Gold jewellery exports to halve on choked supply of inputs

Industry fears Dubai and China taking over India's opportunity in trading and manufacturing respectively

Gold jewellery exports are set to halve this financial year on shortage of the metal.

After a steep fall in the first half of the financial year, the decline was arrested in October on expectations of robust sales in the US, the world’s largest consumer of ornaments with a 38 per cent global market share. Hopes were pinned on Christmas, New Year, Mother’s Day and a recovery in the US economy. The ensuing US festive season (one-and-a-half months) is significant for jewellers across the world as it accounts for 40 per cent of sales.

Shipments’ value in the first seven months of the financial year recorded a decline of 50.8 per cent to Rs 23,545.6 crore compared to Rs 47,867.3 crore a year ago.

In dollar terms, however, the decline was sharper by 54.7 per cent to $3,951.4 million between April-October 2013 as compared to $8,727.46 million a year ago.

“Exports may decline 50 per cent this year. The falling trend will continue. With inadequate recovery from domestic sources through melting of used jewellery, jewellers are suffering a shortage of at least 50 per cent of the raw material,” said Mehul Choksi, chairman and managing director, Gitanjali Group, on the sidelines of the Ficci-UBM Gems & Jewellery Conclave, an event coinciding with the Mumbai Jewellery & Gem Fair, Wednesday to Friday.

The government has restricted import of gold to control the burgeoning the current account gap by introducing a 20:80 formula, under which a minimum 20 per cent gold arrived should be mandatorily supplied to exporters. The government also raised import duty on the metal to 10 per cent. Despite all these, consumers’ appetite has not waned.

“There is a genuine concern for exporters. Unless the current account gap slips to 3.6-3.8 per cent, easing of gold import rules looks impossible. Meanwhile, the government can explore processes to make gold available for exporters,” said Naina Lal Kidwai, president, Ficci.

In the meantime, Dubai, a major trading centre, has achieved $39 billion of gold trading this year, similar to the figure for the full year of 2011. China has emerged as a large manufacturing centre, a status India was enjoying.

“So, China may gulp us if gold is adequately not supplied,” said Choksi. Meanwhile, the Gem & Jewellery Export Promotion Council is in talks with the ministry of economic affairs for replenishment of 300 kg of gold with tax benefits for exporters who executed orders between July 22 and September 27, the period which saw extremely low import.

“Exporters honoured their commitments to keep future business afloat by paying a high import duty. Hence, they be rewarded through at least replenishing the quantity,” said Vice-Chairman Pankaj Parekh.