It's now or never!

TRADE ZONE: INDUSTRY VIEW

'Jewellers exporters must carve out new markets'

Indian gems and jewellery exports clocked a very handsome figure of $17.5 billion in the year 2006-07. This is extremely respectable for a sector that generates employment for more than 2 million semi-literate people in the country and has a potential to generate employment for at least another million by the end of 2012.

Such labour-intensive sectors, where India is globally competitive, can exceed its own targets if it starts taking advantage of the evolving trade regime. The industry must realize that the free trade agreements being signed by India provide them with a constructive and qualitative opportunity to generate predictable market access for their products in the shortest period of time.

Let's take the example of the proposed India-Japan comprehensive economic cooperation agreement, which is to incorporate a free trade agreement in the area of goods. The Generalized System of Preference (GSP) in Japan is the advantageous duty exemption system against import of jewellery from the developing countries in order to help promote their export and develop industrialisation.

Fine jewellery of gold classified under 711319 under Japanese Customs tariff enjoys a preferential duty of 2.16 per cent under the GSP mechanism. GSP is controlled under a system of annual 'quota' in amount for jewellery items, which takes place from April 1, when the Japanese fiscal year starts. The amount of each item is announced by the government before the season. Indian exports of jewellery covered under (customs code 711319) to Japan have risen from a meagre $6 million in 2002-03, have risen to $25 million in 2005-06.

These figures are extremely paltry when one finds that the size of the Japanese jewellery market is $16 billion. India's share of this market at present is therefore 0.15 per cent. Capturing a modest one per cent share of the Japanese market would increase Indian jewellery exports to Japan by $135 million.

As seen above, the GSP rate on gold jewellery originating from India is not zero but is 2.16 per cent. The India-Japan CECA provides the Indian jewellery industry with an opportunity to carve out a zero basic customs duty vis-à-vis Japan.

Thus Indian jewellery exporters will have a straight two-plus percentage point advantage over their competitors from Thailand. This advantage in import tariffs would allow Indian exporters to neutralise the advantage of geographical proximity currently enjoyed by Thai exporters.

Indian jewellery exporters should also try and get out of this 'quota' mechanism applicable to the value of jewellery imports into Japan. This will allow Indian jewellery to access the Japanese market irrespective of quotas and during any time of the year.

The Gems and Jewellery Export Promotion Council (GJEPC) has done a commendable job to facilitate the qualitative growth of the jewellery sector in India. It now faces an unfolding opportunity which it should utilise to carve out new markets for its exporters. Such a process will reduce the dependency of the jewellery exporters on markets such as the US, and will only help them spread their risks better. It will also enable the branded jewellery sector to expand their presence in different geographical domains.

It is either now or never!

The author is chief economist at Economic Laws Practice, Advocates & Solicitors