because of high pipeline inventory. So, G&J export in the 2015-16 is expected to be the lowest in the last few years."

But now, pipeline inventory has exhausted. So demand for fresh jewellery would start to reflect the trend in the next few months.

Meanwhile, global diamond miner, De Beers sees an improvement in rough diamond demand as excess inventory had continued to work through the system in recent months. "Retailer restocking after the end of year holiday season is supporting demand for polished diamonds and, in turn, we are seeing improved demand from the midstream for rough diamonds. However, we remain mindful of the need for a cautious approach as the recovery continues," said Philippe Mellier, chief executive, De Beers Group.

It will reflect in other value chains including India's G&J exports positively in coming months, said Shah.