Indian gems and jewellery industry fails to take advantage of US-China trade war

<i>With the US deciding to impose 10 per cent import duty on Chinese jewellery, Indian jewellers were hoping to get a portion of the Chinese export pie of US $ 2 billion</i>

Representational image
Representational image
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NH Correspondent

It is going to be a dark Diwali for jewellers this time as Prime Minister Narendra Modi failed to capitalize on the US-China trade war notwithstanding the recent Howdy Modi publicity blitzkrieg in Houston.

The gems and jewellery industry was hoping that US President Donald Trump's decision to impose 10 per cent import duty on Chinese jewellery would help boost the sagging exports of diamonds and jewellery made from precious or semi-precious stones to the US from India.

While China's gems and jewellery exports to the US amounts to about US $ 2 billion a year, India’s exports have declined by 7.6 per cent to US $ 18.9 billion dollars in the first half of this fiscal.

With the US deciding to impose 10 per cent import duty on Chinese jewellery, the Indian jewellers were hoping to get a portion of the Chinese export pie of US $ 2 billion. However, there are no signs of putting the Indian jewellery exports on the fast track.

India faces tough competition from Thailand and Vietnam which have much friendlier business policies to take advantage of the US-China trade war.


Indian jewellery industry is facing several roadblocks. If the government fails to provide incentives to foreign investors wanting to shift their manufacturing and processing operations to India it could lose a large chunk of the US $ 2 billion export market to competitors.

According to industry sources, there are several stumbling blocks for the gems and jewellery industry to step up production to meet the demand from the US market which consumes more during the Christmas. For one, there is a reluctance of banks to lend to jewellers since the Nirav Modi scandal. This has caused a working capital crunch and rise in manufacturing cost.

Says vice-chairman of the Gem and Jewellery Export Promotion Council Colin Shah: “We are unable to take advantage of the US-China trade war because of higher customs duty on rough diamonds and goods and services tax (GST) on certification.”

The industry alleges apathy on the part of the government in resolving the issue despite several representations. The US-China trade war had opened a window for Indian exporters to ship more to America. Several Chinese companies too had visited India recently to explore possibilities of shifting their exports operations from China to India.

The export of cut and polished diamonds had fallen by 24.9 per cent in August and 17.8 per cent in September. The cumulative export over the first six months of 2019-20 was down by 19.8 per cent to US $ 10.3 billion.

However, says former president of the Surat Diamond Association Dinesh Navadia: “Diamonds processors have felt some relief in the past two months. Trading activities have improved and inventories reduced. This is a welcome relief for many processing units.”

Soaring gold price is another matter of concern for the jewellers. Gold price has soared this year, hitting a six-year high in dollar terms. Imports of gold fell for a third month in September to the lowest in more than three years. Jewellers have cut purchases as gold futures in Mumbai touched an all-time high of Rs 39,885 per 10 gram which is more than 20 per cent higher than last year.

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