India’s Gems and Jewellery sector plays an important role in terms of its contribution to overall exports and GDP. With more than half a million firms, the sector contributes at least 6% to the overall GDP of the country and around 15% to total merchandise exports. India is the largest diamond polishing centre in the world with a contribution of around 95% to the total processed diamond globally.
Some of the countries that import jewellery from India are United Arab Emirates, United States of America, Russia, Singapore, Hong Kong, Latin America and China. Strong overseas demand for India-made jewellery, availability of skilled workforce and favourable policy environment are some of the growth drivers in this industry. Apart from exports, strong domestic demand for gems and jewellery is also a significant growth driver for this industry. Indians accounts for around 29% of the total world consumption of gems and jewellery.
India meets its gold demand largely through imports, which accounts for around 85% of total gold supply in the country. The country imports gold either in refined form or in dore form. India has witnessed considerable growth in gold refining capacity in recent years. The number of gold refiners in the organized sector has grown from three or four in 2013 to 30 in 2015, with a total capacity at least 1,450 tonne.
India is also a major importer of diamond from world market. The imported diamond is processed and re-exported to various countries across the globe. In order to ensure regular supply of rough diamond to local diamond processers, Government of India has opened a Special Notified Zone (SNZ) at Bharat Diamond Bourse in Mumbai in 2015. Local diamond processors can buy rough diamond from this zone instead of travelling to different countries or approaching middlemen for this purpose.
Among government policies, allowing 100% Foreign Direct Investment (FDI) in the sector under the automatic route, raising the eligibility limit for Small Scale Industry (SSI) from Rs 12 crore to Rs 15 crore, offering subsidized interest rate for export credit are noteworthy. Since April 2000, the diamond and gold ornament sector has attracted more than USD 850 million FDI, out of which USD 418 million came since April 2014.
Although India is the leading consumer and exporter of gold and jewellery, gold market in the country is characterized by informal traders and lack of transparency in pricing. In order to improve efficiency of trading and price discovery in the gold market, Government of India is planning to set up spot gold exchange (or electronic trading platform) in the country.