Gem and jewellery exports declined 16.26 per cent to $2,826 million during June from $3,375.17 million during the same month last year. Exports during the first quarter of FY20 declined by 10.38 per cent to $9.18 billion from $10.25 billion during the same period last year. Experts say that the trend seen in first quarter is likely to continue and the value of overseas shipments may decline by 10-15 per cent for the full year.
The reasons are many for the dismal scene. Colin shah, Vice-Chairman of the Gems and Jewellery Export Promotion Council (GJEPC) says, "Despite stable market conditions in the US and Europe, subdued demand from China and the Gulf impacted overall exports.”
Cut and polished diamonds were a major laggard, with exports dipping by 19.38 per cent to $1.68 billion this June, from $2.08 billion a year ago. In the first quarter this fiscal, the exports fell 17.33 per cent to $5.20 billion.
India gets orders for further processing of already cut and polished diamonds, which is now becoming unviable due to high import duty.
Gold jewellery exports in June were down 15.41 per cent to $913.88 million while first quarter shipments fell 6.22 per cent to $3.03 billion. Over a fifth of gold jewellery exports is from domestic tariff area (DTA) and increase in import duty on the metal in the Budget will impact further. This is because, under DTA, a unit pays duty on the gold it imports for conversion into jewellery. Once this jewellery is exported, the unit seeks a refund of the duty paid on the gold it had imported earlier. But till such time as the refund is made the unit will face a working capital squeeze, the cost of which will now be greater with higher duty impacting viability of the exports.
Says Shah of GJEPC: “High duty on gold and cut and polished diamond, the continued credit crunch, IGST blockage of capital, SEZ policy issues are they key factors affecting jewellery exports. All in all, we need some respite to turn the tide.”