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Hit by an unprecedented lockdown and heavy cash crunch, gem and jewellery exports from the country touched an historic low of less than $2 million in April, even while imports reached $9 million.
All operations in the gem and jewellery industry came to a standstill in April after the Covid-19 pandemic outbreak and exports hit an historic monthly low.
However, around mid-May, the government allowed certain units at SEEPZ (Santacruz Electronics Export Processing Zone) and the Bharat Diamond Bourse in Mumbai to restart production to enable export of pending orders on priority basis and prevent loss of business. This led to restart of exports, but still it was down 82 per cent at $570 million while imports were at $207 million.
“We expect June to witness a temporary rise in trade, post which there could be a dent again,” said a CARE Ratings report.
The squeeze on bank credit to the industry after the series of defaults by leading jewellers is another major challenge the industry has been facing for long.
As of April 24, the outstanding credit to the industry was down 12 per cent at ₹58,880 crore compared to last year. Besides the credit crunch, tougher government regulations, high customs duty on gold, stricter customs inspection procedures, declining demand in export markets and volatility in exchange rates have hampered recovery of the industry.
Gradual recovery
The near-term prospects of the industry remain weak due to expectations of rising gold prices, loss of jobs due to Covid-19 lockdown, economic slowdown impacting disposable incomes and low consumer sentiments.
CARE Ratings expects gradual recovery from the December quarter with onset of the festival and wedding seasons. Wedding demand may not be at pre-Covid-19 levels, owing to fall in number of wedding days this year and no sign of let-up in high gold prices.
However, long-term prospects remain stable owing to growing consciousness of branded jewellery, especially in smaller cities, growing population of working women and increasing preference for diamond jewellery.
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