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India is a leading player in theglobal gems and jewellery market

The gems and jewellery industry occu-pies an important position in the Indianeconomy. It is a leading foreign exchangeearner, as well as one of the fastestgrowing industries in the country.

The two major segments of the sectorin India are gold jewellery and diamonds.Gold jewellery forms around 80 per centof the Indian jewellery market, with thebalance comprising fabricated studdedjewellery that includes diamond studdedas well as gemstone studded jewellery. Apredominant portion of the gold jewellerymanufactured in India is consumed in thedomestic market. However, a major por-tion of the rough, uncut diamondsprocessed in India are exported, either inthe form of polished diamonds or finisheddiamond jewellery. The largest consumerof gold worldwide, India is also the lead-ing diamond cutting nation.

The Indian gems and jewellery indus-try is competitive in the world market dueto its low cost of production and theavailability of skilled labour. In addition,the industry has set up a worldwide dis-tribution network, of more than 3,000offices for the promotion and marketingof Indian diamonds.

The Indian diamond industry has theworld's largest cutting and polishingindustry, employing around 800,000 peo-ple (constituting 94 per cent of globalworkers) with more than 500 hi-techlaser machines. The industry is well sup-ported by government policies and thebanking sector with around 50 banks pro-viding nearly $3 billion of credit to theIndian diamond industry. India is expect-ed to have its diamond bourse function-ing at Mumbai in 2006.

India is therefore a significant player inthe world gems and jewellery marketboth as a source of processed diamonds

as well as a large consuming market.

The sector is largely unorganisedat present with a small but grow-ing organised sector

The Indian gems and jewellery sectoris largely unorganised at present. Thereare over 15,000 players across the coun-try in the gold processing industry, ofwhich only about 80 players have aturnover of over $4.15 million (Rs 200million). There are about 450,000 gold-smiths spread throughout the country.India was one of the first countries tostart making fine jewellery from mineralsand metals and even today, most of thejewellery made in India is hand made. Theindustry is dominated by family jewellers,who constitute nearly 96 per cent of themarket. Organised players such as Tatawith its Tanishq brand, have, however,been growing steadily to carve a 4 percent market share.

The India Brand Equity Foundation collates, publishes and disseminateswell-researched and comprehensive information on the Indian economy and

industry. We present excerpts from a report on the Indian Gems andJewellery sector prepared by KPMG for IBEF

Gems and Jewellery

IBEFREPO

RT

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The Indian gems and jewelleryindustry has significant potential

India offers attractive opportunitiesacross the industry value chain.

India's strengths offer attractiveopportunities across each of the elementsof the value chain.

MiningIndia has significant reserves of gold,

diamond, ruby and other gem stones. Keystates with gem stone reserves and min-ing potential are Maharashtra, MadhyaPradesh, Orissa, Chattisgarh, Bihar andAndhra Pradesh.

Orissa has deposits of ruby and hasabout 20 varieties of various gemstonessuch as rhodoline, garnet, aquamarineetc. Andhra Pradesh has gold and dia-mond bearing areas, as well as occur-rences of semi-precious and abrasivestones spread over different districts.

Recognising the potential of the largeunexplored gemstone reserves, theGovernment of India as well as differentstate governments have been taking ini-tiatives to open up the sector for explo-ration by global players.

Gemstone processingIndia was the first country to introduce

diamonds to the world - the first to mine,cut and polish them as well as tradethem. The cutting and polishing of dia-monds and other precious stones is one ofthe oldest traditions in India and the coun-try has earned a considerable reputation

both in the domestic and internationalmarkets for its skills and creativity.

In the global diamond market today,Indian diamonds account for 55 per centshare in value terms, 80 per cent share incaratage (weight) terms and 90 per centshare in volume terms. Today there is aready availability of an entire range of dia-monds in nearly every size, quality andcut.

India offers the twin advantages ofskilled labour and low cost in the area ofgemstone processing.

India's significance in the global gems

and jewellery industry can be largelyattributed to its strength in diamond pro-cessing. Value enhancement by the Indiandiamond processing industry is the high-est among other countries, with a valueaddition worth $1.48 billion in 2004 com-pared to $840 million in 2003.

Jewellery manufacturingIndia has well-established capabilities

in making hand-made jewellery in traditional as well as modern designs.Indian hand-made jewellery has alwayshad a large ethnic demand in variouscountries with sizeable Indian immigrantpopulations such as the Middle East,South-East Asian countries, the USA andCanada.

In recent times, India has also devel-oped capabilities in machine-made jew-ellery. With imported or domesticprocessed studding, Indian machine madejewellery is expected to generate demandfrom non-ethnic jewellery markets aswell. The share of gold jewellery in India'sexports of gems and jewellery increasedfrom 9 per cent in 1994 to 22 per cent in2004, an indication of growing accept-ance in the world market.

In the area of diamonds, Indian jew-ellers have been focusing on moving upthe value chain, from being polishers ofrough diamonds to the manufacturing ofjewellery. Exports of diamond jewellery

Gold Jewellery

Export of Rgh Diamonds

Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1993-94 2003-04

88% 71%

1%

22%

4%

2%

9%

1% 1%

Cut & Polished Diamonds

Coloured Gem Stones

Share of Gold jewellery has increased in India’s exports of gems & jewellery

Source: Gems & Jewellery Export Promotion Council, KPMG Analysis

Total

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2001-2002 2002-2003 2003-2004 2004-2005

7556

5972

1167

9169

7110

1513

1212

7

8627

2680

1567

7

1118

1

3813

$ m

illio

n

Diamond Jewellery

India’s Exports of Gems and Jewellery

Source: Gems & Jewellery Export Promotion Council, India

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IBEF REPORT

are expected to increase in the future.The central and various state govern-

ments in India have come out with policyincentives to promote jewellery manufac-turing.

Certification Following the World Diamond

Council's statement on adopting credibleand effective measures against the tradein conflict gems, the Indian governmenthas tightened its certification process forinternational trade. The Gems & JewelleryPromotion Council is India's certificationauthority. The government's CentralBoard of Excise and Customs has bannedthe import or export of rough diamondshipments, which are not accompaniedby a Kimberley Process certificatelaunched in Switzerland. Certification forquality diamonds and jewellery has givena fillip to exports and has resulted ingreater acceptance of Indian products inthe world market.

TechnologyThe Indian gems and jewellery industry

has made rapid strides in design, poweredby a new generation of young, profession-ally trained, technology driven designers.Many of India's jewellery manufacturingfacilities are equipped with the latest CAD/ CAM and other advanced design sys-tems. Technology solutions are also avail-able for production control, supply chainand inventory management in the jewelleryindustry. The Special Economic Zones andGems and Jewellery Parks developed invarious states offer technology-enabledenvironments that are conductive togrowth and quality production.

The gems and jewellery industry inIndia is a good blend of modern manufac-turing and design techniques with the tra-ditional skills of the Indian artisan. TheIndian industry is also compliant withinternational norms such as the KimberlyProcess and the Patriot Act.

With well-established capabilitiesacross the value chain, India is an attrac-tive potential market in the gems and jew-ellery sector.

The domestic industry has beengrowing at a significant rate

The gems and jewellery sector in Indiahas been growing across all key seg-ments, as detailed below.

Precious MetalsGold

The current consumption of gold inIndia is estimated at over 900 tonnes,used mostly in 20 / 22 carat jewellery.Nearly 95 per cent of gold is used to man-ufacture gold jewellery for the domesticmarkets and the remaining 5 per cent isexported. Gold consumption in India isprimarily aimed at investment.

SilverIndia annually consumes around 4,000

tonnes of silver. Silver jewellery and otherarticles for personal use, account for thebulk of the sales especially in the ruralareas. India is also the third largest indus-trial user of silver in the world, after theUS and Japan.

PlatinumPlatinum or white gold, targeted at the

premium jewellery segment, is gainingpreference among designers and con-sumers globally. While India's share in theglobal platinum jewellery market is grow-ing by 19 per cent annually, it continuesto be less than one per cent in the globalplatinum jewellery market. Given theglobal growth and the maturing of theIndian market to international trends, thisrepresents an area of potential growth inIndia.

GemstonesDue to the popularity of gemstone-

studded jewellery across the globe,India's gemstone industry has been grow-ing with an estimated turnover of $0.22 - 0.26 billion.

JewelleryThe Indian jewellery market is one of

the largest in the world, with a marketsize of $13 billion. It is second only to theUS market of $ 40 billion and is followedby China at $11 billion.

The gold jewellery market is growingat 15 per cent per annum and the dia-mond jewellery market at 27 per cent perannum.

The emergence of branded jewellery isa new trend that is shaping the Indianjewellery market. Branded jewellery is arelatively new concept in the sector, andhas positioned itself on the quality, relia-bility and wearability factors. The brand-ed jewellery market in India is estimatedat $111.6 million per annum. Trends alsoshow that traditional handcrafted jew-ellery is slowly giving way to machine-made jewellery.

Future OutlookThe future of the industry is quite

promising. More and more buyers acrossthe world are turning to India as their pre-ferred source for quality jewellery.

The Gems and Jewellery ExportPromotion Council (GJEPC) is looking atexploring new markets, such as LatinAmerican countries. The industry alsoplans to make India a trading centre forcut and polished diamonds, and is closelyworking with the government of India inthis regard. The long term prospectslooks good with jewellery exports expect-ed to touch $16 billion in 2010 accordingto industry estimates.

Full report can be accessed atwww.ibef.org.

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

$ m

illio

n

Value addition in the Indian diamond processing industry

4812.34349.8 4205.5

6271.0

7141.0

8627.5

7110.6

5971.96186.7

6647.8

Imports of roughdiamonds

Exports of finisheddiamonds

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