Jewellery segments shows fast, 'jobless' growth in 2009-10

Polished gems and jewellery, one of the biggest exports from India, grew 16% during the last financial year, even as the value added in India was down by 20% compared to two years ago. The sector accounted for around 13% of India's total exports in the country last year and hit a record $28 billion in exports, 36% higher than the pre-recession figure.

The growth was more pronounced in gold jewellery exports, which increased to $9.4 billion from $5.6 billion two years ago. Diamond exports increased to $17.5 billion from $14.2 billion during the last two years. India's share in US diamond jewellery market increased from 20% to 25% last year.

Thanks to the momentum, the exports are set to double by 2013, according to the industry body, Gems and Jewellery Export Promotion Council (GJEPC).

Industry representatives, however, seemed less than happy, pointing out that a lot of the growth was accounted for by 'trading' or simple import and export with no value addition in India.

"We are still reeling under the impact of the job losses, though things have continued to get better for the diamond industry," said Vasant Mehta, chairman of GJEPC.

India is one of the biggest hubs of diamond work in the world, after Israel and Belgium. It imports raw diamonds, to the extent of $9.1 billion last year and has around 8 lakh workers in its factories cutting, polishing and creating jewellery with them. The difference between its raw diamond import and finished diamond export is the 'value added' in the country.

"This figure is still 20% below the 2007-08 level, at $6.7 billion.. Around 20% of our workmen are still unemployed or employed in other industries," Mehta said. Job losses had reached a peak of 50% during the first half of 2009, but has since recovered after stronger than expected demand for diamonds from the US.

Indian diamond industry, which depends entirely on imported raw diamonds, is unique in the league of big diamond hubs by the absence of international diamond majors. Most of the work is done in India, but the products are shipped back to big brands abroad and sold under 'Italian or Hong Kong' brands.

The council has been pressing for making lenient tax laws for the sector to attract international companies and make India a true diamond hub, known for its products. The government even sent a delegation of officials on a trip to Belgium and Israel, to "study" the tax laws in those hubs. The committee suggested that taxes be calculated on a deemed profit of 9% instead of going on a case-by-case basis for each business unit. This was opposed by the industry, who wanted profits to be reckoned at 3%.

"Currently, the proposal is to tax on the basis of 6% profits. But that is higher than the profits that most participants make. Why would international companies set up base in India if they have to pay tax on profits they don't make?" Mehta asked. GJEPC will also conduct many diamond 'fashion' shows in India with international participation to get out of its "outsourced craftmanship" tag.