Gems and jewellery exports have had a stellar run in 2010, recording a 45 per cent growth in value terms, against the 17 per cent growth in 2009, going by data compiled by the Gems and Jewellery Export Promotion Council.

Diamond exports expanded 49 per cent in 2010, while gold jewellery exports clocked a more sedate 27 per cent growth, due to a poor December quarter. Gold and diamond exports together account for over 95 per cent of India's gems and jewellery exports. The gems and jewellery sector, in turn, contributed about 16 per cent to the total Indian exports in 2010.

Diamond's share

The share of diamond exports in the total gems and jewellery exports (in value terms) has gone up from 63 per cent in the March 2010 quarter to 73 per cent in the December quarter. Diamond exports have posted growth rates of over 35 per cent in every quarter in 2010. Sparkling indeed!

However, a good part of this growth is attributable to the rise in the prices of polished diamonds. After plunging on falling demand during the slowdown, diamond prices have risen over 50 per cent in 2010, while rough diamond prices have surpassed pre-crisis levels.

In volume terms, therefore, India's diamond exports have seen a tamer growth of 22 per cent, with the March 2010 quarter recording the highest growth of 48 per cent. Growth tapered to 9 per cent by the December quarter.

Gold's share

The increasing share of diamonds in exports has been at the cost of gold. From a 31 per cent share in the March 2010 quarter, gold jewellery exports accounted for 20 per cent of jewellery exports by the December '10 quarter in value terms.

Growth in gold jewellery exports was a massive 98 per cent in the March '10 quarter — a low base effect, since the March '09 quarter saw low exports in the wake of the global recession. However, rising gold prices appear to have put off gold-buying, with exports declining 7 per cent in the December '10 quarter, which is the festival season in key markets of the US and Europe. It needs to be noted that a major portion of gold jewellery demand arises from India alone.

In other markets, gold is usually a setting for the gem and is not accorded high importance in jewellery. That may account for the relatively lower growth in gold jewellery exports.

India, however, is not a large exporter of gemstones. The share of non-gold jewellery and gemstones in the total export basket has remained low at 1 per cent.

Going forward, the high growth rates may temper since 2010 was a year when jewellers restocked as demand recovered from the 2009 slump.

The European market still appears mired in depressed demand, while the sustainability of the nascent US demand is yet to be seen.

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