Losing Shine

A drop in global demand;

A change in domestic policies.

At home, the RBI scrapped post-shipment finance for exporters in foreign currency and freed interest rates for the same over 90 days. It has also ordered routing of all important documents through banks. Both moves were meant to curb the abuse of the then prevailing systems and put an end to subsidising export credit.

However, exporters feel that these moves have hurt trade tremendously. RBIs policy changes were announced in February 1996. According to Vasant Mehta, Councils Convenor the effect was immediate. For instance while exports of diamonds grew at 18.77 per cent for 11 months since April 1995, it grew only by 2.99 per cent for two months of March and April 1996. Sanjay Kothari, partner Diatrends, an exporter who has been tapping the domestic market for growth in the past year adds had it not been the growing domestic market of costume jewellery, gold diamond merchants would have been compelled to slow down their business.

 

Infact, as exports are coming down, most gems and jewellery traders are focusing on the domestic markets. The Mumbai-based Geetanjali, Intergold and Diatrends companies which were primarily into exports earlier have located their new units in the Domestic Tariff Area (outside SEEPZ). Diatrends now gets half its business from the domestic market and the rest from exports. Today, customers prefer low cost diamond jewellery ranging between Rs 3,000-7,000. This has helped us fetch good markets at home also, says Mr Kothari. He believes that there has been an attitudinal change among the domestic buyers, who now prefer 22 and 18 carat and light weight gold jewellery. This has helped in expanding the market.

Exporters feel that the government can tilt the balance back in their favour by reversing the announcements on post shipment credit. They are also up in arms against the RBI decision where by all import documents are to be routed through banks. They feel this would increase the lead time for deliveries. And rival nations like Italy, Belgium and Israel will be able to sharpen their edge on them. The exporters have appealed against these measures, through the Council. But until the government listens to its demands, the domestic markets are being tapped to compensate for export loss.