FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
India is one of the largest exporters of Gems and Jewellery. The industry plays a vital role in the Indian economy for its role as a major contributor to the total foreign exchange reserves of the country.
The overall net exports of Gems and Jewellery registered an annual growth of 9.1% to reach $ 35.6 bn during 2016-17. Exports of cut and polished diamonds, gold jewellery and silver jewellery registered a growth of 10.2%, 1.9% and 35.9%, respectively during 2016-17. Exports of gold coins and medallions from India stood at $ 1.9 bn, while exports of silver jewellery stood at $ 3.3 bn during April 2017-February 2018.
India is also a major importer of gems and jewellery. The imports of gems and jewellery increased at a CAGR of 7.8% from $ 11.63 bn in 2004-05 to $ 28.8 bn in 2016-17. The imports during April 2017-February 2018 stood at $ 28.3 bn.
US, Hong Kong and UAE are the major exporters, who accounted for 75% of the total gems and jewellery exports from India during 2016-17. Other big importers of Indian jewellery include Russia, Singapore, Latin America and China.
The Indian Government has permitted 100% Foreign Direct Investment (FDI) in the sector under the automatic route.
The market size of Gems and Jewellery in India contributes to about 7% of the country’s GDP.
Gems and Jewellery industry contributes to about 16% to India’s total merchandise exports and has grown at a CAGR of over 14.8% over the last 50 years. The Gems and Jewellery industry in India is one of the largest in the world, contributing 29% to the global jewellery consumption.
The overall market size is expected to reach $ 110 bn by 2022 from approximately $ 60 bn in 2017. The industry that currently employs over 4.5 mn people, is expected to provide employment opportunities to over 8.2 mn people by 2022.
Gems and Jewellery comprises of the following sub-sectors:
India being the largest manufacturer of cut and polished diamonds globally, its global diamond market share is 60% and 90% in value terms and volume terms, respectively. The country where gold jewellery forms around 80% of the total jewellery market, stood as the biggest buyer of gold globally in 2016-17.
India gems and jewelry market is forecast to register growth during the forecast period, owing to growing e-commerce platform along with organized retail channels. Moreover, opening of exclusive showrooms, availability of jewelry through online retail space, and tie-ups of jewelry providers with online vendors to facilitate easy sale and supply of gems and jewelry to end customers is also expected to drive the country’s gems and jewelry market. Increasing urbanization and development, changing consumer lifestyle, and growing innovative and premium product launches are some of the other factors that would have a positive impact on the gems and jewelry market during forecast period.
In terms of type, India gems and jewelry market has been categorized into gold, diamond in gold, gemstones, diamond, silver and others. Of these categories, gold jewelry accounted for the highest revenue share in India gems and jewelry market in 2018. The category is also anticipated to continue accounting for a significant market share during the forecast period, as all leading market players are offering jewelry keeping in mind the altering consumer preferences, latest fashion trends and growing interest of youth in exclusive jewelry designs.
Demand for gems and jewelry in India is predominantly concentrated in the southern region. South India gems and jewelry market is likely to register growth over the course of next five years, primarily owing to the presence of a large number of market players and aggressive marketing strategies adopted by companies. Moreover, increasing brand consciousness along with rising middle class population in the region is expected to aid the region’s gems & jewelry market.
Major players operating in India gems and jewelry market are expanding their product portfolio and are customizing jewelry as per consumer demand. Malabar Gold Private Limited, Titan Company Limited, Kalyan Jewellers India Private Limited, PC Jewellers Limited and Gitanjali Gems Limited are few of the leading market players.
The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent of the country’s GDP and 15 per cent to India’s total merchandise exports. It also employs over 4.64 million workers and is expected to employ 8.23 million by 2022. One of the fastest growing sectors, it is extremely export oriented and labour intensive.
Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India’ in the international market.
India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labor. India is the world’s largest cutting and polishing center for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 75 per cent of the world’s polished diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). India's Gems and Jewellery sector has been contributing in a big way to the country's foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route. The sector employs over 4.64 million employees and is expected to employ 8.23 million by 2022.
India’s gems and jewellery sector is one of the largest in the world contributing 29 per cent to the global jewellery consumption. The sector is home to more than 300,000 gems and jewellery players. Its market size will grow by US$ 103.06 billion during 2019-2023.
India’s demand for gold reached 760.4 tonnes in 2018 and 496.11 tonnes during first nine months of 2019. India's gems and jewellery exports stood at US$ 25.11 billion in FY20P (till Jan 2020, Provisional). During the same period, exports of cut and polished diamonds stood at US$ 16.32 billion, thereby contributing about 73.42 per cent of the total gems and jewellery exports in value terms. Exports of gold coins and medallions stood at US$ 814.33 million and silver jewellery exports stood at US$ 1.22 billion in FY20P (till Jan 2020).
India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. The Goods and Services Tax (GST) and monsoon will steer India’s gold demand going forward.
The Gems and Jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewellers are able to fulfil their changing demands better than the local unorganised players. Moreover, increase in per capita income has led to an increase in sales of jewellery, as jewellery is a status symbol in India.
The cumulative Foreign Direct Investment (FDI) inflows in diamond and gold ornaments in the period April 2000 – December 2019 were US$ 1.17 billion, according to Department for Promotion of Industry and Internal Trade (DPIIT).
Some of the key investments in this industry are listed below.
In the coming years, growth in Gems and Jewellery sector would be largely contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2 per cent of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry.
The Government of India made hallmarking mandatory for Gold Jewellery and Artefacts. A period of one year is provided for implementation i.e. till January 2021.
As per Union Budget 2019-20, the GST rate has been reduced from 18 per cent to 5 per cent (*5 per cent without Input Tax Credit (ITC)) for services by way of job work in relation to gems and jewellery, leather goods, textiles etc.
The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018. The gold jewellery hallmark will now carry a BIS mark, purity in carat and fitness as well as the unit’s identification and the jeweller’s identification mark. The move is aimed at ensuring a quality check on gold jewellery.
The Gems and Jewellery Export Promotion Council (GJEPC) signed a Memorandum of Understanding (MoU) with Maharashtra Industrial Development Corporation (MIDC) to build India’s largest jewellery park in at Ghansoli in Navi-Mumbai on a 25 acres land with about more than 5000 jewellery units of various sizes ranging from 500-10,000 square feet. The overall investment of Rs 13,500 crore (US$ 2.09 billion).
Gold Monetisation Scheme enables individuals, trusts and mutual funds to deposit gold with banks and earn interest on the same in return.