INTRODUCTION

1 : - India is deemed to be the hub of the global jewellery market because of it

s low costs availability of high-skilled labour.
2 : - India is the world's largest cutting and polishing centre for diamonds, wi
th the cutting and polishing industry being well supported by government policie
s. Moreover India exports 95% of the world's diamond, as per statistics from the
Gems and Jewellery Export Promotion Council (GJEPC).
3 :- The industry has generated US$ 38.6 billion of revenue from export in 20152016, making it the second largest exporter after petro chemicals.
India's gems and jewellary sector has been contributing in a big way country's f
oreign exchange earnings.
ORAGNISED TO UNORGANISED..................................
4: - The Indian government presently allows 100% Foreign Direct Investment (FDI)
.
5:- The gems and jewellary market in India is home to more than 500000 players,
with the majority being small players.
6:- The sector is highly-fragmented and unorganised, and is characterised by fam
ily-owned operations. Around 96% of the gems and jewellery players have family-o
wned businesses, but, over the last few years, more organised players have been
entering the sector. The products in the sector can be categorised as gemstones,
jewellery and pearls, which can be further segmented into diamonds, coloured st
ones (precious, semi-precious and synthetic), studded jewellery, costume jewelle
ry, gold and silver.
7 :- Gem and Jewellery constitutes 6% of the total organized retail.
8 :- Until recently the trend that was followed in Indian jewellery market was o
f buying jewellery from the trusted neighborhood jewellers. However with the ope
ning up of branded retail in jewellery the trend
seems to have evolved whereby increasing number of individuals are opting for br
anded jewellery. The
change in trend is driven by a number of factors such as brand consciousness, ch
oice of designs,
consciousness towards hallmarking and certifications of gold and diamond along w
ith a growth in
urbanization and increase in disposable income.
Indian gems & jewellery market is highly fragmented across the value chain with
96% of players
operating in the unorganised sector, which are mostly family run labour intensiv
e, and use indigenous technology. MSME s are forming major constituents of the uno
rganised Gems and Jewellery market of
India. Organised players such as Tata with its Tanishq brand and Gitanjali, a pi
oneer in the branded
jewellery segment have, however, been growing steadily carving a 4-5 per cent ma
rket share. As
India s jewellery market matures, it is expected to get more organised.
CHANGING TRENDS
We have identified the following global trends:
1.Branding: brands entering the market and taking market share from local jewell
ery shops
2.Fashionability: jewellery is increasingly perceived as an accessory, which is
changing spending habits
3.Customization: increasing demand for personalised jewellery

4.New customer segmentation: for example, more female self-purchasers driven by

increasing number of working women
5.Growth in consumer base driven by emerging markets
DRIVING FORCES
A number of factors are driving the growth of the branded jewellery sector which
includes strong performance of the Indian economy, rise in the number of high n
et worth individuals and an increasingly youthful population with high disposabl
e incomes. Moreover, the changing lifestyle and culture of this section, which h
as a greater exposure to global fashion and tastes (both directly and indirectly
through media) etc, influence their jewellery buying pattern. Branded jewellery
, and particularly branded diamond jewellery also has an aspirational value cate
ring to the rising desires and wants of the upwardly mobile segments. Further, t
he rise of modern retail sector has also made it easier for sale and distributio
n of branded jewellery. Finally we see that the investment motive in purchase of
jewellery is decreasing and design and style are gaining importance as purchase
drivers. Today, diamonds are also viewed for their investment potential, so bra
nded diamond jewellery which combines both these factors is gaining popularity.
Opportunities for the Sector
Entering New Markets
The US has been the major market for Indian gems and jewellery sector over the y
ears. However, with the current global slowdown, the dependence on the US market
has affected the Indian gems and jewellery sector tremendously. The sector is e
xploring new locations to diversify business and to minimise the risk. Russia, M
iddle East and China are few of the emerging destinations that are witnessing an
increase in jewellery demand. The Indian gems and jewellery players can tap the
se countries to diversify and increase their business.
Cutting and Polishing of Large-Sized Diamonds
India is one of the leading diamond processing centres of the world. India s vast,
low cost and extremely skilled workforce provides it with a competitive edge ov
er other countries. However, it is predominantly involved in cutting and polishi
ng of small-sized diamonds, which weigh less than one carat. India's cut and pol
ished diamond exports have a high global share in terms of number of pieces; how
ever, in terms of value the share is much lower. By moving up the value chain an
d processing larger stones India can further increase its value share in total e
xports. Large diamonds are less commonly found in nature, therefore, the price o
f a diamond rises exponentially with its size. Indian exporters who have dominan
ce in processing of small stones have already started moving into cutting of lar
ge and medium size stones. For moving up the value chain, the industry should tr
y forward and backward integration. Hence strategic alliances with producers of
roughs and retailers of jewellery could lead to higher market share.
Given India s low cost and skill labours, there exists an opportunity for processi
ng large stones, which will provide the players with higher margins as well as r
ise in realisations on capex.
Value Addition
There exists a huge opportunity for Indian players to do value addition to the p
rocessed diamonds and to export diamondstudded jewellery. India is already a lea
der in processing small-sized diamonds and it also has inherent capabilities of
manufacturing hand-crafted jewellery. Further, with its dominance in processing
small diamonds, India has an advantage of manufacturing affordable diamond jewel

lery for the world market.

Jewellery Retail
The Indian retail sector is growing rapidly. This provides an excellent opportun
ity for the Indian players to manufacture and sell their jewellery through the r
etail channels that are fast catching up in the Indian markets. Further, this mo
ve will also provide an organised structure to the largely unorganised gems and
jewellery sector and lead to further growth of the sector.
Outsourcing Hub
India can become an outsourcing hub for designing and manufacturing jewellery. T
here is an increased trend of outsourcing designing and manufacturing of jewelle
ry from India by global retail players such as Wal-mart and JC Penny. The player
s in the sector can tap this opportunity to diversify business, reduce risk and
increase revenues.
Outlook
The outlook for the gem and jewellery sector is positive. On account of the glob
al recovery, the Indian gems and jewellery sector is also on a recovery mode. In
December 2009, the exports from the sector grew by 45.35% as compared with the
same period in 2008. According to GJEPC, the players received good orders for Ch
ristmas in 2009, which indicates a gradual recovery for the sector. The positive
trend is expected to continue, as major economies are showing signs of recovery
, which is resulting in fresh orders for the sector.
Further, the gems and jewellery sector is also expected to grow in the domestic
market, going forward. As the per capita consumption of jewellery is low in Indi
a, there exists an attractive opportunity to tap the domestic market.

CHALLENGES FACEDKey Issues of the Sector

Unorganised Sector
The gems and jewellery sector in India is unorganised and fragmented. Around 90%
of the players operate in the unorganised sector mostly in family-run operation
s. The nature of the sector prevents it from achieving economies of scale. Also,
being largely unorganised, the sector mainly uses labour-intensive and indigeno
us technology that affects their growth prospects. Further, the sector finds it
difficult to enhance their global competitiveness due to difficulties in adoptin
g technologies as a result of inadequate financial capital and high labour costs
per unit.
Threat from China
Currently, China is the second-largest diamond processing centre in the world af
ter India; however, it is slowly catching up and is threatening to displace the
Indian gems and jewellery sector from its dominant position in the world. The la
bour cost in China is the lowest, just like in India; however, the gap between t
he two countries is narrowing slowly. Besides, the Chinese economy is growing ra
pidly and is creating a demand for gems and jewellery in the domestic market. Fu
rther, many diamond manufacturers from Belgium and Israel are setting up manufac

turing plants in China. India also faces threat from China in terms of technolog
y adoption, which allows China to process diamonds at a more competitive price.
Predominance of the US market
The Indian gems and jewellery sector is pre-dominently dependent on the US marke
ts, which is its top export destination. The growth of gems and jewellery sector
is heavily dependent on the growth of demand in the US market. However, the rec
ent appreciation of the rupee vis--vis the US dollar and a slowdown of the US eco
nomy have aggravated the concerns for the sector. All these factors necessitate
India s venture into other geographical locations. During FY07, the exports to the
US market registered a growth of 14% over exports of FY06; however, owing to th
e slowdown in the US economy, the exports grew only 1.15% in FY08 over the previ
ous year. In the current situation the heavy dependence on the US market has aff
ected the exporters as they are facing a drop in orders and delayed payments.
Exchange Rate/Currency Risk
The gems and jewellery sector is affected by the rupee/dollar exchange rate beca
use it is export-oriented. Any volatility in the exchange rates affects the marg
ins of the players. For instance, the recent appreciation in the rupee against t
he dollar had made the exports of gems and jewellery less competitive in its key
export destinations.
High Level of Inventories
As the gems and jewellery sector is highly dependent on imports for its raw mate
rials, the players have to maintain a high level of inventory. However, maintain
ing this inventory becomes difficult for the players during the slack season, as
it carries inventory price risk. For instance, due to the current recessionary
trends, the demand slumped and inventory piled up much to the chagrin of the pla
yers.
Decreasing Diamond Reserves
The supply of rough diamonds is expected to fall in the near future as the diamo
nd reserves are decreasing. There has been no major diamond reserve discovery si
nce 2003, when reserves were last discovered in the Diavik Diamond Mine in Canad
a. The reduced supply will push up the prices of rough diamonds, which will furt
her put pressure on margins. Future supply levels are largely dependent on the i
ndustry s ability to identify new diamond deposits.
Competition from Other Luxury Goods
With the increase in disposable income and the change in standard of living, the
demand for luxury goods such as perfumes, consumer electronics, leather, automo
bile, gadgets etc are also increasing. The gems and jewellery sector is experien
cing competition from these luxury goods, which is eating into the market share
of the sector.
Beneficiation in Mining Countries
India is facing a threat from the emerging cutting and polishing centres in the
diamond-producing countries such as South Africa, Ghana, Angola, Botswana, Namib
ia etc. The local government is increasingly pressurising the African countries
for processing locally-mined materials such as diamonds within the country itsel
f to increase earnings through value addition to the vast natural resources that
these countries possess. South Africa has launched a draft Beneficiation Strate
gy for the minerals industry of South Africa in March 2009. The newly-formed Afr
ican Diamond Producers Association (ADPA) is advocating establishing a joint pol

icy that would support beneficiation across Africa. This could lead to fewer rou
gh goods being made available on the open market and in creating a threat to the
existing diamond processing centres such as India, as new processing centres co
mes up.
Global Economic Slowdown
The global economic slowdown has hit the Indian gems and jewellery sector hard.
As the sector was primarily dependent on exports to the US and European countrie
s, the meltdown in these countries affected the gems and jewellery sector to a g
reat extent. The players faced issues relating to inventory build-up and liquidi
ty pressure. A number of diamond units in Gujarat were shut down that rendered t
housands of workers jobless. Further, the bank finance, which was largely in dol
lar terms, also faced a setback due to foreign exchange rate fluctuations. This
further added to the woes of the players who were struggling to come out of the
global recession.
Even though the sector is in the recovery mode, owing to a gradual recovery of g
lobal markets, the credit cycle of the sector has changed drastically. The delay
ed payments from customers have raised the interest outflows for the companies.
Synthetic Diamonds
The sector also faces a challenge in the form of integration of synthetic or man
-made diamonds. With the advent of technology, it is difficult to differentiate
between natural and synthetic diamonds. It may so happen that the synthetic diam
onds are passed on as real diamonds and in the long run, this could affect the c
redibility of the sector. Further, as synthetic diamonds are much cheaper and id
entical to the man-made diamonds, these diamonds may find a clientele that is a
substitute to the natural diamond and may end up eating into the market share of
the diamond industry.
Issue of Conflict Diamonds
India is the largest importer of rough diamonds and a leading player in cutting
and polishing of the same, therefore, it runs the risk of dealing with conflict
diamonds. Conflict diamonds are those that are mined illegally in African countr
ies such as Angola, Liberia, Sierra Leone and the Democratic Republic of Congo t
o fund illegal military wars. In spite of the KP certification, there are issues
related to fake KP certificate. These fake certificates put diamond importing c
ountries at a risk of dealing in conflict diamonds.

Strategies to overcome those challengesThe following recommendations are suggested to tackle the
several problems of gems and jewellery sector of India:
Import of raw material is the basic requirement of the
trade; therefore it is necessary that the rough should be
available in ample quantity, of good quality and at reasonable prices.
Product planning and development is also recommended because our exporters and
manufacturers are requiring changes from time to time as per trends in the globa
l

market.
Manufacturers should emphasize on their comparative
advantage that is created through market structure,
technology, product diversification and others.
The discussion stresses that it is necessary to diversify the
export product portfolio, and concentrate more on other
products of gem and jewellery like pearls, Synthetic
stones, costume/fashion jewellery, non-gold jewellery
and coloured gem stones.
In addition, government should establish more designing institutes of jewellery patterns especially in major cities.
Furthermore, the researcher also subscribes to the view
that to popularize the use of gem and jewellery products
among the various sections of society at the national and
international level, proper publicity measures should be
initiated through media network.
There should be a provision to organize trade fairs and
exhibitions. As the markets has become international,
natural exchange or near orientation of techniques andand scientific methods can
be made.

SWOT ANALYSIS
Strength?
Large integrated diamond and jewellery players and having an internation
al presence.
?
Strong marketing and distribution network. Strong retail presence in Ind
ia and in US.
?
Strong brand equity and broad product range like gitanjali, tanishq.
?
Net worth of the total size of the gems and jewellery sector (both domes
tic and exports) is about Rs 4,15,000 crore. So we can say that it is financiall
y very strong sector.
?
Highly skilled, qualified and motivated employee.
Weaknesses?
There may be conflicts of interest between organized and unorganized pla
yers.
?
As the major raw material requirements need to be imported, companies no
rmally stock huge quantities of inventory resulting high inventory carrying cost
s.
?
Technology is less improved compared to China and Thailand s company.
Opportunities?
New markets in Europe and Latin America.
?
Growing demand in South Asian and Far East countries.
?
Industry moving from a phase of consolidation.
?
Expansion possibilities in lifestyle and luxury products in India like P
latinum jewellery, diamonds etc because increasing disposable income of people.

Threats?
International competition- China, Sri Lanka and Thailand s entry in small
diamond jewellery.
?
Increase in the price of gold and diamonds.
?
Other local competitors. According to the data 97% jewellery sales are b
y family jewellers.
?
Threat from producing nation like S.A. and Russia.