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The spread of the coronavirus to more countries is expected to take a heavy toll on the gem and jewellery industry, shaving off ₹13,800 crore, or about $2 billion, in exports this fiscal.
This will put further pressure on the working capital of the industry, which is already reeling under a severe credit crunch and pile-up of inventory due to lower export demand.
Overall, gem and jewellery exports are expected to fall 5 per cent from the previous fiscal’s ₹2.77-lakh crore ($39.68 billion).
Hong Kong impact
After devastating Mainland China, the coronavirus outbreak has spread to the US, Australia, Italy, Japan, Singapore, Hong Kong, Iran, Thailand, Taiwan and Korea. In fact, the complete shutdown in Hong Kong, a major trading hub for gold and diamond jewellery exports from India, had hit the industry hard.
Colin Shah, Vice-Chairman, the Gem and Jewellery Exports Promotion Council of India (GJEPC), said most of the countries which have reported new cases of coronavirus are major markets for Indian gem and jewellery exports. In all probability, orders from these countries will either be deferred or cancelled, leading to exports falling by at least 5 per cent this fiscal, he added.
GJEPC, he said, is working with the government and bankers to ensure that exporters who have raised money against cash receivables from exports are not affected by the recent developments.
The overall gross gem and jewellery exports declined 6 per cent to $31 billion ($32 billion) in the first 10 months of this fiscal. In rupee terms, it fell 5 per cent to ₹2.16-lakh crore (₹2.27-lakh crore).
Gold price rise
The sharp rise in gold prices on the back of the coronavirus scare is also expected to pull down jewellery exports. In fact, the 4 per cent increase in gold jewellery exports in the first 10 months of this fiscal to $10 billion ($9.80 billion) was the only saving grace in the entire gem and jewellery export sector.
Over the past five days, gold prices have rallied about ₹2,700 per 10 g to touch ₹43,590 on Monday.
In the global markets, gold prices touched a multi-year high of $1,689 an ounce.
Cut and polished diamond exports dipped 17 per cent to $16.32 billion ($20 billion), while in rupee terms, it slipped 16 per cent to ₹1.15-lakh crore (₹1.37-lakh crore).
GJEPC’s Shah said the government should provide immediate respite by bringing down duties and taxes to make India a global manufacturing base, besides making efforts to tap new export markets to hedge the concentration risk and tackle unforeseen situations such as the virus outbreak.
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