In the first eight months of FY20, exports of cut and polished diamonds fell 19.4 per cent. This kept the overall gems and jewellery exports lower by 5.8 per cent at $25.5 billion. Polished diamonds and coloured gemstones were big underperformers in this basket. But gold and silver jewellery as well as synthetic gemstones have shown positive trends.
Industry sources said economic slowdown in major consuming countries, financing issues with banks turning cautious and hostile approach of the Customs department towards rough imports are major roadblocks for the industry.
The falling exports are owing to the changing preferences of young consumers and rising popularity of lab-grown diamonds. In the first eight months of FY20 (April-November), export of cut and polished diamonds fell by 19.40 per cent to $13.27 billion compared to the same period of the previous year. For coloured gemstones, exports were down by 20.73 per cent to $263 million.
Since April, the Customs department issued three notifications in three months which had impacted the initial sentiment, eclipsing exports. The notification in June was on availing undue benefit of import without paying duty.
In May, several disclosures were sought by the Customs regarding suspected mis-declaration of values in both import and export of rough diamonds. For several weeks after the May notification, exporters who imported rough diamonds were not able to lift the consignments. All these issues have taken a toll on exports in the sector.
Gold jewellery is another important contributor to exports and has seen marginal growth of 5.3 per cent to $8.66 billion. This was due to the headwinds like tightening government policies and closure of Scotia Bank which impacted services to exporter.
Another reason for the marginal growth is the difficulty in claiming duty drawback after Customs started demanding details of the complete supply chain to verify the import duty paid. The industry was also not able to take advantage of the US-China trade war even as several companies having base in China were willing to shift to India. India’s norms for units in export zones were not suitable to them.