By K Raveendran
The imposition of extra tariff on Chinese gold jewellery exports by the United States has helped the Indian jewellery export trade to dislodge the United Arab Emirates as the country’s leading export market. The tariff on Chinese jewellery has made Indian exporters more competitive on the one hand, while the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE introduced in 2022 has allowed 90 percent of Indian exports to the UAE duty-free, facilitating re-exports from the UAE to the US. Together these two factors have made the US Indian jewellery’s biggest export market.
The new agreement removed a major hurdle for Indian jewellery’s re-exports from the UAE on account of the 5 percent import duty imposed by that country in 2017 as well as another 5 percent value added tax (VAT), making Indian jewellery lose its competitiveness. The situation has now been turned around, with the Indian exporters becoming more competitive.
India has been one of the biggest exporters of gold jewellery and the free UAE access has ensured far-reaching impact on the Indian exports, leading to a major pickup in the business. The outlook for exports is even brighter over the coming years as the government has launched measures to boost manufacturing and exports. Proposals to allow advance payments to overseas precious metal suppliers and to set up Mega Common Facility Centres (CFCs) in the Santacruz Electronics Export Processing Zone (SEEPZ) in Mumbai and Surat are seen further stimulating growth in the sector.
The CFCs are expected to facilitate sharing of manufacturing best practice and state-of-the-art machinery, which would bring the latest technology and resources within reach of small manufacturers. If these efforts are supported by appropriate communications around both quality and craftsmanship, the future of India’s gold jewellery market will be assured, according to the World Gold Council. Manufacturers are increasingly focused on producing lightweight pieces to satisfy demand from the younger consumer, especially those who want daily wear gold jewellery that matches their adoptive Western-style attire.
But the domestic market has been grappling with several challenges, including numerous changes in the regulatory environment and in consumer behaviour. The council feels that the domestic gold jewellery demand will face further challenges in the days to come. Changing demographics and the possibility that millennials will move away from gold as other luxury items demand their attention are reckoned to be important factors that will impact domestic jewellery demand.
Despite the traditional nature of India’s gold demand, consumer behaviour over recent years has changed and continues to do so. Plain gold jewellery maintains80-85 percent of market share, the majority of which is22-carat although the market for 18-carat jewellery is growing.
According to the council, the country exhibits distinct regional preferences. Studded jewellery, known as Polki, Kundan or Jadau, has an estimated market share of 15-20 percent overall, although in Northern India this share is considerably higher. In the South, consumers are more inclined towards plain gold products, 60-70 percent of which are studded with diamonds and the remaining 30-40 percent set with precious or semi-precious stones.
Much of the Indian gold market is very traditional, reflecting important cultural and religious ties. This can be seen in the long-standing preference for 22-caratjewellery and the dominance of bridal jewellery. But the gold market is evolving, with changing tastes and designs driven by economic growth, globalisation and changing consumer preferences. In recent years, for example, demand has grown for lightweight and studded jewellery.
Apart from gold, India has a sizeable and vibrant silver jewellery market and is the world’s largest fabricator of silver jewellery. A 2019 consumer survey found that 60 percent of the women surveyed owned gold jewellery, closely followed by 57 percent, who owned silver jewellery, but only 26 percent owned diamond jewellery, while platinum jewellery did not appear among the top purchases by female consumers, as this market is still in its infancy in India.
Daily wear and fashion jewellery account for 45-50 percent of the domestic market. Unlike the bridal segment, which is primarily22-carat, daily wear products cover 22-, 18- and14-carat. Even so, 22-carat remains dominant with more than 80 percent of the market, and 18- and 14-caratcombined account for a 15-17 percent share, with both having increased over the last decade. According to the council, 14-carat jewellery has only emerged in the last two or three years and, as it stands, only a small number of retailers currently offer this lightweight, relatively low-carat product. (IPA Service)
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