Gems and jewellery exports from India declined 3.12 per cent in 2018-19 owing to credit crunch, delays in GST (goods and services tax) refunds, and high import duties on polished diamond. Industry captains don’t see improvement in export in FY20 either.
Data compiled by the Gems and Jewellery Export Promotion Council (GJEPC) showed gross gems and jewellery exports from India was $39.68 billion in 2018-19, compared to $40.96 billion in the previous year.
Gross cut and polished diamond exports from India, however, remained stable at $23.82 billion during 2018-19 (FY19) against $23.72 billion in the previous year.
The decline in exports of gems and jewellery, a labour-intensive industry that contributes around 13 per cent of the country’s merchandise exports, is significant. Since the Nirav Modi-Punjab National Bank (PNB) scam broke in January last year, the industry has been facing liquidity crisis due to lenders tightening provisioning and sanctions of funds.
Lenders suspended using letters of undertaking (LoUs) for disbursal and started asking for collateral valued by third parties for over 100 per cent more than the loan.
“India’s gems and jewellery exporters are facing problems which need to be addressed immediately. Liquidity remained tight throughout this year despite repeated requests from the industry to bankers and the government seeking ‘ease of doing business’ here. The industry is also struggling with blockage of working capital due to delays in getting refund. All these issues have hit overall gems and jewellery exports this financial year,” said Colin Shah, vice-chairman, GJEPC.
He is not optimistic about FY20 either. He estimates exports could fall a bit again.
Another problem is the delay in GST refund, which not only blocks working capital but also requires repeated efforts for claiming them. Last year, the government raised import duty on cut and polished diamond to 7.5 per cent from 2.5 per cent earlier.
However, gold jewellery exports from India prevented a steep fall in exports, thanks to units in special economic zones (SEZs) and export-oriented units (EOUs).
The GJEPC data shows exports from SEZs and EOUs saw a good jump in the gold jewellery segment. Exports went up 24.36 per cent to $12.03 billion compared to $9.67 billion in the previous year.
“The government needs to implement the Baba Kalyani report on duty-free sales of jewellery from SEZs/EOUs to domestic tariff areas (DTAs). While jewellers are ready to pay a gold import duty of 10 per cent and GST of 3 per cent, other duties applicable to selling gems and jewellery from these special export centric zones to domestic markets should be abolished. We have submitted recommendations to the ministry concerned but still awaiting a favourable result,” said Shah.
A committee headed by Baba Kalyani, chairman of Bharat Forge, recommended to the ministry of commerce and industry allowing duty-free sales of gems and jewellery from SEZs/EOUs to DTAs. Currently, such sales attract a duty of 15 per cent, equivalent to the duty levied on imports of gems and jewellery from overseas.
China has imposed 20 per cent on gems and jewellery, making it difficult for Indian exporters to sell there. The industry, therefore, has asked the government to allow sales for domestic and exports from one unit.