The Hindu Business Line : Gems and jewellery exports — How much of the glitter is gold?

ACCORDING to the `Sparkle of Success', an online brochure of The Gem and Jewellery Export Promotion Council (GJEPC), total exports of gems and jewellery from India increased from $2.9 billion (around Rs 12,706 crore) in 1991-92 to $9.1 billion (around Rs 39,872 crore) in 2002-03.

This trebling of exports over the period translates into an impressive average rate of growth of nearly 40 per cent per year.

The cutting and polishing of rough diamonds (imported into India at 0% import duty and without any licences), the GJEPC brochure says, provides employment to `one million' people across the country.

The brochure goes on to add that "diamonds account for 80 per cent of the total export basket of the industry," but plays down the fact that the proportion of cut and polished diamonds in total gem and jewellery exports has fallen more than seven percentage points since 1991-92, from 85.2 to 78.1 per cent.

Further, since the exports of gold jewellery in 2002/03 are reported to have touched $1.5 billion (around Rs 6,572 crore) from $0.3 billion (around Rs 1,314 crore) in 1991-92, this means even as the share of cut and polished diamonds in the export basket dropped, the share of gold jewellery rose, from scratch to 16.6 per cent between 1991-92 and 2002-2003.

Interestingly, over this same period, the share of rough diamonds in total gem and jewellery exports increased from 0.03 to 2.2 per cent, yet data on the "pearls, precious and semi-precious stones" category are typically reported only for imports - $6 billion (around Rs 26,289 crore) in 2002-03, comprised mostly rough diamonds.

A similar `under-reporting' of the value added by the gem and jewellery export industry is the omission of data on platinum imports. Yet these imports must be sizeable, since special provisions have been made for the metal to be imported `under licences through nominated agencies' on payment of import duty of Rs 500 per 10 grams.

At this point of the story it is interesting to note that similar facilities are available to this industry for the import of gold, on payment of duty at the rate of Rs 250 per 10 grams.

The GJEPC brochure provides no data on how much gold and platinum are being or have been imported by the industry. However, it is known total gold imports into India, stood at $4 billion (around Rs 17,520 crore) a year over the period 1999-2000 to 2002-03.

If one assumes that, say, $1.3 billion (around Rs 5,694 crore) of gold imports in 2002/03 were ear-marked for use in exported gold jewellery, and adjusts for the (re?) export of rough diamonds, this would substantially reduce the net export of gems and jewellery - usually computed as the difference between total gem and jewellery exports and imports of pearls, precious and semi-precious stones. From $3 to 1.5 billion dollars, in a total export basket of 9.1 billion dollars. That is to say, a 50 per cent drop, from 33 per cent to 16.5 per cent.

Making further adjustments for imports of platinum and silver (the latter is available to the industry on payment of duty of Rs 550 per 10 grams); total exports of silver into the country in 2002-2003 stood at about half a $0.5 billion US dollars, the net value added by the industry to the balance of trade may turn out to be rather slender. At any rate when compared to the fiscal concessions enjoyed by the industry, and the money and effort spent on promoting it.

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