‘There is a shift to diamonds from gold'

The Indian gems and jewellery industry has done extremely well in 2010, compared to 2009. We spoke to Mr Mehul Choksi, Managing Director, Gitanjali Gems, to get his perspective on how the industry has fared.

Excerpts from the interview:

How does the demand for gold and diamond jewellery compare in the domestic market?

There is a definite shift towards diamond from gold, even though diamond prices have actually increased compared to that of gold. Growth rate in diamond jewellery is 40 per cent against a 25 per cent growth in gold for the past year.

Diamond jewellery is gaining ground, primarily due to investment demand.

Much of the jewellery in India is bought for its resale value and, contrary to popular belief, diamond does have resale value. Since diamond has given a high return this year, consumers believe in it more strongly.

Compared to gold, the resale value for diamond is definitely lower. Gold has an exchange price, but diamond goes by quotations and, thus, you may have to take a 10-15 per cent cut from your buy price.

Further, there is now a certification for every single piece of jewellery that is sold in the modern market, which ensures quality.

Apart from investments, diamond finds favour because of its ‘aspirational' nature. Everyone has gold jewellery. Owning a diamond set makes a strong fashion statement.

Demand for jewellery comes from the wedding segment and from the young working population.

Wedding demand is higher, especially for bigger jewellery sets, while the working population goes for smaller designs. for instance, there is a lot of demand for small-sized diamonds during the Valentine's season.

Having said that, the growth is more due to increase in the prices of polished diamonds rather than actual volumes.

Why is there a frenzy for domestic retail expansion?

To put it simply, markets are developing, in terms of retail real estate and consumption. Over the past three years, retail expansion has more than doubled, value-wise. It's a transformation of sorts for jewellers, as a one-shop jeweller tries to become a chain. However, to be successful, they require deep pockets and dynamic people at the helm, given that one-shop and small-chain jewellers have limited capacities. Additionally, funding has not become easier or more accessible.

How has the export market fared?

This year has been extremely good. In fact, it will go down as one of the most successful years in the history of diamonds. Until a few quarters ago, consumers did not buy much merchandise; jewellers were simply clearing stock. This was a replacement year, and exports grew by 30-40 per cent for India. Polished diamond prices have gone up by 50 per cent, particularly for Indian jewellers; some have managed even 80 per cent increases. Additionally, Indian jewellers have moved on to larger-sized diamonds, and have made great strides in this category over the past two years. However, mining activity has not really picked up; demand is outpacing production and so high rough diamond prices can sustain.

What are your budget expectations?

We expect better and easier SEZ policies. I believe that gems and jewellery will grow well in the next decade and that growth is unlikely to happen without SEZs.

The ones that have come up, in Surat and Gitanjali's own, for example, have been very successful. We would also push for continued interest subvention for exporters. Dollar credit worldwide is more easily accessible than in India.

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