Chapter 2 REVIEW OF LITERATURE 2.1 INTRODUCTION Literature Review is considered an important component of research.

Review of literature involves summarising the current status of research works already done. Its helps to identify the gaps in terms of the area appearing relevant and those which have been already studied and those which are subject for further studies. A review of the pertinent past work and contradictions, pitfalls and other failings of the earlier work is necessary mainly to substantiate the need for another research study. Previous research studies are abstracted and significant writings of authorities in the area under study are reviewed. The review of relevant Literature on the study area is necessary before going deep into the research work. Reviews of related studies enable the researcher to get an in-depth knowledge of the topic and to conduct the study in a different approach from that of the existing studies in the relevant field.

This enables to carry out the study in the untouched field. In this chapter, the researcher has attempted to take up the review of the available literature on various aspects of Gems and Jewellery industry in India vis-a-vis challenges and

opportunities before the industry. In doing so, the researcher surveyed a number of journals, magazines, research papers, project reports, published and unpublished reports and thesis, dissertations, conference and seminar proceedings, books and websites. Such a review has provided a proper background to the researcher for the development of the present study. It will be worth mentioning to state that very few studies have been carried out on the topic Gems and Jewellery Industry in India: Challenges and Opportunities. Hence, this study has

significance. The reviews made in this aspect are summarized below: Vinod Kuriyan,1 in his article reports that with the volatile price of gold casting a shadow of uncertainty over both Jewellery production and retail, the Indian Gems and Jewellery Industry responded with some surprising bold experimentation with looks and alternative materials. The domestic turnover

was down mainly because of the uncertainty over the price of gold. However, the outlook for diamond jewellery looks good due to two factors i.e. price competitiveness and increasing preference of the consumers. Despite the price rise of the precious metal there was a marked improvement in the quality of displays and positioning of the products. The domestic Indian Jewellery is coming into its own and will take its place along side the already globally successful export production industry.1 Mallika Hegde (2006) in her Ph.D. unpublished thesis, Performance Evaluation of Minerals and Metals Trading Corporation (MMTC) of India with special reference to Precious Metals Division , opined that jewellery trends are changing the world over. The customer has become more demanding, looking for better quality in the product. New tastes and preferences in line with the best changing fashion trends need new skills in manufacturing, new materials and new standards of perfection. Towards this end, MMTC is totally committed to meet every need and choice from any part

of the world, as a challenge to its learning, acquiring and developing new skills. 2 Dasiy Tanwani (2007) in her article , Indian Jewellery, Retail, an impressive phenomenon , published in the Journal of Gem and Jewellery Industry , states that the Retailing in Indian jewellery sector is emerging stronger with various big companies opening multiple stores across the country. Jewellery brands have made diamond jewellery more popular than ever before. Just like foreign lands jewellery in malls is now a common feature in India too. The traditional jeweller has recognized the need of branding and superior services. The customer is accorded utmost respect and is pampered with comfortable shopping and better services. However, there are certain aspects of jewellery retailing that have not been incorporated completely by all. 3 Denise Meyer,2 in his article opines that the consumer has to see the advertisement three times before she or he remembers the product. Whether it is the print media or television or radio advertisement, the average consumer must be exposed to the same message at least three times before it

sticks. He also opines that the consistency of the message and the medium will enable the consumer to remember the product and what it stands for. 4 Pallavi (2007) in her article, High-End Couture Jewellery Pieces: What Sets them Apart and Why they Lead the Design Trends for t he Industry , published in the magazine The Art of Jewellery , states that the business of jewellery is set to get more and more evolved yet difficult each year as the people across the world get more into the fold of fashion products and evaluate the level at which the fashion interpreted in the jewels they buy and wear. It has become an obvious fact that the jewellery world has to come face to face with the challenges of the fashion industry and make products that address the emotional, psychological, philosophical and fashion needs of the people today. She also opines that the jewellery buying today needs to be a holistic experience and a jewellery store needs to move beyond, and become a world that invites you, charms you and surprises you all the time. 5 Nilesh Shah, in his article states that the Indian Gems and Jewellery and diamond industry is going through taxing

times with the proposals in the finance bill and the new taxes slab onto this industry not only bite the size of the profits but also increase the burden of procedures and paper work and making it all cumbersome and difficult to follow, the provisions of the bill are vague and incomplete leaving the industry unclear on procedures to recover their money. He is of the opinion that the industry is not averse to paying tax and the procedure is very tedious. The hassles and the corruption at every point have made this sector to deal with many agencies which is a headache for this sector. With the introduction of Value Added Tax (VAT) the picture has become more chaotic as VAT requires good implementation too, though the sector has welcomed VAT in the sector as long as it was beneficial for the Gems and Jewellery sector.6 Shanoo Bijlani and Regan Luis (2009) in their article, Foreign Brand Recognition Poor in India and Price Still Dominates , published in Solitaire International , The Indian Gem and Jewellery magazine, reports that an increasing number of global brands are setting up base in India, commensurate with the rapid growth in the number of high net

worth individuals in the country. But, they have to face the Indian consumer who is not brand conscious, but definitely price conscious. Further the global players coming in India have to bear in mind that, a brand has to be aspirational. Indian consumers buy these products not because they need them, but because it elevates their social position. What this means for the domestic and international players is that, they will have to necessarily invest in building retail management strengths, understanding the consumers better, branding and distribution capabilities. The opportunities for growth are huge, provided they are tailored made for the Indian consumers.
7

Fflur Roberts, states that the global luxury goods market of Gems and Jewellery indicates another solid years of performance in stores for 2012 despite, persistent economic turbulence, mounting troubles in the Euro zone and ongoing political instability in several emerging markets. This is expected to grow by 4 percent in comparison to the previous year. This is because developed countries remain by far the largest spenders on personal luxury specially markets in USA, Japan, Italy and France together account for half the value of

sales in 2012. The consumers of middle class of China, Russia, Brazil and India are showing a growing demand and luxury consumers around the world showed almost 22 percent growth in comparison to 2007, which is an indication that the there is a luxury resilience in the Gems and Jewellery sector even though there was economic turbulence globally . Pranay Narvekar, in his article states that the industry's legacy is on the crises and the industry has already seen a pivotal shift in how rough diamonds are priced and sold and there is a paradigm shift from the producers to the managers. The business is no longer run by persons who are producers and now they are managed by professional senior managers who may or may not have experience in the diamond business. The sole focus is on the profitability of the company over the duration of their tenure in office which is generally around three to five years. The benevolent producers no longer exist with all the large producers focusing on maximizing the prices rather than ensuring the basic health of the industry. The senior management has to justify that he is securing best possible prices during the course of his tenure and is not really

concerned about whether his customers are profitable or what they require from the market. Focusing solely on ones profitability is acceptable for industries where there are multiple uses of same raw material and product is easier to value. Diamonds on the other hand, belongs to one supply chain with all the finished diamonds ending up in jewellery, hence all supply chain should focus on their end customer. The research shows that global retail diamond consumption growth has not even kept pace with inflation growth, let alone Gross Domestic Product (GDP). The price rise in diamonds, of late is already making its impact felt on consumers, with reports of customer tastes moving towards lower qualities of diamond and with new luxury designs having lower diamond content. 9 Sumit Lal (2005) in his article, Indian Branded Jewellery Industry, published in The Gem News , Indian Diamond Institutes Quarterly Bulletin, states that the Indian diamond merchants are involved in the business of cutting and polishing diamonds for decades, have finally woken up to the potential for the manufacturing and trying to enter the

Diamond Branded Jewellery. He opines that the consumers attitude and approach is rapidly changing and the largely unorganized sector is gearing up to service the consumers present attitude and approach. The young generation is clearly looking for contemporary, bearable style that is aesthetically appealing with a clear accent on the design and quality. The consumers are moving away from the option to wear traditional jewellery of relatively cheap and poorly made to fashionable jewellery . Todays buyer also seeks the wider selection at a single convenient location and also excepts an international shopping experience that have witnessed in other sectors of the economy. He is also of the opinion that lack of distribution, advertising, branding and the lack of skilled manpower and technology to create and produce the design for the international market are the key challenges that have been identified for the related underperformance in the jewellery segment.10 Arjun Batra and N. K. Gupta, in their research paper reveals that the global economic turmoil erupted from US sub prime mortgage market in August 2007 and engulfed almost

the entire world economy with its negative repercussions. India also felt tremors of the same due to reversal of capital flows, slow down in demand-external as well as internal, narrowing profit margins and shrinking growth in all sectors of our economy. Overall annual economic growth rate receded along with fallen merchandise exports but the Indian Gems and Jewellery industry kept scintillating even in this global melt down. In studying the Gems and Jewellery industry during pre recession and post recession periods, they studied performance of five organizations with respect to the assessment of the impact of recession on the sales, expenses and profitability of these companies. On the basis of the study, they suggested certain effective measures to enhance their potential and competiveness in the Gems and Jewellery sector. Chanchala Jain, in her research paper states that Gems and Jewellery industry is an important emerging sector in the Indian Economy and as ranked among the fastest growing sectors, it contributes greatly to foreign exchange generation. According to the study, Gold jewellers form around 80% of the

Indian Jewellery market, with the balance comprising fabricated studded Jewellery that includes diamond studded as well as gemstone studded Jewellery. She analyzed the performance of Gems and Jewellery industry in India for the period 2006-2011. Based on the study, she opines that there is a continuous increase in the export of Gems and Jewellery industry in India and plays a vital role in the economic development of the country. There is a vital scope for expansion in the markets in the global economy and can be recognized as a major foreign exchange earner. Due to the importance of this sector the government has taken many initiatives to boost the exports and declared a thrust for exports. Anli Suresh, in her research paper states that the evergrowing demand for gold in India irrespective of the continuous escalation in its price and Indian demand for savings and real income levels will drive gold, not by price. The study observed that the emerging socio-economic trends may provide some challenges to the gold market; however, purchasing will remain underpinned by Indias long -standing

and deep cultural affinity for gold. The study envisage that the Gem and Jewellery sector has a huge market in India and abroad and the limited size of total gold market provides tremendous leverage. Due to the rising geo-political tensions across the globe, the public distrust the paper assets and the investors turn to gold for a safe heaven. When the economy crisis occurs, the government rescues themselves with the printing press making their currency worthless and gold worth more. The study also analyzed the Gems and Jewllery in India both in gold and diamond, export of Gems and Jewellery and government initiativeness. The study concludes that Indians are buying gold for its virtues as an investment rather than for adornment. Indu Rao, in her working paper states that the Indian diamond industry thrives in the atmosphere of secrecy and informality that envelops the diamond trade and has for long been labelled as an unorganized sector of the economy.

However, it resembles a close-knit community composed of thousands of small, medium and large sized Cut and Polished Diamonds (CPD) units and has grown to become one of the

highest foreign exchange earners for the country. The industry exports CPD worth US $ 14 billion annually and enjoys a 95% market share of the global exports of CPD pieces. An in-depth study of the industry reveals that the so called unorganized sector is in fact highly organized and has great potential to offer useful insights to the field of management in terms of new forms of organizing, networking, business processing and for doing international business. This paper presents summary of findings from research conducted in the Indian diamond industry over a period of last four years. The first part of the study includes insights about the remarkable rise, growth and the unique working of the industry. The second part makes use of a case study of a 40 years old large-sized CPD units to help gain further understanding of the Indian diamond industry and part three is about the impact of the 2008 global turmoil and of the industrys revival after a severe recession. The study of the Indian diamond industry reveals that, the production and the exports are on its rise, recession and recovery provide useful insights to the field of management.

Amitava Hazra and Madhumita Malakar, in their pilot study opines that the Gems and Jewellery industry, is predominantly an unorganised sector and almost 96% of the business is with the family jewellers and the remaining 4% is with the organised sector. This being one of the major foreign exchange earner for Indian economy, its growth and competitiveness in the global market is to be sustained through the process of innovation. It also states that among many factors that contributed to the upsurge of the industry, the most intangible one is the various technological and nontechnological innovations that have been brought in by the industry to capitalise on the opportunities created by the series of policy changes.

The

mainstay

of

the

study

examined

both

the

technological and non-technological dynamism of the firms. The technological part is grouped under the heading Product innovation to capture the initiatives towards changes in product, process, raw material use, and R&D initiatives. Nontechnological initiatives of the firms are grouped here under

market innovation. Major findings of the study are certain initiatives in this sector towards developing technological and market advantage at a global scale and to upgrade the existing skill of the manpower appears as one of the major factors, which needs to be addressed.

This has been seen as the precursor of innovation. The Initiatives in achieving globally acceptable quality and standard are apparent in the organised sector. The complex process of innovation in market place has been broadly categorised in the study are targeting and creating new markets, new designs, going for brands to promote products. The study had taken a close look at various government policies that had influenced the technological and market related initiatives of the firms. Supportive policies to boost export have actually brought confidence and dynamism in the industry. It is observed in the study, that in an industry that

largely, caters to the traditional demand and also modern snob market, innovation is essentially in industry organisation with limited technological changes.

The indicators suggested above are derived from the observations on the behaviour of the existing firms and in the industry. Although these indicators refer specifically to the features of the Gems and Jewellery industry of India, they also bring out the fact that organisational innovation is actually a derivative of market types and skill requirements in the production process of the industry. In this sense the indicators would have general appeal and should reveal features of the similar relations in other industries.

Export-Import Bank of India, in its study titled reveals that, Indias Gems and Jewellery industry is highly

unorganized and fragmented with more than 90% of the players having family owned businesses and there had been a loss of market for Gems and Jewellery exports due to recession and global economic slowdown.

Following

the

economic

slowdown,

asset

price

evaluations, job losses and decrease in disposable income have

happened, along with escalation in gold prices, which have changed the consumption pattern of gems and jewellery. Further, the economic slowdown has also affected the consumer buying pattern, with growing demand for single-line jewellery, low-carat jewellery, and gems-studded jewellery. The study also states that the financial performance of players in this sector has also been affected by the recessionary trends in demand. Out of the fourteen jewellery companies analyzed, 6 companies witnessed a decline in income, and eight companies witnessed decline in profit during the first half of 2009-10.

The steep rise in raw material prices has squeezed the cost efficiency of the Indian Gems and Jewellery sector. It also shows that although India currently enjoys dominance in the worlds cut and polished diamond market, China may emerge as a rival in the long term, mainly because of the availability of cheap labour, growing domestic demand, and also the improvement in the quality of workmanship in the country.

Utilization of hi-tech, speedy and efficient machinery and software has led to the gradual replacement of traditional / manual methods of polishing, manufacturing and designing of gems and jewellery. Proactive players in the Indian Gems and Jewellery industry are always on the lookout for better technology for their units. However, such technology

absorption is relatively low in Indian Gems and Jewellery industry, due to the small size and unorganized nature of majority of the players. Also, mere absorption of technology may not be helpful, without a proper blend between manual labour and machinery to provide ethnicity to the end-products. Usage of semiskilled and unskilled workforce in operation of such high-end machines may result in significant underutilization of the machinery / technology, and may at times cause losses in operations. Skill development is therefore very essential for proper reclassification of the workmen in this industry.

The study conducted by Investment Information and Credit Rating Agency of India Limited (ICRA), analyzes the

structure of Gems and Jewellery industry of India and its importance to economy. The demand, for Indian gold and diamond jewellery both domestically and internationally are increasing. The key issues facing the sector are large presence of unorganized sector are discussed in detail. The study also describes the recent trends in jewellery consumption and the possible long term threat from different markets. The study states that the Gems and Jewellery industry is highly sensitive to the government policies and hence continued support from government is crucial for the growth of this sector. The outlook of the study reveals that the diamond industry is optimistic that the recent healthy growth in world GDP, and increased marketing expenditure could result in increased demand growth. Both China and India represent potential new sources of demand for diamonds. China has the potential to become a leading consumer of diamond jewellery. China's retail sales in recent years have shown strong growth relative to other centers. In India, diamonds are an established consumer product, but the potential size of the market is only just being recognised, especially in comparison with annual

gold demand. The long-term outlook for the Indian diamond and jewellery industry continues to be positive. Indias competitive advantage is likely to centre on its skilled labour combined with a ready adoption of leading-edge technology and an increasing degree of vertical integration.

An EXIM Bank study, reveals that the India's exports of Gems and Jewellery showed a year-on-year (y-o-y) growth of 40.7 percent in 2008-09 compared to 23 percent witnessed in the previous year, despite a global economic slowdown. The Indian Gems and Jewellery industry is one of the important sectors of the Indian economy. The Gems and Jewellery industry in India comprises sourcing, processing,

manufacturing and selling of precious metals, diamonds, pearls, precious and semi-precious gemstones and artificial jewellery. India is one of the fastest growing jewellery markets in the world and is the largest consumer of gold in the world. India is also one of the largest diamond processors in the world, with more than 90 percent in terms of pieces, around 80

percent in terms of carats and around 55 percent in terms of volume being processed in India. India is also the largest consumer of gold in the world (over 700 tonnes in 2008), accounting for around 24 percent of world gold consumption, majority of them going into production of jewellery. Over the years, India is also emerging as largest trading centre for gold. However, during the second quarter of 2009, the consumption of gold had shown a decline mainly due to the rising prices and global slowdown. Despite global economic slowdown, in the year 2008-09, the exports of Gems and Jewellery from India showed a y-o-y growth of 40.7 percent as compared to a y-o-y growth of 23 percent

witnessed during 2007-08. Demand for Gems and Jewellery are income elastic and is likely to remain moderate in the near future. The continuation of demand slowdown in the US and Europe might slow down the exports of Gems and Jewellery as also the domestic retail market. One of the major trends witnessed in the Gems and Jewellery industry due to the economic slowdown has been the recycling of gold or in other terms, gold scrap.

Key focus has been the surge in the levels of gold scrap coming back to the market. With mine production on a declining trend and the outlook relatively benign, scrap levels are likely to remain as the primary supply of gold due to uncertainty over the short to medium term. Selling old gold jewellery has provided consumers with access to the muchneeded funds during these very difficult economic times. In the price sensitive markets, the profit-taking motive behind recycling activity has been very strong, highlighting the intrinsic value of jewellery and the strength of the savings / investment aspect of gold jewellery purchases. Increase in recycling activity has been both a western and non-western phenomenon, although volumes in the non-western markets have continued to dominate. In western markets, the primary motivation behind recycling of gold has been distress selling, while in the more traditional non-western market, the primary motive has been profit- taking. The prospects in growing economies in India, Middle East, Hong Kong and China are expected to help the sector to regain its glitter. Changing

lifestyle and urbanization are also expected to fuel the growth of the industry, mainly in branded jewellery. According to industry estimates, the branded jewellery segment is expected to grow over 40 percent in the coming years. Consumers being exposed to western lifestyles show increased preferences to products which are popular abroad, and this in turn will help in maintaining the demand and growth of the industry. One of the major advantages of the Indian Gems and Jewellery industry is the low cost of labour involved in the production of finished diamonds. India has one of the best skilled manpower to design and make high volumes of exquisite jewellery at relatively low cost. It is reported that, the cost per carat for cutting and polishing diamond is US$ 10 in India as compared to US$ 17 in China and US$ 150 in Belgium. India also has the largest resource hub in diamond cutting and processing. The long-term outlook for Indian Gems and Jewellery is expected to be positive. India's competitive advantage is likely to be centered on its skilled labour combined with a ready adoption of leading technology.

References 1. Vinod Kuriyan, New Looks and Innovations mark new Indian Jewellery , Solitaire International, The Indian Gem and Jewellery Magazine, Mumbai, JuneJuly 2006, pp. 44-48. 2. Mallika Hegde, Performance Evaluation of Minerals and Metals Trading Corporation (MMTC) of India with special reference to Precious Metals Division , S.N.D.T Womens University, Mumbai Ph.D.

Unpublished Thesis 2006, p. 436 , p.437. 3. Dasiy Tanwani, Indian Jewellery, Retail, an

impressive phenomenon , Journal of Gem and Jewellery Industry, Jaipur, Vol. 45, No. 2, February 2007, pp. 21-27. 4. Denise Meyer, The Power of Three, Professional Jeweller, Philadelphia, January 2004, pp. 76-77. 5. Pallavi, High-End Couture Jewellery Pieces: What Sets them Apart and Why they Lead the Design

Trends for t he Industry, The Art of Jewellery, Bangalore, Vol.6, No.5, May 2007, p.136. 6. Nilesh Shah, Taxation Woes , Diamond World, Mumbai, May-June 2005, pp. 156-158. 7. Shanoo Bijlani and Regan Luis, Foreign Brand Recognition Poor in India & Price Still Dominates, Solitaire International, The Indian Gem and Jewellery Magazine, Mumbai, February 2009, pp. 49-51. 8. Fflur Roberts, Luxury Resilient in the face of Economic Turbulence , Solitaire International, The Indian Gem and Jewellery Magazine, Mumbai, November 2012, p. 66, p.67. 9. Pranay Narvekar, Rough Diamonds a Paradigm Shifts, Solitaire International, The Indian Gem and Jewellery Magazine, Mumbai, June 2012, 54. 10. Sumit Lal, Indian Branded Jewellery Industry pp.50-

The Gem News, Indian Diamond Institutes Quarterly Bulletin, Vol. X, January- March 2005, p. 13.

11.

Arjun Batra and Dr. N. K. Gupta, Scintillating

Gems and Jewellery under Global Meltdown- A Study on Indian Gems and Jewellery Industry, The International Journal of Research in IT and

Management, Jagadhri, Vol. 1, Issue 1, May 2011, pp.105-115. 12. Chanchala Jain , A Trend Analysis of Export

Performance of Gems & Jewellery Industry In India , International Journal of Engineering Sciences & Management (IJESM), Greater Noida, Vol. 2, Issue 2, April- June 2011, pp.170-174. 13. Anli Sureshin, A Review on Gold Quest in the Portfolio by Indian Investors ,

Investment

International Journal of Research in Management & Technology (IJRMT), Vol.1, No.2, December 2011, pp.128-134. 14.Indu Rao , Organizing the un -Organized? The Rise, Recession and Revival of the Indian Diamond Industry, Indian Institute of Management, Ahmedabad, W.P. No. 2009-09-01, September 2009.

15.

Amitava Hazra and Madhumita Malakar, Status

of Innovation in Gems and Jewellery Industry of India, Centre for Knowledge, Ideas and

Development Studies (KNIDS), Kolkata, July 2006. 16. Export-Import Bank of India, Indian Gems And

Jewellery: A Sector Study , Occasional Paper No. 138, Quest Publications, February 2010, 94-119. 17. Investment Information and Credit Rating Agency pp.

of India Limited (ICRA), The Indian Gems and Jewellery Sector , New Delhi, July 2006, 36. 18. EXIM Bank, Indian Gems and Jewellery Exports pp. 35-

Rise 40pc despite Recession , 2009.