India’s jewellery industry occupies a distinct position on the global stage as it is not only a crucial pillar of India’s export economy but also serves as a symbol of cultural heritage and timeless elegance. The sector provides employment to more than 5 million people.
Let’s explore the key challenges, current trends, and future prospects of the gems and jewellery industry comprehensively.
Current Market Size
India is a hub for the jewellery industry due to low operating costs and the availability of a highly skilled labour force. It is the largest cutting and polishing centre for diamonds. The value of the retail jewellery market stands at $80 billion in FY24, growing from $50 billion in 2018.
According to the World Gold Council, total gold demand reached 136.6 tonnes in the January-March quarter of 2024, reflecting an 8% increase.
The diamond jewellery market is expected to reach $17 billion by 2031. Gems and jewellery are among the largest items in India’s exports, with total exports for FY24 amounting to $32.71 billion, down from $37.96 billion in FY23. This decline is primarily due to a slowdown in the US and Chinese markets, which constitute the core consumer base for Indian exports. However, exports of gems and jewellery to the North Africa and West Asia region (with the UAE as a major market) rose to $9 billion, up from $7 billion in the previous fiscal year.
Market Trends in Gems and Jewellery Exports
A glance at India’s export basket reveals the prevalence of gems and jewellery in large volumes across both advanced and developing economies. India’s western region, particularly cities like Surat and Ahmedabad in Gujarat, is well known for its trade in cut and polished diamonds, lab-grown diamonds, gemstones, and gold articles. In 2022-23, this region contributed 74.66% of the total jewellery exports from India.
According to the latest data from the Gems and Jewellery Export Promotion Council (GJEPC), exports of gems and jewellery in September 2024 amounted to $2.54 billion, a 15.90% decrease from the $3.02 billion recorded in September 2023. The export of gold jewellery in September 2024 was valued at $894.23 million, witnessing a rise of 1.28% compared to the previous year. Additionally, overall exports of cut and polished diamonds stood at $1.29 billion in September 2024, down 22.87% from $1.67 billion in September 2023.
The USA, part of NAFTA, is the biggest export destination for FY24.
FDI in the Gems and Jewellery Sector
Foreign retail and institutional investors have become heavily involved in India’s booming jewellery industry. Between 2021 and 2023, there has been a consistent influx of foreign funds into the sector. This industry is the second-largest foreign exchange earner for the Indian economy. The government has taken proactive steps to increase foreign investor participation, allowing FDI in retail and paving the way for the emergence of an organised retail jewellery market.
FDI inflows have been rising steadily since the COVID-1 pandemic.
Challenges Faced by the Gems and Jewellery Industry
According to a report by GTRI, the Indian lab-grown diamond market is facing significant headwinds, primarily due to falling prices, lack of consumer interest, and competition from cheap imports. Intriguingly, despite overcapacity in lab-grown diamond production, India continues to import a substantial volume of these diamonds, highlighting an urgent need to correct this anomaly. Prices of lab-grown diamonds have plummeted by 65%, dropping from Rs 60,000 to Rs 20,000 per carat over the past year, showcasing extreme stress in the industry.
Government Initiatives to Promote the Jewellery Industry
Here are some major government initiatives aimed at supporting and boosting the gems and jewellery industry:
Budgetary Support: In the Union Budget 2024, the government reduced import duties on gold and silver to 6% and on platinum to 6.4%. This is expected to enhance domestic value addition in gold and precious metal jewellery in the country.
Taxation Reforms: The government abolished the 2% equalisation levy and introduced a safe harbour tax on rough diamond trading, which has the potential to make India a trading hub for diamonds.
Hallmarking Rules: From 1st April 2023, hallmarking of gold jewellery and related items became mandatory, helping to maintain quality and consumer trust in gold and diamond products.
Regulatory Compliance: The gem and jewellery sector has received Authorised Economic Operator (AEO) status from the Ministry of Finance, streamlining import-export processes allowing for rapid cargo release and reducing bank guarantees by 50%.
Stocks to Add to Your Watchlist
Below are some stocks of gold and jewellery companies that you may consider, as they have the potential to provide decent long-term returns:
These are some of the best bets in the stock markets when it comes to gems and jewellery.
The Future of India’s Gems and Jewellery Sector
In 2023, India emerged as the largest exporter of diamonds, with a total value of $18.2 billion. According to Vipul Shah, Chairman of the Gems and Jewellery Export Promotion Council (GJEPC), India aims for total gem and jewellery exports of $75 billion by 2030.
FY25 export figures have experienced a decline, primarily due to geopolitical tensions and the slow recovery of Western economies. Between April and September 2024, the total gross exports of gems and jewellery stood at $13.40 billion, representing a 12.49% decrease compared to the year-on-year figure of $15.31 billion.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
