Diamond Market Overview
The favourable policies introduced by the Government failed to boost the diamond sales in the domestic market. Subdued consumer sentiments due to appreciation in prices of unpolished diamonds and high import duty structure are main reasons for flat sales.
Diamond sales in the domestic market continue to remain flat despite of positive sentiment in the market. Jewellers said that consumer sentiment remains subdued though prices of polished diamond have dropped. Amidst this, the diamond manufacturing sector is staring at losses as the prices for rough diamond have not been reduced by the miners even though the polished stones’ prices have bottomed out. Saurabh Gadgil, Chairman & Managing Director, P. N. Gadgil Jewellers Pvt. Ltd said, “Diamond sales in the domestic market for the first half of the year have remained flat despite the measures taken up by the government and the healthy business environment.”
Rajesh Tulsiani, Co-founder of Dwarkadas Chandumal Jewellers says that diamond sales are quite slow due to the ongoing holiday season and no weddings currently happening in the country. On a different note, Rajeev Seth, Chairman & Managing Director of Tara Jewels says, “Consumer sentiment has certainly improved in the last one year but it has not translated into significant sales. This in turn has resulted in overall industry sales of studded diamond jewellery remaining flat.” The studded diamond jewellery business is affected the most due to regulatory constraints like 10 per cent import duty on gold. However, when it comes to policies for diamond industry, Government has adopted measures that are in complete favour of the industry.
Favourable policies introduced by Government
India is considered to be the hub of global jewellery market and is largest cutting and polishing centre for diamonds in the world. Hence, to promote the diamond industry government has introduced varied measures like investor friendly policies, upgradation of technology & skills and export promotional measures. This has resulted in the healthy business environment. Gadgil adds, “The government also plans to set up Special Notified Zone (SNZ) for trading and import of rough diamonds. Once established it will encourage overseas diamond mining companies to open offices at designated zones in India to sell their produce to Indian manufacturers reducing or cutting the costs on middlemen. It will transform India into one of the largest rough diamond trading centres.”
Talking to ET, Vijay Jain, CEO, Orra said, “Though the government has announced some regulatory measure for the jewellery sector like the gold monetisation scheme, the sector is still suffering from high import duty structure. The demand for diamond studded jewellery has remained flat in last one year though at Orra we have seen a 10 per cent growth as against 20-25 per cent in previous comparative period a year ago.” In terms of studded diamond jewellery, the government has come up with one positive step which is the abolition of the 80:20 rule. “Government must now take the logical step forward by removing the import duty of 10% on gold. This will mean that the thriving grey market for gold will come to an end and organised players like us will have a level playing field,” says Seth. “Another enabler for the industry is that jewellery is among the 12 focus areas in the Union Government’s ‘Make in India’ push and manufacturing in this sector is expected to get a fillip because of this. Gems & Jewellery have traditionally been among the highest contributors to India’s export earnings. It is in the interest of the country as a whole that exports from this sector is encouraged,” adds Seth.
Demand for diamond jewellery
The gems and jewellery sector has been one of the fastest-growing sectors in India in the past few years. Diamond sales in the domestic market have remained smooth and steady over the last year. This stability is attributed towards reduction in the prices of polished stones. However, the prices of unpolished diamonds have shown appreciation. Samir Sagar, Director of Manubhai Jewellers says, “We have not seen any robust growth in diamond sales in last one year. The demand scenario is not likely to pick up before June-July both in the domestic and international markets.”
Last month, the country had imported diamonds worth Rs 8,601.88 crore compared to Rs 12,009.02 crore in the same month last year — a drop of 28.37%. In volume terms, the country has imported 111.61 lakh carats of diamonds compared to 133.55 lakh carats in the same month last year, which is a drop of 16.43%. Some in the cut and polish trade are even planning to extend their summer break, which starts from May, to six weeks from three to avoid inventory pileup. “The last quarter has been very bad for the diamond industry. Most of them will clock losses in the last quarter of FY15 as the demand for solitaires that earn major revenues for the trade has almost disappeared. The diamond trade has reduced offtake of rough diamonds from miners by almost 30%,” Vipul Shah, Chairman of GJEPC said.
Jewellers see improvement in diamond jewellery demand. Though diamond sales in the first half was flat, the second half looks promising with the advent of festive and wedding season in India. Gadgil shares, “the outlook and buying patterns of consumers in the recent years have changed; they are now beginning to move towards branded diamond jewellery and are also willing to pay justified premium for high quality and inventive designs. The sector has gained global popularity because of its talented craftsmen, highly skilled labour, excellence in cutting and polishing fine diamonds and precious stones, technological advancement and its cost-efficiencies.” Diamond jewellery is considered as a symbol of luxury and status that is inviting more consumers to buy diamonds. “People want to move away from traditional look and shift towards modern look with diamond jewellery. Even for gifting, people prefer diamond jewellery instead of gold jewellery,” tells Ishu Datwani, Founder of Anmol Jewellers.
More and more people are opting for diamonds rather than plain gold jewellery. “Diamond offers great investment opportunity and is regarded by consumers as more on trend. Young urban women consumers, exposed to global trends, are increasingly opting for diamond\diamond studded jewellery instead of traditional gold jewellery. Another diamond-demand driver is the new ease in part-exchanging the gems, thanks to the introduction of a transparent price index,” explains Seth. The diamond industry is expected to grow as industry experts expect the size of the Indian gems and jewellery to double to $80 million by the year 2018.
–Rika Aash Pathak