The Hindu Business Line : Diamond jewellery losing `shine' in US, eyes China

Factfile
Economic growth in US is dwindling; Withdrawal of GSP will make Indian products expensive there
But India can look forward to is sale of cut and polished diamond to China
Constant innovation will help companies face competition

EXPLORING NEW MARKETS: Mr Sanjay Kothari, Chairman, Gem & Jewellery Export Promotion Council, addressing a press conference in Mumbai on Tuesday. — Paul Noronha

Mumbai April 17 Indian diamond jewellery may be facing a double whammy.

In the US, it is losing its market share to iPod's, plasma and other luxury items. The US is the major market for diamond jewellery from the country. Expected withdrawal of the General System of Preference three months from now would potentially make Indian products more expensive in the US.

The Gem & Jewellery Export Promotion Council (GJEPC) Chairman, Mr Sanjay Kothari, said: "US accounts for 31 per cent of our gems and jewellery exports. We are trying to look at other markets like Japan and CIS nations.''

That's not all. China is another country to watch. Sustained economic boom is seen putting more money in the hands of the Chinese, something that would translate into demand for luxury products, including diamond jewellery.

But India may not be able to cash in on the emerging Chinese demand boom because Beijing is a well-known exporter of diamond jewellery. What India can look forward to is sale of cut and polished diamond to China.

Diamond jewellery faces competition from other products such as electronic gadgets and high-end branded luxury items offered in markets like that of US, Japan and Europe, said Mr Ashish Goenka, Managing Director of Suashish Diamonds Ltd.

If the system of preference ends in the US, it will bring India on par with Chinese products, as they do not enjoy the preference.

Chinese products are recognised internationally, said Mr Vasant Mehta, Vice-Chairman of GJEPC. This might put some pressure on the margins of the companies. However with back-end efficiencies and constant product innovation, the proposed end of preference should not be a problem, Mr Goenka said.

Economic performance in a country has an important bearing on the diamond trade. Hence with the slowing economic growth in the US, Indian companies are on the hunt for newer markets, in addition to considerable focus on domestic market as well.

"We are witnessing strong economic growth in India and China; so we are focusing on expanding our operations in these two markets," he said. Recently, GJEPC delegation visited China to explore trade opportunities. If the Chinese market opens and implements zero duty, China will mean a huge market for India, said Mr Mehta. Currently gem and jewellery attracts a 4 per cent import duty in China.

The answer lies in constant innovation. To keep pace with competition both from within the industry and outside, companies will have to focus on designing.

Today, the shelf life of a product is lesser than ever before because of continual launch of new designs and products, Mr Goenka said. Companies not only employ hundreds of designers, but also outsource the designing activity. Innovative designing is like R&D for the gem and jewellery industry. Although Indian designing skills are improving, they are yet not on par with international competition.

Gold Jewellery

The case is not the same with the demand for Indian gold jewellery. Gold jewellery is mainly exported to the West Asian countries, which are a traditional demand.

"Indian handmade gold jewellery is unique and such skill cannot be found elsewhere in the world,'' said Mr Vijay Kapoor, proprietor of P. M. Dwarkadass Jewellers.

The demand for traditional jewellery is to stay as long as there is demand from occasions such as marriage and festivals, he added.

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