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Downtrend to gain momentum: Jewellery exporters

By Dilip Kumar Jha in Mumbai
December 17, 2008 11:27 IST
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Reeling under severe collapse in demand from the US, India's gems and jewellery exports are likely to continue declining at 30 per cent at least for the next six months, analyst said.

"In November, total exports from India declined 34.25 per cent to $987.10 million after 16.3 per cent fall in October which indicates that the condition is worsening.

The US market, which contributes about 75 per cent of India's jewellery exports alone, has recorded reduced orders, which have dipped by over 50 per cent because of economic slowdown.

If the trend continues, gems and jewellery exports would nosedive almost at the current rate," said Vasant Mehta, chairman, Gems and Jewellery Export Promotion CouncilĀ in the sideline of a conference on Tuesday in Mumbai.

The most important aspect in the ongoing downturn is the drastic fall in orders at the manufacturing level. Mehta estimated the average reduction of over 20 per cent in orders between April-October 2008.

This resulted in lay off of over 65,000 workers since the commencement of economic downturn. Mehta said that more lay offs cannot be ruled out in future if the orders are not revived either from the domestic or international markets.

As per an estimate, domestic market constitutes about 25 per cent of the total industry turnover of over Rs 75,000 crore (Rs 750 billion).

India executes about 45 per cent of annual orders in the third quarter because of the rise in demand for Christmas and new year from the western countries. But, the three month period remained almost idle and season was dull this year.

While analysing the effects of economic slowdown on the entire gems and jewellery sector, Mehta anticipated many processing units to commence their operation in the first week of January after over two months of holidays.

Meanwhile, the Council has discussed the issue with the Ministry of Commerce and urged to ease gold supply by allowing large exporters to import directly and distribute to retails in remote areas.

"The non availability of gold has been an issue with the remote Indian consumers which has been affecting overall sales of the industry.

"Additionally, at almost 2-3 centres in the country, the government-nominated agencies failed to meet retailers demand. If this loophole is addressed, gold jewellery sales would rise atleast by 23 per cent," Mehta added.

The council, in its recent presentation to the ministry, also sought introduction of duty drawback scheme for gold and inclusion of gems & jewellery sector under the market linked focus product scheme.

Inadequacy of dollar finance which constitutes about 50 per cent of total working capital, has been a major constraint for this sector which if available even at 7 per cent rate of interest against 1-2 per cent in competing countries, becomes non-feasible.

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Dilip Kumar Jha in Mumbai
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