India’s gems and jewellery exports declined by 3.12 per cent for the financial year (FY) 2018-19 due to credit crunch, inordinate delay in GST (goods and services tax) refund resulting into blockage of available working capital and high import duty on polished diamond. Industry captains don’t see improvement in export in FY20 either. Data compiled by the apex industry body, the Gems and Jewellery Export Promotion Council (GJEPC) showed total gross gems and jewellery exports from India at $39.68 billion for financial year 2018-19, compared to $40.96 billion for the previous year. Total gross cut and polished diamond exports from India, however, remained stable at $23.82 billion during FY 2018-19 versus $23.72 billion for the previous year.
The decline in India’s gems and jewellery exports assumes significance, as it is a labour intensive industry that contributes around 13 per cent of country’s total merchandise exports. After the $2 billion Nirav Modi-Punjab National Bank (PNB) scam broke out in January 2018, the entire jewellery industry has been facing a liquidity crisis, with lenders tightening provisioning and sanction of fund. Lenders suspended use of letters of undertaking (LoUs) for disbursal and began asking for third-party-valued collateral worth over 100 per cent of the loan amount. “India’s gems and jewellery exporters are facing a number of problems which need to be addressed immediately. Liquidity remained tight throughout this year despite repeated requests from the industry to bankers and government seeking ‘ease of doing business’ here. Over and above, the industry is also struggling with blockage of working capital due to inordinate delay in working capital refund. All these issues put together have hit overall gems and jewellery exports down this financial year,” said Colin Shah, vice chairman, GJEPC.
He isn’t very optimistic for FY20 either, and estimates there could be a marginal drop in exports again. Another problem that hit exports is the delay in GST refund which not only blocks working capital, but also requires repeated efforts for the claim. Last year, the government raised import duty on cut and polished diamonds to 7.5 per cent from 2.5 per cent earlier. Gold jewellery shipments prevented the industry from steep fall in exports, thanks to the units existing in Special Economic Zones (SEZs) and Export Oriented Units (EOUs). GJEPC data showed gold jewellery exports from SEZs and EOUs surged 24.36 per cent to $12.03 billion, from $9.67 billion the previous year.