Accessing bank credit still remains the major challenge for the Indian gem and jewellery sector despite growing market share of chain stores (national and regional) increasing steadily over the last decade.
While there are many promising signs of the retail market moving towards a more robust and organised ecosystem, more than 20 per cent of loans given to this sector have become non-performing assets, resulting in the gem and jewellery industry gaining just 2.7 per cent of total credit issuance, said the World Gold Council report titled ‘Jewellery market structure.’
Gaining market share
Financing is even more troublesome for smal independent jewellers who tend to rely on the monthly gold scheme for funding. The report surmises that national and regional chain stores will continue to gain market share because of the large inventory they are able to carry.
Conversely, if the smaller players are not able to meet the accepted standards of transparency, their access to credit will be limited, as banks and financial institutions remain wary of lending to the gem and jewellery sector, it added.
Despite being one of the world’s largest fabricators of gold jewellery, India’s jewellery manufacturing industry is still highly fragmented and unorganised with only 15-20 per cent of the manufacturing units operating as organised and large-scale facilities, which was less than 10 per cent about five years ago.
Somasundaram PR, Regional CEO (India), World Gold Council said small players need to become more transparent and adapt technology faster if they have to gain access to credit and protect market share.
The wave of change facing the industry due to technical adoption and broader tax compliance in the economy can be a boon for those who are willing to transform, but there is a significant risk for others whose business models continue to rest on legacy practices, he added.
The manufacturing industry is still dominated by small jewellery workshops and artisans. Industry estimates suggest that there are 20,000-30,000 manufacturing units across the country. While ‘karigars’ (artisans) form the backbone of the gem and jewellery industry, many still work in extremely poor conditions and are underpaid compared to other industries, said the report.
The government and industry are increasingly focusing on shifting manufacturing from congested centres to jewellery parks and this will aid organisations within the trade. These integrated industrial parks will provide access to facilities for artisans under one roof, including manufacturing units, commercial areas, residences for industrial workers, commercial support services and an exhibition centre.