3. CONTENTS
Page No.
List of Tables 5
List of Exhibits 7
List of Boxes 9
Executive Summary 11
1. Introduction 30
2. Raw Material Base: Global scenario 32
3. International Trade in Precious Metals, Gems and Jewellery 41
4. Profile of Select Countries 47
5. Status of Precious Metals, Gems and Jewellery Industry in India 61
6. Market Analysis 84
7. Challenges and Strategies 93
Annexure
1. World Gold Demand 108
2. Production of Diamond in the World and in India 109
3. World Exports and Imports (2007) of Select Precious Metals, 110
Gems and Jewellery
4. India’s Major Export Destinations and Import Source Countries 113
of Precious Metals, Gems and Jewellery (2008-09)
5. Members of Kimberley Process 116
Project Team:
Mr. S. Prahalathan, General Manager, Research & Planning Group
Ms. Renuka Vijay, Manager, Research & Planning Group
3
4.
5. List of Tables
Table Title Pg. No.
No.
1. Consumer Demand for Gold in the World 31
2. Major Producers of Gold in the World 33
3. Major Producers of Silver in the World 39
4. Major Producers of Gemstones in the World 39
5. Major Producers of Platinum in the World 40
6. Brazil’s Exports of Precious Metals, Gems and Jewellery 48
7. Brazil’s Major Export Destinations and Import Sources of 49
Precious Metals, Gems and Jewellery
8. China’s Exports of Precious Metals, Gems and Jewellery 50
9. China’s Major Export Destinations and Import Sources of 52
Precious Metals, Gems and Jewellery
10. Exports and Imports of Diamonds by Israel 54
11. Israel’s Exports of Precious Metal, Gems and Jewellery 54
12. Israel’s Major Export Destinations and Import Sources of 55
Precious Metals, Gems and Jewellery
13. Italy’s Exports of Precious Metals, Gems and Jewellery 56
14. Italy’s Major Export Destinations and Import Sources of 57
Precious Metals, Gems and Jewellery
15. Malaysia’s Exports of Precious Metals, Gems and Jewellery 58
16. Malaysia’s Major Export Destinations and Import Sources 59
of Precious Metals, Gems and Jewellery
17. Reserves of Gold in India 64
18. Reserves of Gold in India - State-wise 64
19. Trends in Foreign Exchange Reserves of India 66
20. Export and Import of Gold Jewellery by India 68
21. Exports of Gold Jewellery by SEZ/EPZ 69
22. Reserves of Diamond in India 70
23. India’s Exports and Imports of Diamonds 73
24. Reserves and Resources of Select Precious Stones in India 74
25. India’s Exports and Imports of Precious Stones 75
26. India’s Exports and Imports of Platinum 77
5
6. Table Title Pg. No.
No.
27. India’s Exports and Imports of Pearls 78
28. India’s Exports and Imports of Silver 79
29. Market Analysis of Articles of Jewellery (HS 7113) 85
30. Market Analysis of Articles of Jewellery (HS 711311) 85
31. Market Analysis of Articles of Jewellery (HS 711319) 86
32. Market Analysis of Articles of Jewellery (HS 711320) 87
33. Market Analysis of Articles of Natural and Cultured Pearls, 88
Precious or Semi-precious Stones (HS 7116)
34. Market Analysis of Articles of Natural and Cultured Pearls, 89
Precious or Semi-precious Stones (HS 711610)
35. Market Analysis of Articles of Natural and Cultured Pearls, 90
Precious or Semi-precious Stones (HS 711620)
36. Market Analysis of Imitation Jewellery (HS 7117) 91
37. Market Analysis of Imitation Jewellery (HS 711711) 91
38. Export Performance of Indian Gems and Jewellery Industry 94
39. Analysis of Major Export Destinations of India for 95
Gems and Jewellery
40. Financial Performance of Companies (April-September 2009-10) 96
41. Production Cost/Net Sales Ratio Across Manufacturing Sector 97
6
7. List of Exhibits
No. Title Pg. No.
1. Price Trends of Gold in Select Currencies 34
2. Company-wise World Diamond Production, 2007 35
(in terms of value and volume)
3. World’s Largest Producers of Diamonds, 2007 36
(In Terms of Volume and Value)
4. Diamond Pipeline 37
5. Value Chain of the Gems and Jewellery Industry 61
6. Value Chain of Diamonds and Precious Stones 62
7. Production of Gold in India 63
8. India’s Share in World Consumption of Gold Jewellery 65
9. India’s Gold Consumption 66
10. Trends in Prices of Gold (January 2005- December 2009) 67
11. Diamond Production in India 70
12. India’s Major Export Destinations and Source Countries 72
for Diamonds (2008-09)
13. Prices of Gold and Silver (December 2008-December 2009) 96
in India
14. Prices of Platinum (Jan 2008-Dec 2009) 103
7
8.
9. List of Boxes
No. Title Pg. No.
1. World Diamond Council 38
2. Responsible Jewellery Council 44
3. Kimberley Process 45
4. Diamond Dollar Account Scheme 82
5. Exim Bank’s Role in Supporting Indian Gems and 83
Jewellery Industry
6. BIS Certification Scheme for Hallmarking of Gold Jewellery 101
7. Benefits of Becoming a Member of Hallmarking Convention 102
9
10.
11. EXECUTIVE SUMMARY
INTRODUCTION RAW MATERIAL BASE:
Gems and jewellery are being used GLOBAL SCENARIO
by the Indians since ages, for both
Production
aesthetic, as well as investment
purposes. India has the distinction Gold
of being one of the first countries
The major producer of gold in the
to introduce diamonds to the world.
world in the year 2008 was China
The country was also one of the with a production of 295 metric
first countries to mine, cut & polish, tonnes (growth rate of 7.3% over
and trade in diamonds. The two the previous year); China held a
major segments of the gems and share of 18.9% of the total world
jewellery business in India are gold production of gold during 2008,
and diamond jewellery. While a followed by South Africa (12.7%),
predominant portion of gold USA (10.7%), Australia (9.9%) and
jewellery manufactured in India is Peru (9.7%). Compared to 2007,
for domestic consumption, a during 2008, countries such as
predominant portion of rough, uncut Indonesia (-23.7%), Australia
diamonds processed in India are (-8.5%), USA (-3.4%), Canada
exported either in the form of (-1%) and South Africa (-0.8%)
polished diamonds or in the form witnessed a decline in production,
of finished diamond jewellery. The and countries such as China
gems and jewellery industry has an (7.3%), Russia (5.1%) and Peru
important role in the Indian (2.9%), witnessed an increase in
economy. With an estimated production of gold.
consumption of 713 tonnes of gold During the third quarter of 2009,
during the year 2008 (including the demand for gold has shown a
jewellery consumption of 501 decline in almost all the segments.
tonnes), India is one of the largest This may be partially owing to global
consumers of gold in the world. economic slowdown and increase in
11
12. prices, reducing the disposable (19%), Mexico (15.8%), China
income with the consumers. (13.7%), Chile (10.5%), and
Australia (9.5%). There has been
Diamond an increase in the production
During 2007, Botswana was the compared to the previous year in
largest diamond producing country, almost all the major countries,
in terms of value, estimated at US $ except USA and Australia, which
2.96 billion, recording a decline in witnessed a decline of (–) 11.1%
growth of 7.7% over the year 2006. and (–) 4.3%, respectively.
Botswana constituted a share of In the case of gemstones (other
25% in the world production of than diamond), major producers of
diamonds. Botswana was followed the world include: Botswana (26.5%),
by Russian Federation (21.7%), Russia (24.7%), Canada (19.1%),
Canada (13.7%), South Africa Angola (10.6%) and South Africa
(11.7%) and Angola (10.5%), as the (6.5%). Though most of the countries
world’s largest producers of haven’t shown an increase in its
diamond. Lesotho (growth of production in 2008, over 2007, some
96.4%), Canada (17.5%) and Sierra countries such as Sierra Leone
Leone (13%) were countries, which (66.7%), Guinea (35%), Central
showed impressive growth rates in African Republic (27%), and Angola
their production of diamonds during (14.9%) have shown tremendous
2007. increase in production in the year
2008, over the previous year. Brazil
Russia was the largest diamond (-33.3%) and Australia (-0.4%) were
producer by volume with a production the few major countries, which
of 38.3 million (23% of world’s showed a decline in production, over
diamond production) carats in 2007, the previous year.
followed by Botswana (20%), Congo
The largest producer of platinum
(17%), Australia (11%) and Canada
in the world was South Africa, holding
(10%). In terms of growth in volume
a share of 76.6% of the total world
of production, Guinea recorded
production, followed by Russia
115% growth in 2007 (over 2006),
(12.5%), Canada (3.6%), Zimbabwe
followed by Canada (28%) and
(2.8%) and USA (1.9%). However,
Angola (5.7%). major producers such as South
Africa (–7.8%), Russia (– 7.4%) and
Silver, Gemstones and Platinum USA (– 4.1%) have shown a decline
Major producers of silver in the in their production in 2008, over the
world in the year 2008 include Peru previous year.
12
13. INTERNATIONAL TRADE IN leading exporters, as well as
PRECIOUS METALS, GEMS importers of precious stones (other
AND JEWELLERY than diamond) in the world in the
year 2007. Hong Kong was the
Exports and Imports of largest exporter of precious stones
Precious Metals and Stones (other than diamonds) with a share
of around 17.1% of the total world
Gold exports, and was followed by USA
The largest exporter of gold in the (13.2%), Switzerland (12.7%),
world in the year 2007 was USA Thailand (12.2%), and India (9%).
with a share of 19.9% in total world In the case of imports, the leading
exports, followed by Australia importers include: USA (26.5%),
(15.9%), Canada (9.3%), Hong Hong Kong (14.4%), Switzerland
Kong (7.3%) and Peru (7.1%). The (9.2%), Thailand (7.2%) and India
world’s largest importers of gold (6.3%).
include Switzerland (25.7%), UK
(19.6%), USA (8.4%), India (7.5%), Pearls
and South Africa (4.4%). In the case of Pearls, Hong Kong
was the largest exporter, with the
Diamond exports valued US $ 482.92 million
Israel (with a share of 19.7%), constituting a share of 30.2%, in
Belgium (19.6%), India (14.3%), the world exports of pearls in the
USA (12.8%), and UK (9.1%) were year 2007. Japan, China, Australia,
the largest exporters of diamond in and French Polynesia were the
the world, in the year 2007. The other major exporters of pearls.
largest importers of diamonds Hong Kong was the largest
include: USA (17.7%), Belgium importer with a share of around
(16.2%), India (13.1%), Israel 33.2%, followed by Japan (18.3%),
(13%), and Hong Kong (12.9%). USA (15.8%), Germany (4.4%), and
India was an exporter as well as Australia (4%).
an importer of diamonds, with a
respective share of 14.3% and Platinum
13.1% in the world. This may be South Africa, constituting a share
because, India imports rough of 32.5% was the largest exporter
diamonds, for value addition, and of platinum in the world in the year
exports as cut and polished 2007. UK, USA and Germany were
diamonds. the other major exporters. USA was
also a major importer of platinum
Precious Stones constituting a share of 24.4% in the
Hong Kong, USA, Switzerland, world, followed by Japan (19.2%),
Thailand and India were among the Germany (12.7%) and UK (8.6%).
13
14. Silver Articles of Imitation Jewellery
Major exporters of silver in the year World exports of articles of imitation
2007 include: China, with a share jewellery were valued at
of 15.9% in the world, followed by US $ 4967.03 million in 2007. Major
Mexico (11.2%), Hong Kong (8.7%) exporters of imitation jewellery
and Germany (8.1%). USA, Hong include Hong Kong (21.9%), China
Kong, UK, Germany and India were (17.2%), Austria (8%), France
the major importers of silver in the (6.4%), and Italy (5.7%); major
world. importers under this category
include USA (19.6%), Germany
Exports and Imports of (7.3%), France (7.3%), UK (6.4%),
Jewellery and Italy (6.2%).
Articles of Jewellery Profile of Select Countries
World exports of jewellery articles
made of precious metals was Brazil
valued at US $ 42.5 billion in 2007; Brazil is known for its diversity and
major exporters include: Italy volume of precious stones deposits
(14.2%), India (11.9%), USA in its soil such as tourmaline,
(10.5%), and Hong Kong (9.9%). aquamarine, agate, amethyst,
Major importers of jewellery include: citrine, topaz and quartz; Brazil is
USA (23.7%), UAE (13.7%), Hong the only major source of imperial
Kong (9.1%), and Switzerland topaz and paraiba tourmaline in the
(6.7%). world.
During 2007, Brazil’s exports,
Articles of Natural / Cultured under the HS Code 71 catetory,
Pearls, Precious Stones consisted mainly of gold (valued
World exports of articles of natural US $ 790.88 million), followed by
and cultured pearls, or made of precious stones (with a value of US $
precious stones was valued at US $ 111.57 million), and articles of
1945.99 million in 2007. Major jewellery and parts (with a value of
exporters include USA (76.4%), US $ 72.9 million). Major export
Hong Kong (6.4%), China (5.4%), destinations of gems and jewellery
Switzerland (2%), and Japan include: USA, Germany, UK, Hong
(1.3%); major importers under this Kong and Mexico, and the major
category include: Hong Kong import sources include Peru, South
(15.7%), Switzerland (14.9%), UK Africa, Germany, Belgium and UK.
(9%), Netherlands Antilles (9%), Gold was largely exported to USA
and Japan (8.6%). (around 95% of the total exports of
14
15. gold by Brazil). India was a major sub-item which was largely exported
source country for import of (according to value) from China,
diamonds, imitation jewellery and under the HS Code 71 category, was
articles of natural and cultured articles of jewellery and parts of
pearls. precious metals with a share of
30.9% in the total exports of gems
China and jewellery in the year 2007.
China is one of the largest However, silver (42%), and articles
consumers of gold, with gold of natural or cultured pearls and
jewellery being the major item of precious and semi precious stones
demand. In the year 2008, the total (30.8%) were the items which
demand for gold in China was showed highest CAGR during the
392.7 tonnes, a growth of 19.8%, period 2005 – 2007. Exports of
over the previous year. During the precious stones showed a decline
third quarter of 2009, the gold (-26.4%) over the years, from US $
demand in China was 120.2 29.1 million in 2004 to US $ 15.8
tonnes, a growth rate of 12% over million in 2007. Major destinations for
the corresponding quarter of 2008. China’s gems and jewellery exports
After diamond was found in the include: Hong Kong, USA, Belgium,
three provinces of Liaoning, Switzerland and UK.
Shandong and Hunan, the diamond
industry in China has been growing, Israel
since 1980s. The annual production Diamond jewellery is the main sub
of diamonds in 2008 was US $ 1.3 segment of Israel’s gems and
million (69.4 thousand carats), an jewellery industry, followed by gold,
increase of 18% in value (13% in silver and imitation jewellery. The
carat) since 2006. China is one of artists in Israel make use of most
the largest producers of silver in the of their skills, innovative
world. In the year 2008, China technologies and techniques, which
produced silver worth 2600 tonnes, enable them to offer their products
an increase of 1.6% over the at very reasonable prices.
previous year; China, in the year
Exports of diamonds, according
2008, held a share of 13.7% in the
to the Central Bureau of Statistics,
world production of silver.
Government of Israel, showed a
China’s exports of gems and decline following the economic
jewellery have grown by 21% per recession. During January -
annum since 2005; from US $ 5.5 September 2009 there was a drastic
billion to US $ 8.1 billion in 2007. The decline in exports ranging above
15
16. 40%. The economic slowdown was However all the categories of
cited as the main reason for this precious metals, gems and jewellery
decline in exports. During 2007, the have witnessed an increase in
export of precious metals, gems and exports from Italy, with platinum and
jewellery by Israel touched US $ 19.1 diamonds witnessing the highest
billion, achieving a CAGR of 7.5%, CAGR of 69.8% and 52%,
during 2005-2007; and the imports respectively, during 2005 to 2007.
of Israel were US $ 12.6 billion in The exports of platinum increased
2007. Israel was a major exporter of from US $ 222.71 million to US $
diamonds, which constituted around 642.17 million, and that of diamonds
97% of the total gems and jewellery increased from US $ 56.83 million to
exports, and around 2% was US $ 131.45 million during this
accounted by articles of jewellery. period. The total exports of precious
Major export destinations of metals, gems, and jewellery (HS
diamonds from Israel include: USA, Code 71) witnessed a CAGR of
constituting a share of 48.5%, 17.4%, since 2005, showing an
followed by Belgium (16.7%), Hong increase from US $ 6.3 billion to US
Kong (15%), India (4.8%) and $ 8.7 billion, in value terms. Major
Switzerland (4.7%). Major source export destinations of Italy’s precious
countries for imports of diamonds by metals, gems and jewellery industry
Israel include: USA (40%), Belgium include: USA, Switzerland, France,
(24.8%), India (8.5%), Hong Kong UAE and UK, and the major source
(8.2%), and UK (8.1%). countries for import of precious
metals, gems and jewellery include:
Italy USA, Switzerland, France, Belgium
Italy has a large gems and jewellery and Hong Kong. Major export
industry, mainly located in the destinations of articles of jewellery
regions, namely, Veneto, Toscana, and parts include: USA (15.4%), UAE
Lombardia, Lazio and Piedmont. (13.6%), Switzerland (10.2%),
These regions have captured more France (6%) and UK (4.9%), and the
than half of the Italian market of major source countries for articles of
gems and jewellery. There are two jewellery and parts include:
major clusters in Italy for gems and Switzerland (29.6%), Hong Kong
jewellery which are located in (13.9%), France (8.8%), Poland
Vicenza and Arezzo. (7.9%), and Turkey (7.7%).
Constituting a share of 69.5%,
articles of jewellery and parts was the Malaysia
major jewellery export item, under Malaysia is another major producer
the HS Code 71 category, in Italy. and exporter of gems and jewellery,
16
17. with the industry having STATUS OF PRECIOUS
concentration in Penang. According METALS, GEMS AND
to industry sources, approximately JEWELLER Y INDUSTRY IN
75-80 percent of the gold and INDIA
jewellery in Malaysia are
manufactured or fabricated in Gold
Penang, followed by Johor Bahru The total resources of gold in the
and Kuala Lumpur, with activities country, as on April 2005, were
ranging from manufacturing to estimated at 390.28 million tonnes.
import, export, retail and wholesale. Out of these, 19.25 million tonnes
were under the reserve category,
During 2007, exports of precious
and the balance 371.03 million
metals, gems and jewellery from
tonnes were under the resources
Malaysia were valued at US $ 2.1
category. Besides, the total
billion, of which 64% constituted
resources of gold ore of placer type
articles of jewellery and parts,
in the country were estimated at
followed by gold with 19% share.
26.12 million tonnes. Karnataka has
Other export segments of gems and
the largest known reserves of gold
jewellery, namely, diamonds,
in India followed by Rajasthan and
precious stones, pearls, and silver
Kerala. Although there have been
constituted marginal share in the
significant ore resources, India’s
total gems and jewellery exports from
gold production has shown a
Malaysia.
decline over the years.
Major export destinations for
India has been the largest
gold include: Thailand (27.9%),
consumer of gold jewellery in recent
Australia (13.9%), Hong Kong
times, and in the year 2008, the gold
(13.2%), China (8.9%), and Taiwan
consumption in India was estimated
(8.2%), whereas the major source
to be 501 tonnes, accounting for 23%
countries for gold include: Japan
of world demand. In the third quarter
(71.3%), Singapore (19.2%),
of 2009, the consumption of gold
Indonesia (3.2%), USA (2.9%), and
jewellery in India has declined by
Hong Kong (1%). In the case of
nearly 37% and the total
articles of jewellery and parts, major
consumption of gold has declined by
export destinations include: UAE
around 45% over the same period in
(71.2%), Singapore (21.3%), USA
the previous year.
(2.6%), China (1.7%), and Hong
Kong (1%); and the major source During the year 2008-09, the
countries include: Singapore export of gold (or jewellery) has
(60.1%), China (14%), Hong Kong witnessed a growth rate of 51.1%
(7%), USA (4.8%), and Switzerland over the previous year, from US $
(4.1%). 4.3 billion to US $ 6.5 billion, and the
17
18. imports had grown by 24.4%, from over the previous year. During the
US $ 17.1 billion to US $21.2 billion. year 2008-09, the exports of
Major source countries for import of diamonds showed an increase of
raw gold by India include 10.6%, touching US $ 15.7 billion.
Switzerland, constituting 44.6% of Export of crushed industrial
the total imports of raw gold in the diamonds showed a tremendous
year 2008-09, followed by Australia increase during this period. India
(19.7%), UAE (19.6%) and South imported diamonds valued
Africa (10.4%). Main export US $ 7.7 billion in 2007-08; during
destinations of gold jewellery include the year 2008-09, the imports
UAE, Singapore and Hong Kong. increased by 110% from US $ 7.7
billion to US $ 16.3 billion. In the case
Diamond of diamond exports, major
According to USGS data, diamond destinations were: Hong Kong
production (gem and industrial) in (30.1%), UAE (22.5%), USA
India in the year 2007 was 55 (17.6%), Belgium (11.4%), and Israel
(5.0%). As regards diamond imports,
thousand carats and has remained
Hong Kong (27.6%), Belgium
more or less stagnant over the
(24.4%), UAE (25.6%), UK (6.4%),
years. As per United Nations
and USA (4.8%) were the major
Framework Classification (UNFC)
source countries for India.
system, as on 1.4.2005, India had
total resources of around 4.5 million Precious stones
carats, of which 1.2 million carats
was reserves. By grades, about Although traditional Indian
17% of resources are of gem gemologists have identified around
variety, 18% are of industrial variety, 84 precious and semi-precious
while bulk of the resources (65%) stones, nine stones, namely: Ruby,
is placed under unclassified Emerald, Pearl, Diamond, Red
coral, Zircon, Blue sapphire, Yellow
category. Andhra Pradesh accounts
sapphire, and Cat’s Eye, form the
for 40% of diamond resources,
‘Navratnas’ or nine gems. India was
followed by Madhya Pradesh
more an exporter of precious
(32%), and Chhattisgarh (28%).
stones than an importer of the
India imports rough diamonds same, and the difference between
and process them for value addition these two being minimal. During
and exports. As a result, India is a 2007-08, the exports of precious
net exporter under this category in stones were US $ 280.8 million, an
value terms. India exported increase of 6.5% over the previous
diamonds valued US $ 14.2 billion year, and in the year 2008-09,
during 2007-08, an increase of 34% exports of precious stones
18
19. witnessed a marginal decline of 2008-09, of around 6542% over the
0.1%, over the previous year. previous year. During 2007-08, the
Import of precious stones has imports had grown by 55% over the
grown marginally in the year 2008- previous year. UAE was the major
09, by only 4.6% over the previous export destination for India’s export
year. of raw platinum, constituting 49%
of total exports; major source
Major export destinations for
countries for raw platinum imports
precious stones (other than
by India include: UAE (78.7%),
diamonds, which were not worked or South Africa (15.3%), Switzerland
graded) include: USA (30.5%), Hong (2.7%). UAE and Australia were the
Kong (22.7%) and Thailand (13.9%). major export destinations of
The source countries for the same platinum jewellery constituting a
include: Thailand (23.3%), Hong combined share of 43.8% and the
Kong (19.1%), and Zambia (13.9%). major source countries for imports
In the case of articles of precious by India were Thailand and Belgium
stones other than diamonds (natural/ with 69% and 13% share,
synthetic), the major export respectively.
destinations were USA (38.8%),
Germany (23.9%), and Switzerland Pearls
(9%), and the source countries for
During 2007-08, the exports of
the same include: Hong Kong
pearls had witnessed an impressive
(27.8%), Sri Lanka (22.2%), and
performance, with the export of
Germany (16.7%).
cultured pearls showing a growth
of 125%. During the year 2008-09,
Platinum the imports of pearls declined by
The total resources of platinum 7.8% over the previous year. Major
group of metals in India, as on April export destinations of pearls
2005, was only 14.2 tonnes; the include: USA (38.6%), UAE
entire known resources are located (14.1%), Austria (12.0%), Japan
in Niligiri, Boula-Nuasahi and (7.5%), and Hong Kong (10.8%).
Sukinda areas in Orissa. The The source countries for import of
exports of platinum which had pearls by India include Japan
witnessed an increase of 175% in (34.5%), China (31.9%) and Hong
value terms, during 2007-08, over Kong (21.1%).
the previous year, showed a
tremendous increase of 1804% Silver
during the year 2008-09, over the During 2007-08, exports of silver
previous year. Imports also showed (unwrought and semi-manufactured
a high increase during the year form) witnessed a negative growth
19
20. of 35.5%, and silver jewellery the financing requirements of
witnessed a growth of 19.5%. various enterprises. The credit
However, during the year 2008-09, facilities are available for financing
exports of silver (unwrought and at all stages of export cycle of
semi-manufactured form) grew by Indian firms. The Bank’s Lines of
27.4%, and export of silver Credit (LOC), extended to
jewellery witnessed a growth of commercial banks, financial
87%. During the year 2008-09, institutions, regional development
India imported unwrought silver banks, and entities overseas, serve
valued around US $ 2 billion, a as a market entry mechanism to
growth of 79% over the previous Indian exporters, and provide a
year. Import of silver jewellery safe mode of non recourse
witnessed a growth of 80.6%. Major financing option to Indian exporters.
export destinations of silver include: Apart from LOC, the Bank offers
USA (21.3%), Switzerland (29.7%), buyer’s credit and supplier’s credit
UK (13.8%), Iran (11.5%), and for exports on deferred payment
Japan (9.3%), and that of silver terms. These facilities help
jewellery include: USA (38.1%), companies, especially the SMEs, to
China (12.6%), UAE (10.4%), Hong offer competitive credit terms to the
Kong (7.1%), and UK (5.8%). The buyers and to explore new
source countries for import of silver geographical markets.
by India include: UK (38%), China
Exim Bank has extended
(15.4%), Russia (11.8%),
supplier’s credit, pre shipment credit,
Switzerland (11.6%) and Hong
post shipment credit, and foreign
Kong (3.8%); and that of silver
currency packing credit (FCPC), to
jewellery include: USA (35.2%),
the firms engaged in the gems and
Italy (17.6%), Hong Kong (12.3%),
jewellery sector, among others. Exim
UAE (12.4%), and Thailand (6.1%).
Bank has signed an MOU with the
Indian Diamond Institute, which
ROLE OF EXIM BANK IN
envisages development of human
SUPPORTING INDIAN GEMS
resources through professional
AND JEWELLERY INDUSTRY
training, and thereby support the
Exim Bank of India seeks to create export efforts of the industry. Exim
an enabling environment to Bank has provided grant to IDI for
promote two-way transfer of upgrading LRS (Laser Raman
technology, trade and investments Spectroscopic Machine) equipment
and operates a wide range of in order for the Institute to provide
lending, service and support training to carry out in-depth study
programmes. The Bank has a of all types of gems. The MOU will
variety of loan products to cater to also enable the institutions to
20
21. exchange literature, data, concentrate on markets like: UK
information and research output on and Switzerland for articles of
the gems and jewellery industry, and jewellery of gold and platinum
also help in exchange of foreign group of minerals (HS code
experts between the two institutions, 711319); USA, Germany, UK and
in organizing their respective training Switzerland for articles of jewellery
programmes. made of silver (HS code 711311);
USA, Japan, Switzerland and UAE
MARKET ANALYSIS for articles of natural and cultured
The product-country analysis shows pearls (HS code 711610);
that USA, EU, Japan and Hong Switzerland, UK and Japan for
Kong are the leading importers of articles of semi-precious stones
major gems and jewellery products. (HS code 711620); and USA,
These countries have been Germany, France, UK and Italy for
articles of imitation jewellery (HS
sourcing their jewellery import
code 7117).
requirements mainly from countries
such as Hong Kong, China, Italy, India may leverage its traditional
USA, Germany and UK, of which craft-skills, low-cost labour, and
USA, UK and Germany are fabrication techniques in some of the
importers as well as exporters. jewellery products (such as
Hong Kong appears to be more of processing of small-sized
a trading hub in the Asian continent. diamonds), and replicate such
India served as one of the major advantages in the production of other
source countries for diamonds, as products, and thereby become a
also for articles of jewellery for global player across the gems and
select countries. In the case of jewellery segments.
diamonds, India is one of the major
importers of rough diamonds, and CHALLENGES AND
one of the major exporters of cut/ STRATEGIES
polished diamonds. India’s exports
of cut and polished diamonds have Challenges
been to all major markets in the
world. India is also a major exporter Unorganised Sector
of articles of jewellery and parts, Being an unorganized sector
and the exports have been to all hampers the ability of Indian gems
the major importers in the world. and jewellery Industry to emerge as
However, some of the markets are a world-class supplier. According to
not well-explored by Indian gems a FICCI study, the gold processing
and jewellery exporters. For industry has around 15,000 players,
example, India may endeavour to with only around 80 units having
21
22. revenues over US $ 5 million. India steep increase, since the last few
is also home to around 4,50,000 years, which has been changing
goldsmiths, over 100,000 gold the buying pattern of consumers.
jewellers, along with about 6,000 During the period December 2008 -
diamond-processing players and December 2009, the price of gold
8,000 diamond jewellers. per ten grams, has increased from
Rs 13,445 to Rs 16,870, showing
Impact of Recession an increase of 26%. Even though
There had been a loss of market the price of silver had witnessed a
for gems and jewellery exports due decline after February 2009, it
to recession and global economic again started rising after April 2009.
slowdown. During 2007-08, there From Rs 17,847 per kg in
was growth in export of gems and December 2008, the silver price
jewellery by 23%, over the previous increased to Rs 27,430 per kg in
year. The growth trend continued December 2009.
even in 2008-09 during which the
exports showed a growth of 44% Possible Threats from China
over the previous year. and from Other Countries
Producing Diamonds
However, during the period April-
September 2009-10, due to Although India currently enjoys
economic slowdown, the demand for dominance in the world’s cut and
gems and jewellery shrank, which polished diamond market, China
resulted in export slowdown for India. may emerge as a rival in the long-
Following the economic slowdown, term, mainly because of the
asset price devaluations, job losses availability of cheap labour, growing
and decrease in disposable income domestic demand, and also the
have happened, along with improvement in the quality of
escalation in gold prices, which have workmanship in the country. It may
changed the consumption pattern of be added that increasing number
gems and jewellery. Further, the of diamond processors are setting
economic slowdown has also up their facilities in China due to
affected the consumer buying these reasons. Also, there has
pattern, with growing demand for been growing pressure in major
single-line jewellery, low-carat diamond producing countries in
jewellery, and gems-studded Africa, like Botswana, Namibia and
jewellery. South Africa, to gain further
economic benefits from diamond
Rise in Prices value chain, seeking investments in
As mentioned earlier, the prices of cutting and polishing industry. Such
precious metals, especially gold developments may affect the
and silver, has been witnessing prospects of India.
22
23. Low Level of Technology quality, reducing wastage,
Absorption introducing new designs and
Utilization of hi-tech, speedy and concepts, and innovation in supply
efficient machinery and software chain management and marketing.
has led to the gradual replacement The gap between hi-end machines
of traditional / manual methods of and unskilled labour can also be
polishing, manufacturing and reduced with innovative R&D
designing of gems and jewellery. solutions.
Proactive players in the Indian
gems and jewellery industry are
Strategies
always on the lookout for better Branding of Jewellery
technology for their units. However,
such technology absorption is Branding of jewellery plays a very
relatively low in Indian gems and important role in the jewellery
jewellery industry, due to the small market as it assures consumers
size, and unorganized nature of that the products are of certain
majority of the players in this quality, durability, and conform to
industry. Also, mere absorption of several social, environmental and
technology may not be helpful, durability standards. Brand
without a proper blend of manual promotion is therefore one of the
labour with machinery, to provide best modes of market penetration.
ethnicity to the end-products. Though in its nascent stage,
Usage of semi-skilled and unskilled branded jewellery in India has been
workforce in operation of such high- showing encouraging signs, despite
end machines may result in tough competition. According to an
significant under-utilization of the estimate by the Indian Brand Equity
machinery / technology, and may, Foundation (IBEF), the market for
at times, cause losses in branded jewellery is expected to
operations. Skill development is reach US $ 2.2 billion by 2010.
therefore very essential for proper Some of the jewellery brands in
reclassification of the workmen in India are DeBeers, D’damas,
this industry. Tanishq, Oyzterbay, and Gili. In
order to gain market share,
R&D and Product Development branded jewellers may have to
Another major challenge faced by come up with designs that
the industry is the low level of R&D customers want, and win the trust
intensity, and facilities for and confidence of consumers by
undertaking R&D and product hallmarking and demonstrating the
development. Proper R&D solutions purity of the gold used by them. To
would help in improving product compete with traditional players,
23
24. branded players may also find quality products even in rural areas.
some ways to differentiate India may also consider becoming
themselves from others. While the a member of International
success of a particular brand may Hallmarking Convention, and derive
depend on differentiation and the benefits of such Convention.
affordability, quality will be a key
element in sustaining a brand. In Increasing Market Presence of
addition, branded players require Platinum Jewellery
focused advertising and astute With the gold prices increasing at
salesmanship to compete with record levels, consumers have
traditional jewellers. started showing interest in
ornaments made from other metals,
Hallmarking of jewellery like platinum and palladium. The fall
Hallmarking is the accurate in prices of platinum has also
determination and official recording triggered the demand for platinum
of the proportionate content of jewellery across the world, including
precious metal in jewellery. India. During the past one year the
Government of India has been prices of platinum have witnessed
protecting the interests of decline, which is one of the main
consumers from adulteration, and reasons for the consumers to opt
irregular metal quality, and for platinum jewellery. During March
launched the Hallmarking Scheme 2008, the price of platinum stood
through Bureau of Indian at US $ 2005 per troy ounce (31.1
Standards. The principal objectives gms), and during November 2008,
of the Hallmarking Scheme are to the price fell down to as low as US
protect the consumers against the $ 844 per troy ounce. As of
fraud of adulteration and to oblige December 2009, the price of
the manufacturers to maintain legal platinum stood at US $ 1448 per
standards of fineness. However, it troy ounce. As the demand for
is difficult to make Hallmarking of platinum jewellery is increasing and
gold jewellery mandatory across the especially when the consumer
country due to insufficient number preferences are shifting to platinum
of certification centres. At present, jewellery, due to rise in price of
there are over 100 BIS-recognised gold, Indian jewellers need to
assaying and hallmarking centres in diversify their product range and
India, which are centred around concentrate more in the
Tier – 1 and Tier – 2 cities. It is manufacture of platinum-based
proposed that India may consider jewellery. Leading retail jewellers
expanding the network of should also add exclusive space for
hallmarking infrastructure across platinum jewellery in their stores.
the country, and help penetrate According to industry observers, at
24
25. present, facilities for ore packaging are very important in
beneficiation and extraction of marketing such products. Focusing
platinum group metals do not exist on such product lines would enable
in the country. Technology also has the players in establishing an edge
to be imported for extraction of over their competitors. Players
platinum group of metals, which should also have desire for product
should be promoted in India innovation to catch-up with the
change in consumer trends.
Change in Product Portfolio
As the recession is reducing the Continuous Skill Development
demand for jewellery products Human resource is one of the
worldwide, it is necessary to critical factors for the gems and
diversify the export product jewellery industry, as the industry
portfolio, and concentrate more on is labour-centric. Non-availability of
lesser-priced jewellery, such as skilled workers is often cited as one
imitation, fashion or costume of the major reasons for the inability
jewellery. Indian gems and jewellery of the players in this industry to
industry may also diversify the scale up their operations. Thus, the
export product portfolios on the players need to constantly upgrade
lines of the change in perception the skills of the workmen, through
of the consumers. It may be training and retraining strategies, to
mentioned that the new-age enhance their productivity. Some of
consumer perceives jewellery as a the focus areas for imparting skill-
personal accessory that manifests upgradation include: technology
the wearer’s attitude, personality interface of design and product
and lifestyle. Significant development, innovation in
opportunities may be available to manufacturing process and
the players in the Indian jewellery reduction of wastage,
industry, if they leverage and standardization and quality control,
package the products with the and international networking and
blending of tradition and culture in marketing. In addition to firm level
designs that are universal and strategies, the industry also needs
contemporary in their aesthetic to address the challenge of skill
appeal. While the products with development collectively. Supply of
such blend would stand out with craftsmen / artisans that come
resemblance of cultural and through generations need to be
regional identity, they may not complemented by fresh talents,
significantly look as ethnic products. trained in a professional manner, to
In other words, the products should have access to wider talent pool.
be a new-look piece, but with The industry may establish close
traditional inspiration. Branding and linkages with the existing learning
25
26. centres, and help them in imparting feasible under conventional
skills / training that are needs of methods. Technology also helps the
the hour. At present, there are few fabricators to churn-out the new-
institutes which provide training in design products in a much speedy
jewellery design, viz., Indian way.
Institute of Gems and Jewellery,
Indian Diamond Institute, and Establishing Diamond Bourses
National Institute of Design. Also, At present, one diamond bourse,
the National Skill Development Bharat Diamond Bourse, has been
Corporation (NSDC), initiated by the established in Mumbai.
Government of India, is expected Nevertheless, the traders have to
to give thrust on skill development
visit Antwerp, Israel, Hong Kong
of various sectors, including gems
and other locations to buy and sell
and jewellery. It is also important
rough and polished diamonds.
for the players to accomplish
Establishment of more diamond
greater degree of professionalism
bourses will give a major fillip to
and establish appropriate
India to emerge as an international
organization structure that would
diamond trading hub, and also to
attract and retain best talent in the
industry. make trading in diamonds easier
for the players in India. It will be
Technology Upgradation easier to get the rough diamonds
through these trading centres and
Players in this industry need to also for getting buyers for the cut
adopt latest technology, including and polished diamonds.
the ICT interface in all aspects, Government of India has already
starting from mining, cutting and
announced the plan for establishing
polishing, to fabrication and
more diamond bourses to make the
marketing. Technological solutions
country an international trading hub
are available for several of the
to boost the gems and jewellery
challenges faced by the gems and
exports. These diamond bourses
jewellery industry; these solutions
are expected to provide a single
include: innovations in designs
platform for traders and it would
(through CAD/CAM machinery),
help in making India a trading
quality and finish of products
(through infrared, photo-typing, centre for diamonds.
etching, wax-casting), cost control
in process and reduction of Increase in Exploration
wastage (laser cutting, hollow-tube Activities
processing). Imparting of As per United Nations Framework
technological solutions may reduce Classification, total resources
cost and time, which may not be (reserves and remaining resources)
26
27. of gold ore (primary) in India as on states is required to be boosted for
April 1, 2005, were estimated at discovering new economically
390.28 million tonnes, of which only viable kimberlite / lamporite rocks
19.25 million tonnes are placed for indigenous production of
under reserve category, and the diamonds.
rest, 371.03 million tonnes, under
resources category. Besides, it has Enhancing Visibility through
been estimated that the total Continuous Participation in
resources of gold of placer type in International Exhibitions
the country would be around 26
Continuous participation in
million tonnes. However, resource
international trade shows and
augmentation and gold production
jewellery exhibitions is very
have not been significant in India.
important for the Indian gems and
This may require increase in
jewellery industry; such strategy
exploration activities with
would help in projecting the industry
improvements in technology and
as a player in entire jewellery value
know-how. According to a report by
the Planning Commission, chain, from cutting, polishing,
Government of India, the mining fabricating of wide variety of plain
sector also requires improved and stone-studded jewellery.
method of narrow-vein-mining for Participation in international
achieving full economic benefits. exhibitions would also help
Introduction of small-scale mining establish new business links for the
culture in the gold industry is also Indian gems and jewellery industry,
another requirement with adoption and would also pave the way for
of modern gold extraction the industry to develop further
technology. Cluster mining of small business links to enhance the level
gold deposits may also deserve of their innovations in designs and
consideration and should be technology. This platform would
encouraged. The metallurgical also help in attracting and
technique for extraction of platinum mobilizing the major buyers of
group of elements from low grade gems and jewellery internationally,
ore is also required to be sourced and also provide exhibitors with
from developed countries, in order learning opportunities and exposure
for India to become a producer of to new markets and trends. The
platinum. Efforts should be made recent foreign trade policy has
to increase the production of rough increased the personal jewellery
diamonds from India to partly meet carriage limit to US $ 5 million, from
the requirement of Indian diamond US $ 2 million, and the limit in case
cutting and polishing industry. of personal carriage, as samples,
Exploration activity in different for export promotion tours, has also
27
28. been increased from US $ 0.1 It is expected that the spike in
million to US $ 1 million. This would gold and silver prices might change
also help the industry promote the consumer preferences, as also
exports, as the industry will be able impact their demand pattern. The
to showcase more jewellery in growing consumer sophistication,
exhibitions abroad. decline in investment-driven
(jewellery) demand, and competition
CONCLUSION from other luxury goods are also
likely to impact the demand pattern
World gems and jewellery industry
of gems and jewellery. Further, the
is on the verge of transformation
consumer awareness and
due to both supply-side and consciousness, generated through
demand-side factors. Some of the the vigilant measures adopted by
recent trends in the global gems various national Governments, are
and jewellery industry include: expected to drive the demand for
fragmentation of rough diamond branded and hallmarked jewellery. At
supply positions; emergence of new national level, India has been
mining areas; beneficiation adopting various strategies to cope
movement in mining countries, and with the global trends in gems and
ever-growing raw material prices. At jewellery business. World Gold
fabrication level, fashion and styles Council and the Indian gems and
have been changing significantly; jewellery industry have jointly
the ratio of cost of raw materials introduced international jewellery
to sales has been coming down, designing competitions among the
squeezing the profit margin of the Indian artisans to generate
fabricators. There has been awareness about the skills of Indian
volatility in raw material prices; the artisans in the global market, as also
global slowdown led to low capacity to expose Indian artisans to new
utilization in this industry bringing design developments emerging
down the margins in the jewellery around the world. There have been
manufacturing. In some countries, initiatives taken by many designing
including India, some of the centers to train Indian jewellers in
processing units have been partially international manufacturing and
shut down due to slackening designing skills. This is expected to
demand. As a result, the value enhance demand as well as sales for
chain in the gems and jewellery the Indian gems and jewellery
industry may witness consolidation; industry.
only select major players are likely Indian gems and jewellery
to cope with the trends and sustain industry is increasingly building its
the competitive pressures. ability to produce full range of sizes
28
29. and qualities of stones, utilizing not interface would also provide the
only the low-cost and abundant necessary platform for firms to scale
workforce, but also advanced up their operations. While several
technologies. The industry has been such measures have been taken, at
seeking further growth through firm-level, industry-level, and
processing of larger size stones and Government-level, there exists still a
manufacture of diamond jewellery. need to strengthen the position of
Both the Government and the gems India in the global market place
and jewellery industry have through a concerted strategy,
recognized the use of IT in diamond addressing the challenges of raw-
clusters in order to enable seamless material sourcing, technological
flow of information between the infusion at processing stage,
functional areas, right from job adoption of dynamism in design and
contractors to small / mid-sized firms, product development, and
to large, integrated units. The IT sustainable market entry approach.
29
30. 1. INTRODUCTION
Gems and jewellery are being domestic consumption, a
used by the Indians since ages for predominant portion of rough, uncut
both its aesthetic as well as diamonds processed in India is
investment purposes. India has the exported either in the form of
distinction of being one of the first polished diamonds or in the form of
countries to introduce diamonds to finished diamond jewellery.
the world. The country was also
one of the first countries to mine, The gems and jewellery industry
cut & polish, and trade in diamonds. has an important role in the Indian
economy. With an estimated
The gems and jewellery sector
consumption of 713 tonnes of gold
may be categorized broadly into:
during the year 2008 (including
Gemstones: Diamonds, jewellery consumption of 501
coloured stones - precious, tonnes), India is the largest
semi precious and synthetic consumer in the world. (Table 1).
stones;
Apart from its historical religious
Jewellery – plain gold,
significance, gold is valued as an
studded, silver, costume
important savings and investment
jewelleries; and
vehicle. Even in present times, gold
Pearls. remains the bride’s wealth and is the
The two major segments of the preferred jewellery worn by women
gems and jewellery business in India in India irrespective of their religious
are gold and diamond jewellery. belief. Buying of gold and jewellery
While a predominant portion of gold is an important part in every stage of
jewellery manufactured in India is for the life-cycle of an Indian citizen.
30
31. Table 1:
CONSUMER DEMAND FOR GOLD IN THE WORLD
(in tonnes)
Countries 2007 2008 % Change
Jewellery Net Total Jewellery Net Total Jewellery Net Total
retail retail retail
investment investment investment
India 551.7 217.5 769.2 501.6 211.4 713.0 -9.1 -2.8 -7.3
China 302.2 25.6 327.8 326.7 65.9 392.6 8.1 157.4 19.8
USA 257.9 16.6 274.5 188.1 78.9 267.0 -27.1 375.3 -2.7
Europe — 9.6 9.6 — 242.7 242.7 — 2428.1 2428.1
excluding
CIS
Turkey 188.1 61.1 249.2 153.2 57.1 210.3 -18.6 -6.5 -15.6
Saudi Arabia 117.9 9.0 126.9 108.9 13.5 122.4 -7.6 50.0 -3.5
Vietnam 21.4 56.1 77.5 19.6 96.2 115.8 -8.4 71.5 49.4
UAE 99.8 7.5 107.3 100.0 9.5 109.5 0.2 26.7 2.1
Russia 85.7 — 85.7 91.4 — 91.4 6.7 0.0 6.7
Egypt 67.8 0.7 68.5 74.3 2.5 76.8 9.6 257.1 12.1
Indonesia 55.2 0.3 55.5 55.9 2.9 58.8 1.3 866.7 5.9
Italy 59.1 — 59.1 50.3 — 50.3 -14.9 — -14.9
Other Gulf 40.0 2.9 42.9 34.8 2.9 37.7 -13.0 — -12.1
UK 50.1 — 50.1 37.2 — 37.2 -25.7 — -25.7
Taiwan 14.7 7.4 22.1 12.2 8.7 20.9 -17.0 17.6 -5.4
Hong Kong 14.2 1.0 15.2 17.0 1.0 18.0 19.7 0.0 18.4
Japan 30.6 -56.3 -25.7 28.2 -39.4 -11.2 -7.8 -30.0 -56.4
Total Above 1956.4 359.0 2315.4 1799.4 753.8 2553.2 -8.0 110.0 10.3
Others 444.3 51.3 495.6 386.4 64.8 410.3 -13.0 26.3 -17.2
World Total 2400.7 410.3 2811.0 2185.8 818.6 2963.5 -8.9 99.5 5.4
SOURCE: World Gold Council
31
32. 2. RAW MATERIAL BASE:
GLOBAL SCENARIO
PRODUCTION Growth in production of gold is
expected to remain flat in 2009, as
Gold increased production in China,
Gold is produced from mines in Canada and Peru may not be able
every part of the world, except to offset decline in production in
Antarctica, where mining is not South Africa, USA, Indonesia and
permitted. From a level of 25701 Australia.
metric tonnes in 2001, world gold
mine production has declined to World gold demand primarily
2327 metric tonnes in 2008, mainly comprises of jewellery fabrication,
because of decline in production in retail investments, industrial and
the major gold producing countries, dental uses and exchange traded
like South Africa, USA and funds. In the year 2008, world gold
Indonesia. demand in volume terms declined for
The major producer of gold in the jewellery consumption and industrial
world during 2008 was China with a and dental purposes; however, gold
production of 295 metric tonnes demand for investment purposes
(growth rate of 7.3% over the showed an increase over the
previous year); China held a share previous year (Annexure: 1).
of 18.9% of the total world production However, in value terms (USD), the
of gold during 2008, followed by demand for gold has shown
South Africa (12.7%), USA (10.7%), considerable growth in 2008,
Australia (9.9%) and Peru (9.7%). indicating the significant price
Compared to 2007, during 2008, increase during this year.
countries such as Indonesia
(-23.7%), Australia (-8.5%), USA During the third quarter of 2009,
(-3.4%), Canada (-1%) and South the demand for gold has shown a
Africa (-0.8%), witnessed a decline decline in almost all the segments.
in production, and only countries This may be partially owing to global
such as China (7.3%), Russia (5.1%) economic slowdown and increase in
and Peru (2.9%) witnessed an prices, reducing the disposable
increase in production of gold. income with the consumers.
1 SOURCE: USGS (U.S. Geological Survey)
32
33. Table 2:
MAJOR PRODUCERS OF GOLD IN THE WORLD
(In metric tonnes)
Countries 2007 2008 % Change %Share in 2008
China 275 295 7.3 12.7
South Africa 252 250 -0.8 10.7
USA 238 230 -3.4 9.9
Australia 246 225 -8.5 9.7
Peru 170 175 2.9 7.5
Russia 157 165 5.1 7.1
Canada 101 100 -1.0 4.3
Indonesia 118 90 -23.7 3.9
Uzbekistan 85 85 0.0 3.7
Ghana 84 84 0.0 3.6
Papua New Guinea 65 65 0.0 2.8
Chile 42 42 0.0 1.8
Mexico 39 41 5.1 1.8
Brazil 40 40 0.0 1.7
Other countries 471 440 -6.6 18.9
World total 2383 2327 -2.3 100.0
SOURCE: USGS
Gold exchange traded funds investor can purchase gold ETF
have gained popularity with investors shares through a stockbroker without
across the world and these were being concerned about such
floated in the market in 2003. These problems.
funds and additional similar funds are
now listed in the exchanges across World gold prices have shown
the countries. Holdings of ETFs an upward trend over the years. Gold
(Exchange Traded Funds) were prices, which stood at US $ 274.5
estimated to be US $ 8.8 billion in per ounce on December 31, 2001,
2008, and US $ 1.3 billion in the third increased to US $ 869.8 per ounce
quarter of 2009. Investing in gold in on December 31, 2008 showing a
the traditional manner is not CAGR of 15.5%.The price has
accessible and carries higher costs increased further to US $ 1,192 per
owing to insurance, storage and ounce on December 1, 2009. Exhibit
higher markups. The claimed 1 shows the gold prices in select
advantage of the ETF is that the currencies. Almost all the currencies
33
34. Exhibit 1:
PRICE TRENDS OF GOLD IN SELECT CURRENCIES
SOURCE: World Gold Council (based on London pm fix)
have shown an upward trend since in terms of value, estimated at US
the year 2000. In Indian rupees, the $ 2.96 billion, recording a decline
price of gold, which stood at in growth of 7.7% over the year
Rs. 12,803 per ounce on December 2006. Botswana constituted a share
31, 2000, increased to Rs. 42,374 of 25% in the world’s production of
per ounce on December 31, 2008. diamonds. Botswana was followed
The price has increased further to by Russian Federation (21.7%),
Rs. 55,228 per ounce on December Canada (13.7%), South Africa
1, 2009. The main reason for the (11.7%) and Angola (10.5%) as
increase in prices of gold was the other world’s largest producers of
strong consumer demand, especially diamond. Lesotho (growth of
with the change in investor behaviour 96.4%), Canada (17.5%) and Sierra
and consideration of gold as safe Leone (13%) were countries, which
investment, post financial crisis. witnessed impressive growth rates
in their production of diamonds
Diamond during 2007.
During 2007, Botswana was the Russia was the largest diamond
largest diamond producing country producer by volume, with a
34
35. production of 38.3 million (23% of the De Beers, Trans Hex, Rio Tinto,
world’s diamond production) carats BHP Billiton and a hand-full of other
in 2007, followed by Botswana companies which use their cartel
(20%), Congo (17%), Australia (11%) power to control the supply of
and Canada (10%). In terms of diamonds on the wholesale market
growth in volume of production, ( diamond pipeline ), thereby
Guinea recorded 115% growth in controlling and stabilizing prices.
2007 (over 2006), followed by The process under the diamond
Canada (28%) and Angola (5.7%) pipeline is given in Exhibit-42:
(Annexure: 2).
Including its mines in South Silver, Gemstones and
Africa, Namibia and Canada, De Platinum
Beers is the world’s largest diamond Major producers of silver in the
mining company, constituting 42% of world in the year 2008 include:
the total production by value and Peru (19%), Mexico (15.8%), China
29% of the total production by (13.7%), Chile (10.5%) and
volume (Exhibit 2). Other major Australia (9.5%). There has been
producers include Rio Tinto, Alrosa an increase in the production
and BHP Billiton. compared to the previous year in
almost all the major countries,
The Diamond Pipeline except USA and Australia, which
The trade in gem-grade rough witnessed a decline of (–) 11.1%
diamonds is primarily controlled by and (–) 4.3%, respectively.
Exhibit 2:
COMPANY-WISE WORLD DIAMOND PRODUCTION, 2007
SOURCE: Indian Gems and Jewellery Sector, ICRA Sector Analysis
2 SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html
35
36. 36
Exhibit 3:
WORLD’S LARGEST PRODUCERS OF DIAMOND (2007)
SOURCE: Indian Gems and Jewellery Sector, ICRA Sector Analysis
37. Exhibit 4:
DIAMOND PIPELINE
1. Rough diamonds are sent directly from De Beers mining operations in Africa
(#1), or secondary mining producers in Canada and Russia, to De Beers’ Diamond
Trading Company (DTC) in London, Gaborone, Kimberley and Windhoek, for
sorting and resale. The rough stones are separated into 16,000 categories based
on size, color and quality, then divided by human or automated sorters into
individual lots called “boxes.”
2. The DTC is part of the De Beers Group supply-chain known as the Central Selling
Organization (CSO), which combines (“aggregating”) supplies of rough diamonds
from multiple sources into one wholesale market (#2).
3. The DTC holds a sale called a “site” or “sight”, ten times per year, in London
and Johannesburg, where De Beers sells the “boxes” to its select group (“supplier
of choice”) of 125 “sightholders” (#3) or diamond manufacturers, cutters, and
retailers. De Beers (DTC) sets the price of each box in advance, determining the
quantity and quality that each site-holder will receive. A ‘sight’ can have a value
of between US $ 500,000 to US $ 2,000,000.
4. The sightholder then transports the box of rough diamonds back to diamantaire
firms (cutting and polishing factories) located around the world (#4). India cuts
the vast majority of small stones (0.20 carats or less) in Mumbai and Surat,
while large stones are primarily cut in Antwerp, Tel Aviv, Ramat Gan, and New
York. Other major cutting centers are located in Johannesburg, China, and
Thailand.
5. The diamonds are then re-sold from the cutting and polishing (manufacturing)
centers to wholesalers (Diamond Bourses), or to jewellery manufacturers (#5)
around the world. Both traders and manufacturers may sell diamonds “upstream”
and “downstream” through the diamond pipeline, to take advantage of market
fluctuations. Once the diamonds are set into jewellery, they are sold to retailers
or directly to the customers.
SOURCE: http://www.allaboutgemstones.com/diamond_pipeline.html
37
38. Box 1:
WORLD DIAMOND COUNCIL
Amid growing concern over human rights violations and atrocities committed
against innocent victims in diamond producing countries, the World Federation of
Diamond Bourses, and the International Diamond Manufacturers Association
passed resolution creating the World Diamond Council (WDC). The resolution
called for the newly formed WDC to include representation from the diamond
industry itself, and also from among countries where diamonds play a major
economic role, and from the international banking sector. The mandate for the
World Diamond Council is the development, implementation and oversight of a
tracking system for the export and import of rough diamonds to prevent the
exploitation of diamonds for illicit purposes, such as war and inhumane acts. Human
rights activists refer to diamonds exploited in this way as “blood” or “conflict”
diamonds.
As a result of the commitment and resolve of WDC leaders and members,
significant strides have been made towards resolving and reconciling the issues
threatening the diamond industry because of “conflict” diamonds. Various
committees, under the aegis of WDC, were formed for efficient functioning to
cover areas such as legal, technical, legislative, steering, finance, banking,
information and research.
The world diamond industry does not condone the exploitation of diamonds
for illicit or immoral purposes. Nor, will it acquiesce to outside efforts to disrupt the
importance that diamonds are to the established and emerging economies around
the world. Rather it is the goal of the diamond industry, working through the World
Diamond Council, to work openly and in partnership with the people of the world
whenever and wherever such challenges occur.
SOURCE: World Diamond Council
In the case of gemstones (other the only countries, which showed a
than diamond), the major producers decline in production compared to
in the world include: Botswana the previous year (Table 4).
(26.5%), Russia (24.7%), Canada
(19.1%), Angola (10.6%), and South The largest producer of platinum
Africa (6.5%). Though most of the in the world was South Africa holding
countries haven’t shown an increase a share of 76.6% of the total world
in its production in 2008, over 2007, production, followed by Russia
some countries such as Sierra Leone (12.5%), Canada (3.6%), Zimbabwe
(66.7%), Guinea (35%), Central (2.8%) and USA (1.9%). However,
African Republic (27%) and Angola the major producers such as
(14.9%) have shown tremendous South Africa (–7.8%), Russia
increase in its production in 2008 (– 7.4%) and USA (– 4.1%) have
over the previous year. Brazil shown a decline in their production
(– 33.3%) and Australia (– 0.4%) were in 2008 over the previous year.
38
39. Table 3:
MAJOR PRODUCERS OF SILVER IN THE WORLD
Countries 2007 2008 % Change %Share in 2008
Peru 3500 3600 2.9 19.0
Mexico 3000 3000 0.0 15.8
China 2560 2600 1.6 13.7
Chile 1900 2000 5.3 10.5
Australia 1880 1800 -4.3 9.5
Poland 1200 1300 8.3 6.9
USA 1260 1120 -11.1 5.9
Canada 800 800 0.0 4.2
South Africa 70 70 0.0 0.4
Other countries 4630 4600 -0.6 24.2
World Total 20800 20890 100.0
SOURCE: USGS
Table 4:
MAJOR PRODUCERS OF GEMSTONES IN THE WORLD
Countries 2007 2008 % Change %Share in 2008
Botswana 25000 25000 0.0 26.5
Russia 23300 23300 0.0 24.7
Canada 18000 18000 0.0 19.1
Angola 8700 10000 14.9 10.6
South Africa 6100 6100 0.0 6.5
Congo 5400 5400 0.0 5.7
Namibia 2200 2200 0.0 2.3
Guinea 815 1100 35.0 1.2
Ghana 720 720 0.0 0.8
Sierra Leone 360 600 66.7 0.6
Central African Republic 370 470 27.0 0.5
Guyana 350 350 0 0.4
Australia 231 230 -0.4 0.2
Tanzania 230 230 0 0.2
Cote d’lvoire 210 210 0 0.2
Brazil 300 200 -33.3 0.2
China 100 100 0 0.1
Other countries 210 210 0 0.2
World total 92596 94420 2.0 100.0
SOURCE: USGS
39
40. Table 5:
MAJOR PRODUCERS OF PLATINUM IN THE WORLD
Countries 2007 2008 % Change %Share in 2008
South Africa 166000 153000 -7.8 76.6
Russia 27000 25000 -7.4 12.5
Canada 6200 7200 16.1 3.6
Zimbabwe 5300 5600 5.7 2.8
USA 3860 3700 -4.1 1.9
Columbia 1400 1700 21.4 0.9
Other countries 3490 3500 0.3 1.8
World total 213250 199700 -6.4 100.0
SOURCE: USGS
40
41. 3. INTERNATIONAL TRADE IN
PRECIOUS METALS, GEMS AND
JEWELLERY
EXPORTS AND IMPORTS OF addition, and for exports, as cut
PRECIOUS METALS AND and polished diamonds.
STONES
Precious Stones
Gold
Hong Kong, USA, Switzerland,
The largest exporter of gold in the Thailand and India were among the
world, in the year 2007, was USA largest exporters, as well as
with a share of 19.9% in the total importers of precious stones (other
world exports, followed by Australia than diamond) in the world in 2007.
(15.9%), Canada (9.3%), Hong Hong Kong was the largest
Kong (7.3%) and Peru (7.1%). The exporter of precious stones (other
world’s largest importers of gold than diamonds), with a share of
include: Switzerland (25.7%), UK around 17.1% of the total world
(19.6%), USA (8.4%), India (7.5%) exports, and was followed by USA
and South Africa (4.4%). (13.2%), Switzerland (12.7%),
(Annexure: 3). Thailand (12.2%), and India (9%).
In the case of imports, the leading
Diamond
importers include: USA (26.5%),
Israel (with a share of 19.7%), Hong Kong (14.4%), Switzerland
Belgium (19.6%), India (14.3%), (9.2%), Thailand (7.2%), and India
USA (12.8%), and UK (9.1%) were (6.3%).
the largest exporters of diamond in
the world, in the year 2007. The Pearls
largest importers of diamonds
include: USA (17.7%), Belgium In the case of Pearls, Hong Kong
(16.2%), India (13.1%), Israel (13%) was the largest exporter, with the
and Hong Kong (12.9%). India was exports valued US $ 482.92 million,
an exporter as well as an importer constituting a share of 30.2% in the
of diamonds with a respective world exports of pearls in the year
share of 14.3% and 13.1%, in the 2007. Japan, China, Australia, and
world. This may be because, India French Polynesia were the other
imports rough diamonds, for value major exporters of pearls.
41
42. Hong Kong was the largest importer Articles of Natural / Cultured
with a share of around 33.2%, Pearls, Precious Stones
followed by Japan (18.3%), USA World exports of articles of natural
(15.8%), Germany (4.4%), and and cultured pearls, or made of
Australia (4%). precious stones was valued at
US $ 1945.99 million in 2007. Major
Platinum exporters include USA (76.4%),
South Africa, constituting a share Hong Kong (6.4%), China (5.4%),
of 32.5% was the largest exporter Switzerland (2%) and Japan
of platinum in the world in the year (1.3%); major importers under this
2007. UK, USA and Germany were category include: Hong Kong
the other major exporters. USA was (15.7%), Switzerland (14.9%), UK
also a major importer of platinum (9%), Netherlands Antilles (9%),
constituting a share of 24.4% in the and Japan (8.6%).
world, followed by Japan (19.2%),
Germany (12.7%), and UK (8.6%). Articles of Imitation Jewellery
World exports of articles of imitation
Silver jewellery were valued at US $
Major exporter of silver was China, 4967.03 million in 2007. Major
with a share of 15.9% in the world, exporters of imitation jewellery
in the year 2007, followed by include Hong Kong (21.9%), China
Mexico (11.2%), Hong Kong (8.7%), (17.2%), Austria (8%), France
and Germany (8.1%). USA, Hong (6.4%), and Italy (5.7%); major
Kong, UK, Germany and India were importers under this category
the major importers of silver in the include USA (19.6%), Germany
world. (7.3%), France (7.3%), UK (6.4%),
and Italy (6.2%).
EXPORTS AND IMPORTS OF
JEWELLERY SELECT GLOBAL TRENDS
One of the recent major trends
Articles of Jewellery
witnessed by the gems and
World exports of jewellery articles jewellery industry, due to the
made of precious metals was economic slowdown, has been the
valued at US $ 42.5 billion in 2007; increase in recycling of gold or
major exporters include: Italy usage of gold scrap. Key focus has
(14.2%), India (11.9%), USA been the surge in the levels of gold
(10.5%), and Hong Kong (9.9%). scrap coming back to the market.
Major importers of jewellery include: With mine production on a declining
USA (23.7%), UAE (13.7%), trend and the outlook relatively
Hong Kong (9.1%), and Switzerland benign, scrap levels are likely to
(6.7%). remain as the primary supply of
42
43. gold. Selling of gold jewellery has New technologies, often
provided the consumers with adapted from other industries, are
access to the much-needed funds finding their way into jewellery
during the economic crisis. In the manufacturing. The use of Computer
price sensitive markets, the profit- Aided Design (CAD) is fast growing,
taking motive behind recycling and is increasingly being coupled
activity has been very strong, with Rapid Prototyping, which
highlighting the intrinsic value of enables new designs to reach the
jewellery and the strength of the market more quickly, thereby
savings/investment aspect of gold increasing competitiveness. Laser
jewellery purchases. Cash flow technology is also being increasingly
challenges have forced consumers utilised, not only for repair of
to sell some of their assets, defective castings and broken
including their jewellery, to raise the jewellery (it enables gem set
much-needed cash. Increase in jewellery to be repaired without the
recycling activity has been both a need for removing the gemstones),
western and non-western but also for decoration (laser
phenomenon, although volumes in engraving), cutting and hallmarking.
the non-western markets have Examples of technologies being
continued to dominate. In western adapted from other industries include
markets, the primary motivation cables (in place of conventional
behind recycling of gold has been chains), knitted wires and powder
distress selling, while in the more metallurgy processing.
traditional non-western markets, the
According to World Gold
primary motive has been profit-
Council, in the first quarter of 2009,
taking.
total demand for gold increased by
Research by World Gold Council 38% to reach a level of 1016 tonnes,
suggests that jewellery buyers valued US $ 29.7 billion. The overall
across the world recognize that gold demand for gold has fallen in the third
jewellery is both a store of value, as quarter of 2009, by 34% over the
well as a means of adornment. corresponding period of previous
Nevertheless, the investment and year, along with investment demand
adornment motives tend to overlap which witnessed a decline of 46%
strongly in traditional markets, such over the corresponding period of
as the Middle East (including Turkey) previous year. The impact of high
and India, largely due to the very gold prices, at a time of global
strong cultural values underpinning economic crisis, led to a widespread
jewellery ownership; bar and coin decline in consumer demand for gold
demand in these regions account for jewellery, by 30%, compared to the
a relatively modest proportion of total same period in 2008. In India,
demand for gold. despite economic pressures and
43
44. sustained increase in gold prices, diamond industry, which is large sub-
second quarter gold demand segment of global gems and
recovered from the exceptionally jewellery industry faced demand
weak levels witnessed in the slump following the global economic
previous quarter, but remained well crisis. Diamond prices in the world,
below the levels of a year before. like many other commodities,
Total gold off-take in India was down bottomed out, forcing the diamond
by 48% during the first three majors (such as De Beers, Zao
quarters, with jewellery, the largest Alrosa) to cut down production and
component of demand, falling supply of rough diamonds to boost
by 36%. up the prices. Mining was halted at
many mines, which were put on
Following the global financial maintenance during this period. The
crisis, the growth environment for the most prominent example was the
global gems and jewellery industry move by Debswana, jointly owned by
remains uncertain. The world De Beers and the Government of
Box 2:
RESPONSIBLE JEWELLERY COUNCIL
The Responsible Jewellery Council (RJC) is an international, not-for-profit
organization established to reinforce consumer confidence in the jewellery industry
by advancing responsible business practices throughout the diamond and gold
jewellery supply chain. The Council aims to build ‘a community of confidence’
across every step of the diamond and gold jewellery supply chain in all geographies,
and among businesses, both large and small. It seeks to work with a wide range
of stakeholders in defining and implementing responsible jewellery practices
through the RJC’s certification system. The certification process starts with the
Council accrediting conformity assessment bodies and auditors who verify RJC
member organizations for conformance with RJC Code of Practices. Membership
opportunity is open to all businesses and associations participating in the diamond
and gold jewellery supply chain and / or engaged in activities that have a potential
impact on consumer confidence in diamond or gold jewellery.
In 2005, a group of 14 organisations from a cross section of the diamond and
gold jewellery business came together to form the Council for Responsible Jewellery
Practices. These founding organisations were ABN AMRO, BHP Billiton Diamonds,
Cartier (part of Richemont), World Jewellery Confederation, Diamond Trading
Company (part of De Beers), Diarough, Jewelers of America, National Association
of Goldsmiths (UK), Newmont Mining, Rio Tinto, Rosy Blue, Signet Group, Tiffany
& Co., and Zale Corporation.
SOURCE: Responsible Jewellery Council
44
