UAE accounts for about 75 percent of gems and jewellery exports from India
India’s exports of gems and jewellery, a major component of the country’s trade basket and among its star forex earners till recent year, has hit the slow lane, with export growth showing a significant declining trend on a consecutive monthly basis in the recent months.
Sagging demand in the international market and liquidity issues in the Indian market are among the major reasons for the fall in exports, a senior trade body official has said.
“Slowdown in demand in major international markets, coupled with issues related to availability of liquidity in the Indian financial market have adversely affected the export of jewellery and gems in the recent months, leading to decline in export,” Surendra Mehta, Secretary, Indian Bullion and Jewellers Assocation (IBJA), told Arabian Business.
The export data available with the federal department of commerce showed 13.7 percent drop in exports of gems and jewellery from India in April this year on a y-o-y basis. Export figures for May 2019 are still being collated.
In FY19, export of gems and jewellery products from India declined by 3.26 percent to $40.19 billion from $41.54 billion in the previous fiscal year.
UAE accounts for about 75 percent of gems and jewellery exports from India. Within UAE, Dubai accounts for a major chunk of India’s export of yellow metal jewellery products.
Besides being the major export destination, several Indian jewellery retail chains, including Malabar Gold & Jewellery, Titan and Kalyan Jewellers, are also present in major cities across UAE.
Gems and jewellery, which accounted for over 12 percent of India’s total export basket in 2018-19, have also slipped to about 11 percent in April this year due to the drop in export growth.
Added to the falling exports, the bullion and jewellers trade body is also concerned about issues related to hedging for exporters.
“With the fear gripping up in the market regarding reduction in import duty on gold, jewellers are stuck in a situation where hedging on the commodity exchange has also become risky,” Mehta said
Gold trading body and retailers expect a cut in import duty on gold to 5 percent from the existing 10 percent in the forthcoming Indian Budget, slated to be presented on July 5.
The industry also expects the finance ministry to increase the Good and Services Tax (GST) on gold from 3 percent to 6 percent in the budget.
“To mitigate the risk on hedging, commodity exchanges should come out with zero duty contracts,” Mehta said.
Currently, commodity exchanges have gold contract which includes import duty on gold but excludes GST.