Gross exports of gems and jewellery have declined for nine months in a row this financial year. It fell by 2 per cent YoY in December to $2,436 million. It had seen a YoY decline of 3 per cent in November. The quantum of de-growth in gross exports in the nine months of FY20 is similar to the previous year of 5 per cent. India exported $27,686 million worth gems and jewellery from April to December 2019. According to a CARE Ratings report, the industry has been affected by weakening demand from main export nations, stress on working capital operations and reduced lending to small scale players. Further, high gold prices in FY20 constrained domestic jewellery retailers.
Lengthy operating cycles and working capital intensive nature of the business is an inherent characteristic of the gems and jewellery industry.
All months of fiscal 2020 have witnessed a decline in gross exports, largely due to fall in international demand for Indian cut and polished diamonds, rough diamonds, coloured gemstones and imitation jewellery. However, there is a strong growth in demand for polished lab grown diamonds, silver jewellery, gold medallion and coins, articles of gold, silver and others, the report added.
Six out of nine months of current year witnessed a fall in imports in gems and jewellery. It declined 3 per cent YoY in December. Overall, Indian imports of gems and jewellery declined 6.5 per cent YoY to $ 18,679 million in the nine months of FY20, owing to fall in imports of rough diamonds (16 per cent), gold jewellery (4 per cent) and rough coloured gemstones (36 per cent). Imports of coloured gemstones and polished lab grown diamonds grew the most by 73 per cent and 41 per cent, respectively.
So far, FY20 has been a disappointment for the Indian gems and jewellery industry, which saw a yearly decline in growth of exports for all nine months, while imports grew in three out of nine months.
Exports of gems and jewellery are unlikely to see an uptick in remaining months of FY20 and are expected to either remain flat or decline further, the report highlighted.
CARE Ratings believes the short-term outlook for Indian gems and jewellery industry, especially cut and polished diamonds segment, to remain muted, while long-term demand remains strongly led by factors such as an increasing female working class population, growing consciousness of branded jewellery, increasing purchasing power in the Tier 2 and 3 cities, and increasing demand for diamond jewellery. However, unfavourable government policy continues to remain a major threat.