The fall in July, first month after presentation of the Union Budget, was the worst since the financial year began. The sharpest fall among items was in cut and polished diamonds. Their export declined 18.3 per cent to $1.5 billion.
This is because domestic industry is holding huge stocks of polished diamonds; globally, inventory is high in the major consuming centres and retail chains, Nimesh Patel, chief financial officer at De Beers Corp had said in a recent interview to Business Standard.
Mining companies have been reducing prices of rough diamonds as a result. Cut and polished diamond export in Q1 was lower by 17.5 per cent, to $6.7 billion, from a year before. High polished diamond inventories and lesser prices are prevailing for months.
Apart from these, Indian exporters are facing pressure from a high customs duty on diamonds.
Gold jewellery export was also down in July, by 5.8 per cent from July 2018, to $963 million.
Exporters were already facing issues of delay in the refund they were claiming on the goods and services tax (GST). This blocked their working capital at a time when banks were wary of providing loans for this. This reluctance of banks has been on for around 18 months.
Colin Shah, vice-chairman of the All India Gem and Jewellery Export Promotion Council, said: “The next quarter will be worse if there is no respite.” The US-China trade war has worsened; also, gold import duty was raised by 2.5 per cent in the Union Budget. Exporters buy duty-paid gold and later seek refunds, including on the GST paid. This ties up their working capital. Annual export from the Domestic Tariff Area is around $3 billion.
Gold jewellery export in Q1 to America was down 4.8 per cent to nearly $4.10 billion.
However, export of silver jewellery and coloured gemstones rose by 97 per cent and 10 per cent, respectively, in Q1, to a combined $437 million.