FICCI Gems & Jewellery

Unlocking the Potential
of Indias
Gems & Jewellery Sector
A Knowledge Report
3 Unlocking the Potential of Indias Gems & Jewellery Sector |
Executive Summary 06
Introduction 09
Market Structure and Potential 11
Growth Drivers, Opportunities &
Challenges 13
Growth Drivers and Opportunities 13
Challenges 18
The Export Market 25
Recommendations 27
Recommendations for the Industry 27
Recommendations to the Government 30
About FICCI 33
About Technopak 34
Cont ent s
4 | Unlocking the Potential of Indias Gems & Jewellery Sector
Foreword
Welcome to the first edition of the Indian Gem and Jewellery industry Knowledge report prepared jointly
by FICC and Technopak. It is being brought out on the occasion of FICCIs International Conference for
the Indian Gem and Jewellery industry focusing on Opportunities Led Growth. We take this opportunity
to thank Technopak Advisors our Knowledge Partners, who have devoted their valuable time, resources
and expertise to prepare this document on our behest
The Indian gem and jewellery industry is at a very significant point in its development. During the last few
decades, the export side has developed, modernized and grown immensely and has been catering to
the global markets, particularly the USA. Meanwhile the much larger domestic industry continued with its
traditional structures and practices.
Since 2000, the export players began to get involved in the domestic industry, even as some of the larger
domestic jewellers began to adopt more contemporary business practices. In the context of the slowdown
in the US market over the last few years, and the global financial crisis that we experienced last year, this
process has further accelerated to a great extent.
The Indian domestic market has shown very promising signs, and there has been a stupendous growth
and increase in penetration of the brands and organized retail across the categories namely FMCG,
Durables, Apparels, and Home Improvement etc. There is a great potential for the gem and jewellery sector
to achieve similar growth.
While exports will continue to play an important role in earning foreign exchange and providing employment
to large numbers, we have to ensure that the domestic industry marches in step with the transformation
sweeping through other lifestyle segments, and modernizes itself in terms of products, outlook and business
practices. The socio-economic conditions are ripe for this change with the large youthful population that is
integrating with a global culture having significant disposable incomes.
Mehul Choksi, Chairman, Gems & Jewellery Committee, FICCI
The large organized players within the industry have an important role to play in this process as they can
catalyse the growth of the industry, set higher standards and create more value across the value chain.
This FICCI-Technopak report looks at all these factors in detail and provides many relevant pointers for the
direction of change.
But a forward looking industry is not enough, a business environment conducive to growth is equally
essential. The industry has been interacting with the government, voicing our concerns and indicating the
direction of the changes we desire. Many of these areas have been summarized in the report. Bodies like
FICCI and other industry associations have to work together and with the government to hasten the pace
of policy change.
We thank Technopak for their effort at integrating their expertise with information and inputs gathered from
the stake holders in the industry to prepare this report that is both comprehensive and concise. It will surely
be appreciated widely throughout the industry and among policy makers.
FICCI would also like to acknowledge the efforts made by the members and stakeholders of the Gem &
Jewellery industry in various initiatives including this report and the Conference and hope that they will
provide a vigorous push to the growth of the industry in the years ahead.
Mehul Choksi
Chairman, Gems & Jewellery Committee
FICCI
Executive Summary
Traditionally the focus of the gems and jewellery manufacturers has been on the large global markets.
Indeed for years, barring the last year or so, these international markets have given large and growing
business to the Indian exporters and have contributed in creation of significant jobs in the country. The
Indian players, duly supported by the Government of India are placed highly competitively in the market.
Hopefully with the revival of the international markets, the Indian players would again stand to gain.
We believe that the domestic market holds similar or even brighter potential for gems & jewellery sector.
The industry can be put on accelerated growth path provided the industry, the government and other
stakeholders plan and act on the initiatives required by the transforming market. In the process the industry
shall continue to generate large amounts of foreign exchange and employment to the Indian socio-
economic fabric.
The key drivers and growth opportunities for this sector are:-
Growing spending power: There is a great opportunity to capitalise on the growing spending power of
the Indians with increased discretionary spending such as that on Gems & Jewellery.
Organised players acting as catalysts: The organised players (includes current players who are
becoming more organised) would act as a catalyst in this transformation. Although the current proportion
of the organised sector is small at present, the available potential and growing momentum is very
encouraging.
Rationalised cost structures: One good aspect of the slowdown is that it has also controlled the
rampant rise in key input costs such as manpower and real estate and this should accelerate the recovery
and growth.
While the opportunities and drivers are strong we need to also surmount some of the key challenges: -
Changing share of wallet: While the share of wallet is changing for the Indian consumer towards
discretionary spending, other categories such as travel, entertainment, electronics etc are growing their
share at a faster rate. Thus, we need to position Gems & Jewellery as a sought after lifestyle product
especially amongst todays youth.
Mindset & Manpower: With the changing consumer and business environment there is also a need to
transform the mindset & manpower in the industry. The human resources and leaders in the industry will
need to adopt a more modern and professional approach towards work and management while they also
retain the best practices that our rich tradition in Gems & Jewellery has enabled us to cultivate. Bringing
in outside professionals in this sector will help accelerate the change.
Upgradation & Modernisation : Besides modernising manpower and mindset; the technology, systems
and processes also need to be upgraded and modernised. This would help not only to achieve the next
leap in growth but also to compete with rising international competition.
Financing: To enable all this growth and transformation the flow of finances to this sector would also
need to be ramped up, especially to the unorganised retail.
To make the most of the opportunities and overcome the challenges we have identified a set of
recommendations for the industry and government. These should serve as a good starting point to kick-
start this proposed journey of higher growth and excellence.
Recommendations for the Industry
(a) Potential Assessment and Strengthening Consumer Understanding
There is dire need for the industry to first understand the various segments of the consumers and their
purchasing and shopping needs. The proposition, design and brands can be created around these
needs.
(b) Invest in Retailing and Brands
The organised retail and brands can provide impetus to the sector. Appropriate investments can potentially
put the category on a higher priority in the consumer basket and can generate the higher margins. An
overall investment of US $ 2 billion is required by for branded jewellery to achieve 15% share of the market.
A possible solution here is to create highly active Industry Co-ordination to bring together the outside
investors and industry stars.
(c) Improve skill sets & quality of people
The Gems & Jewellery industry needs to systematically and collectively invest in up gradation of the skill
sets of its workforce through increased training and manpower development programs. A joint effort by the
Industry to invest in the development of vocational training institutes could be a way forward with Industry
captains leading the efforts to underwrite recruitment of graduates and participate in syllabus design &
development.
(d) Enhance Product Design & Manufacturing Quality Standards
A National Institute of Jewellery Design & Development would go a long way in providing the platform for
development of a pipeline of innovative high quality designers that can serve the industry as a whole. If
Industry captains come together to invest in setting up the institute or expanding existing ones, efforts can
be made to lobby to obtain Government support and create national centres of excellence like NIFT with
multiple campuses and courses.
(e) Promote adoption of Industry wide standards for gaining consumer trust
Enhancement of product quality standards and incentives for increasing adoption of the standards will go
a long way in improving consumer trust and enable the industry to gain share of wallet of the consumer in
the long run. Eventually it will also help in the spread of e-selling in India which has seen a lot of success
in western markets.
(f) Co-operative use of resources
To bring down cost of operation and investments in the sector, industry players should adopt co-operative
use of technology and marketing. Even retail space can be hired by co-operatives when foraying into
international markets.
Recommendations to the Government
Government and Apex bodies could act as facilitators in broadening the outlook of the exporters /players
and help them in familiarizing with the changing scenario both in the domestic and international fronts,
where moving up the value chain and adoption of modern practices has become compelling imperatives.
(a) Provide Industry status to Gems & Jewellery Sector
Special cell to look into specific needs of Industry- At ~US $15 bn, the domestic Gems & Jewellery industry
deserves the same attention and interest as a number of other industries such as Textiles & Steel. The
domestic Gems & Jewellery Retail sector could especially benefit a lot from Industry status. Creating
Technology Upgradation Fund (TUF) for facilitating the modernization of the manufacturing and design
facilities is another important initiative.
(b) Creation of Design Centers /Studios, Holding Fairs
The importance of design has been highlighted by us in this report. This can help significantly in moving
the industry from commoditized selling to design based selling.

(c) Asset (Gold) based leverage
This could help individual investors mortgage their gold and jewellery for credit. Perhaps RBI can think and
act on this suggestion which can potentially unlock significant value.
(d) Regulatory Laws & Taxation
There are some regulations which are restricting the growth of the industry such as search & seizure laws.
Perhaps there is case of rationalizing /removing these restrictive laws. At the same time there is dire need
to standardization in the industry, which can restore the credibility of the industry. In terms of taxation there
should be a continuation and further enhancements of tax benefits, notably deduction under section 10A /
10B / 10AA of the Income tax Act. Removal of Octroi from Mumbai will also go be a big help as the city is
a major hub of Gems & Jewellery.
(e) Modernize Labor Laws
This will enable Indian manufacturers to improve efficiencies, serve Indian consumers better and also grow
exports from India by allowing manufacturers to adopt more flexible labor practices.
(f) Increase the setting up of export focused SEZs
This would help to meet and the growing needs of exporters and create the infrastructure for even faster
export growth. The policy could also help to promote the spread of industry across India besides the
current pockets in western & southern India.
(g) Gold exchange
A physical or internet based exchange to trade precious metals could help the Indian population to
rediscover their age old investment preference for precious metals and jewellery which have time and
again proved to be safe instrument with good returns.
Unlocking the Potential of Indias Gems & Jewellery Sector | 9
01
Gems & Jewellery has had an important place in the Indian society and economy ever since civilization
dawned on the Indian soil. Exhibit 1 explains the traditional value served by Gems & Jewellery to us
In the last few decades the Gems & Jewellery sector has evolved far beyond its traditional roles. Today it
has become a major item of export leading to valuable foreign exchange earnings. The rapid growth in
domestic and export markets have lead also to employment growth and overall economic growth in the
country.
The sector is very people intensive and skilled
manpower is required throughout the value chain
for retailing, designing, jewellery manufacturing,
raw material processing and mining. The sector
has been one of the biggest employers to the
economically weaker sections of the society which
especially dominate the skill-based diamond cutting
& polishing and jewellery crafting (Karigar) trades.
India has used its abundant supply of manpower to
generate cost and skill advantages.
Traditionally the focus of the gems and jewellery
manufacturers has been on the large global markets.
Indeed for years, barring the last year or so, these
international markets have given large and growing
business to the Indian exporters and have contributed in creation of significant jobs in the country. The
Indian players, duly supported by the Government of India are placed highly competitively in this market.
Hopefully with the revival of the international markets, the Indian players would again stand to gain.
In the last few years, on the other hand, the Indian domestic market has shown very promising signs,
evident from the stupendous growth and increase in penetration of the brands and organized retail across
the categories namely FMCG, Durables, Apparels, and Home Improvement etc.
We believe that the Indian market holds similar or even brighter potential for gems & jewellery sector.
The industry can be put on an accelerated growth path provided the industry, the government and other
stakeholders plan and act on the initiatives required by the transforming market. In the process the industry
shall continue to generate large amounts of foreign exchange and employment to the Indian socio-
economic fabric.
Introduction
Precious
metals, gems
& even
jewellery
serve as an
economic
store of value
for investment
and trade
For the
traditional
Indian woman
jewellery is
still the most
important
fashion and
style
accessory
Gems and
precious metal
objects have a
great
astrological
and religious
significance
Gems &
jewellery are
an integral gift
and purchase
items for
special
occasions
such as
weddings and
ceremonies
Traditional Role of Gems & Jewellery
in Indian Society
Exhibit 1
At this juncture when we prepare ourselves to take the higher growth trajectory for this sector we are
confronted with some pertinent questions: -
How can we take the industry to an accelerated path?
How can we ensure that the exports retain their competitiveness and leadership in dynamic world
economy?
How can we improve the quantity and quality of supply of manpower to this sector to support rapid
growth?
How can we move up the value chain to improve returns in this sector besides the revenues?
How can we improve financing for smoother operations (working capital) and rapid growth (long-term
debt, investment)? What role can the government play in this endeavor?
We have attempted to to answer some of these questions in this report. This document is based on the
extensive research, interaction with the various stakeholders and Technopak body of knowledge, attempts
to assess the enormous untapped opportunities and presents some known (still the need of the hour)
initiatives and some new initiatives which can perhaps be the starting point in the future journey.
02
Through the ages, Gems & Jewellery has played a very pivotal role in weaving the social fabric of India.
Besides the ornamental value, jewellery remains an important savings and investment vehicle for most
Indians.
The two major sub-segments within jewellery are
gold (22kt and above) and diamonds, with the former
constituting 80% of the jewellery market, the balance
comprising diamonds and gemstone jewellery.
A major chunk of gold jewellery manufactured in
India is for domestic consumption, whereas a major
portion of polished diamonds or finished diamond
jewellery is exported.
Overall Size: The Gems & Jewellery sector in India is currently pegged around US $ 44 billion of which US
$ 25 billion is exports.
Employment: The sector currently provides employment around 1.8 million people which is a significant
number. Majority of people employed in the sector are semi skilled and belong to economically weaker
sections of the society. The Gems & Jewellery sector is capable of creating additional employment for
around 1.1 million people in the next 5 years.
Domestic Market: Though the government has been proactive in promoting exports in Gems & Jewellery
sector, it now needs to take concrete steps to boost the domestic consumption as well. Even though
India is the largest consumer of gold in the world, the per capita consumption is almost 1/10th that of any
matured market.
The domestic market of Gems & Jewellery is
estimated to be in the US $ 18-20 billion range.
Given the fragmented nature of the industry it is
difficult to put a finger on the exact size. The industry
is expected to grow at around 13% annually and at
this rate it could reach US $ 35-40 billion by 2015.
Currently the domestic Gems & Jewellery market
is fragmented across the value chain. There are
more than 300,000 players across the Gems &
Jewellery sector, with majority of them being small
unorganised players who are operating on wafer thin
Market Structure and
Potential
Gems & Jewellery Sector pegged between US $43-45 billion
Exports (2009): US $ 25 billion
Domestic Industry (2009): US $ 18-20 billion
Employs 1.8 million people
Share of Organised Retail in Jewellery Retail: 4%-6%
Snapshot of the Industry
Domestic Market Size
(US $ Billion)
Exhibit 2
2009 2015
35
40
20
18
E
s
t
i
m
a
t
e
d

s
i
z
e
(
R
a
n
g
e
)
Source : Technopak Anaylsis
80
60
40
20
0
margins. Organised retail of jewellery thus presents
a significant opportunity to create additional value
through higher margins, which would be possible
through differentiation and branding. .
With the onset of organised retail in the last decade,
lots of new players have entered the space. Currently
modern retail players in jewellery space have only
5%-7% share of the total jewellery market, but this
number would increase considerably in the near
future.
The major national players are Tanishq, Gitanjali,
Intergold and Rajesh Exports. Besides these there
are a lot of large regional players as well, such as B. C. Sen in East, P.P. Jewellers, Mehra Sons, Bhola Sons
in North, TBZ, Chintamani in West and Ganjam, C Krishniah Chetty & Sons in South.
Apart from the specialty retail players, lots of retail chains like Shoppers Stop, Lifestyle and Big Bazaar
now have jewellery counters from branded chains. Reliance Retail has entered the market with its chain
Reliance Jewels. The last few years has also seen the entry of international luxury jewellery brands in India
such as Cartier and Tiffanys. Besides the above mentioned brands, lots of jewellery exporters are also
actively looking at the domestic market and plan to open their retail outlets.
Most of the organised retail players, especially
Tanishq, have grown significantly in the last decade,
driven primarily by their value proposition, marketing
investments and by their easy to roll out formats.
The good part is that India is now beginning to move
towards branded jewellery and the consumers have
accepted the modern retail formats. Opportunities
for jewellery chains rely in the proposition of
differentiated styles at good prices.

Though, in spite of the confident march of organised
jewellery chains we strongly believe that the traditional
players would coexist with the modern players this
is in fact the trend in international markets where the
independents still hold significant share of the market as is evident from Exhibit 4 which depicts the retail
scenario in U.S.
Organised Retail in Different
Sectors
Exhibit 3
Apparel
20%
7% 6%
35%
11%
CDIT &
Mobiles
Jewellery
Footwear Books and
Music
Retail Market Organised Market
US Retail Scenario Exhibit 4
1987 1992 2004
Independents Discount store Jewellery chain
store
Non store
retailers
53%
23%
20%
4%
49%
24%
20%
7%
49%
22%
20%
9%
Source Tanishq Corporate Presentation
03
Growth Drivers and Opportunities
Growing Spending Power
Despite recent slowdown, the move from a
Pyramid to a Diamond shaped structure of
the Indian consumer segments is well and truly
underway. Robust income growth particularly in the
service sector accompanied with improvements in
infrastructure are enlarging consumer markets and
accelerating the convergence of consumer tastes.
With a real GDP of ~US$ 1.0 trillion, Globals,
Strivers & Seekers are projected to grow at 11%,
9% and 18% respectively, over the next 10 years.
With this, Indias affluent & rich will number more
than the adult populations of many large countries.
By 2025 Indian Middle class will reach 41% of the
population from 5% in 2005, creating a sizeable
urban middle class. This will create fast paced and
exciting opportunities for firms in the consumer &
retail space.
Indias current per capita annual disposable income
is expected to grow by 8-13% from the current level
of Rs. 32,299 in the next 5 years. Rising income
levels with population increase will lead to an
overall increase in consumer spending and shift in
consumption basket of consumers from the basic
products to more aspirational ones. As wealth
grows spend is added to discretionary categories,
aspiration products and ultimately luxury products.
Need based consumption categories to become
low-involvement items for the core consuming classes. New, rapidly growing consumption categories
would take a larger share of larger share of consumers household spending. Consumers will optimize their
purchases largely on simple attributes of price & convenience (time efficiency) in order to release more
resources (money, time, mental involvement) for the aspiration/lifestyle based consumption categories.
Gems and Jewellery falls in the aspirational based category and can therefore hold good potential.
Growth Drivers,
Opportunities & Challenges
Over the next 10 years Indias affluent & rich will number more
than the adult populations of many large countries
By 2025 Indian Middle class will reach 41% of the population
Indias current per capital annual disposable income is expected
to grow by 8-13%
There will be a shift in consumption basket of consumers from
the basic products to more aspirational ones such as Gems &
Jewellery
Growing Spending Power
1.2 40
32
60
228
108
434
418
612
274
52
126
76
304
293
76
2.4
10.9
91.3
101.1
3.3
5.1
55.1
106
74.1
9.5
33.1
94.9
93.1
49.9
Number of
housholds
Houshold income
brackets
Aggregate
disposable income
Million US $ US $ bn
Globals(> 20,000)
Strives(10,000-20,000)
Seekers (4,000-10,000)
Aspirers( 1,800 4,000)
Deprived(<1,800)
Globals(> 20,000)
Strives(10,000-20,000)
Seekers (4,000-10,000)
Aspirers( 1,800 4,000)
Deprived(<1,800)
Globals(> 20,000)
Strives(10,000-20,000)
Seekers (4,000-10,000)
Aspirers( 1,800 4,000)
Deprived(<1,800)
2
0
0
5
2
0
1
6

P
2
0
2
5

P
The Indian Consumer Spectrum Exhibit 5
Source Industry Reports
Share of food and grocery in the consumers wallet will
continue to drop releasing money for discretionary
expenditure. Gems and Jewellery forms a part of
discretionary expenditure
India also has a rich base of young consumers
compared to other economies which have a different
set of needs and are more amenable to branded
products and services. Currently, the population in
the working age group (16-60) stands at 700 mn
representing about 64% of the total population.
Changing lifestyle orientation, exposure to
international travel and the internet combined to
make this new customer more astute and awareness
levels about trends and quality in jewellery have
increased. This new Indian consumers demands
greater transparency, better service and a more compelling value proposition driven by brand and fashion.
At the same time they are also willing to pay justified premium for the right proposition and design. Market
is expected to witness significant changes because of the changing preferences of the todays youth who
will be tomorrows middle class. The youth of India cannot be ignored as half our population is below 25
years of age.
The industry needs to focus on tapping successfully the needs of this growing Indian middle class working
population and creating more fashionable products and products wearable on all occasions. Retailers
need to spend time and resources to understand consumer needs and expectations very carefully, and
continue to evolve with the consumers.
Organized Players Acting as Catalysts

Introduction of organized retail in a sector gives a boost to the industry in terms of improved practices,
better customer service and after sales service as it puts a lot of emphasis on customer satisfaction and
assurance. Retail chains are able to provide better deals to customers; this gives the industry a competitive
edge with local retailers and retail chains trying to maximize their market share, putting the industry on the
path of growth and expansion.
The Changing Share of Wallet of the Indian Consumer Spectrum Exhibit 6
Food and Grocery
Rent, Utilites & Education
Fuel, Transport & Communication
Savings & Investments
Discretionary Expenditure
(Includes Gems and Jewellery)
40%
20% 9%
4%
27%
2003
20% 10%
4%
30%
36%
2008
20%
11%
5%
32% 32%
2013
Exhibit 7
Source Technopak Analysis
Consumption Classification
Need based merchandise
and services
Aspiration based merchandise
and services
Food & Grocery
Prepared food / food services
Textiles and apparel
Footwear
Medicine & healthcare
services
Air travel
Consumer durables (white and
brown goods)
Consumer electronics (select
categories e.g. DVD players)
Kitchen appliances
Mobile telephone handsets
Home& Home dcor
Personal transport vehicle
Jewellery & wrist-wear (both
for women and men)
Accessories (handbags, pens,
others)
Grooming
Well-being
Education (including Coaching
& Learning)
Leisure & recreation
Socializing & other lifestyle
Organized retail in the jewellery segment is a fairly new
concept. Currently organized retail has a penetration
between 5-7% but this is expected to grow in the
next few years. The expansion of organized retail
and brands can provide impetus to this sector.
Already major retail chains like Big Bazaar, Shoppers
Stop, Pantaloons, Lifestyle etc have started having
jewellery section or Shop-in-Shops in their stores.
Branded jewellery in India can now be seen as a
developing phenomenon. The impact of these
modern formats will be felt most in Urban India. We
anticipate that large investments of about US $ 1
billion in the coming years would be made by large
retailers/brands which would catalyze the growth of
the industry, set higher standards and create value
addition across the industry. As is evident from
exhibit 8 below, retailing of gems and jewellery could
be very lucrative once the startup phase is over.
The entry of leading brands like Gili (Gitanjali Group,
1994), Tanishq (Tata Group, 1995), Sangini (JV of
Sanghavi Exports and Gitanjali Group, 2004), Ishis (Suhashish Diamonds, 2003) Scintillating (Dhanraj
Dhadda Group, 2003), Orra (Rosy Blue Group, 2004), Shubh, Laabh (Rajesh Exports, 2006) amongst
many others into the organized jewellery segment characterised the expansion phase. Tanishq (Tata group)
has been a pioneer and contributes now to the maximum share of the organized retail jewellery market.
These brands promised great quality and the best designs both traditional and contemporary.
The major brands pulling the organized market have now reached a critical point and are looking for more
opportunities to grow. They are already well established in all the top tier cities and state capitals in India
and are now looking to concentrate on their existing base and extend to other categories. Also there are
major plans of expansion in tier 2 and tier 3 cities with the opening of new stores. For instance, Tanishq
is planning to triple its turnover in the next five years timeframe by opening new stores and improving
revenues in the existing ones.
Food &
Grocery
CDIT
Footwear
Books & Music
Pharma & Wellness
Home
Apparel
Jewellery
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-2% 2% 4% 6% 8% 10% 12% 14%
R
O
C
E
ROCE vs EBITDA
EBITDA
Exhibit 8
Company
Turnover 2009
(Rs. Crores)
Number of Outlets Announced Plans
Tanishq 2370 117
Tanishq plans to triple its turnover by opening new stores and focusing on
improving the revenues per store of the existing ones
Gitanjali Group 1275
1246 outlets including
shop in shops
Announced plans for 100 stores in May 2009 of which 30-40 were to be
lifestyle stores
Goldplus 390 30
The retail brand plans to reach Tier-IV and Tier-V cities representing the
smaller towns and rural India with over 25 Goldplus stores across in six
states
Reliance Jewels NA 15 Plan to open 85 more in next three years
Big Bazaar (Navras) NA 60 Shop-in-shops Plan to go to 150 by 2011
Rajesh Exports 100 30 Expansion after consolidating current turnover
Exhibit 9
Source Company Announcements & Official Websites
Snapshot of a Few Organised Retail Players
Expansion of organized retail improves competitiveness and
ultimately customer satisfaction
Currently organized retail has a penetration between 5-7% but
this is expected to grow in the next few years
Branded jewellery in India can now be seen as a developing
phenomenon
Compared to other categories jewellery is quite lucrative in terms
of financial returns
Organized Players Acting as Catalysts
The last few years have seen the entry of a number of luxury brands in India such as Jimmy Choo, Gucci,
Christian Dior, Louis Vuitton, Cartier, Piaget, Tiffany, Moschino and others. Many of them such as Cartier
and Tiffanys are well known for their jewellery ranges.
Better designs, new ranges and innovative marketing are the factors in the success of these brands in
the past few years. Retail chains focusing on these aspects are well positioned to rise since the customer
wants to see variety in his purchases and the brand providing the same takes the cake. Latest ways of
segmentation, targeting various consumer segments with specific designs and exclusive range and new
usage styles has attracted a new set of consumers and created new occasions.
Thus it is very important to gain the momentum in this direction and focus on consumer research &
innovation in design. Players are also required to focus more on marketing and branding efforts and create
innovative campaigns to attract the new set of customers and increase the frequency of their purchase
occasions. Globally there are examples of very successful campaigns that have been launched and have
translated into a steep increase in the sales and revenue.
Real Estate and Other Costs are Now Under Manageable Limits
Last years slowdown has pushed the real estate prices southwards with substantial drop in the value
accompanied far better lease terms. The malls & the main markets across the country saw a drop of 25%
to 30% in footfalls and 10% to 15% dip in sales. There have been corrections of rentals in the range of 25%
to 40% across major cities and markets over the last 2 to 3 quarters in 2009. The market is taking a U turn
from being landlord/developer driven market to being retailer driven. Developers are also experiencing low
occupancy rates, (10-15% on an average) and have low negotiation power for charging high rental rates
due to sluggish demand from retailers for new space booking. This is a good sign for the jewellery retailers
looking for expansion opportunities.
Case Studies - Marketing Success
WGC Akshay Trithiya DTC Nakshatra De Beers
Till some years ago, not many knew what
the Akshaya Trithiya day stood for. It was a
day largely celebrated in parts of Tamil Nadu
& Maharashtra. People considered it to be an
auspicious day to make purchases, as they
believed it would be protected by Lord Vishnu.
But it was after a massive campaign run by
World Gold Council (WGC), an international
organisation funded by leading gold mining
companies, that the day assumed importance
as an occasion to buy gold. Adding to the
frenzy, jewellery stores and goldsmiths lured
customers with discounts, 24-hour sales and
latest designs. In 2006 Akshaya Trithiya sales
jumped 14% in terms of value and in 2007 they
jumped 55% in volume terms over the previous
year.
De Beers success with marketing of Diamonds
in the west is well known, especially their A
Diamond is Forever campaign. DTC which
is also closely associated with De Beers
pulled another masterstroke in India through
the Nakshatra campaign. Based on sound
research, excellent marketing communication
and perfectly cast celebrity endorsement an
age old Indian Jewellery design was used to
capture the imagination of the Indian buyer.
The initiative was so successful that Nakshatra
has subsequently become a top brand while
it was originally meant to be only a vehicle to
arouse cravings for diamonds amongst Indian
consumers. In the past few years diamond
jewellery has recorded growth rates of above
25%.
De Beers: The Right Hand Ring Campaign
brings out the success story of De Beers
by tracing its growth over a period of time.
Realizing that the non-bridal market for diamond
rings had an immense potential, De Beers then
launched a campaign in 2003 targeted at
independent and accomplished women, who
wanted to buy or receive diamond rings for
non-traditional reasons. The novel concept they
promoted was the Women of the world, raise
your right hand. Which created a huge impact,
according to industry sources, had become a
$5 billion category by 2004. Right hand rings
such as modern vintage, contemporary, floral
and romantic brought about a psychological
change in the attitude of women consumers.
The key learning is that occasion based buying
of jewellery in India is strong. An effective
marketing connect of occasions with jewellery
can work wonders
The key learning is that a professional approach
towards marketing can be very effective and
yield high returns through creation of high-
margin brands
The key learning is creating new non traditional
ways of motivating consumers to make the
purchase by realizing the need gaps in the
market and establishing an effective marketing
connect
Noteworthy Marketing Campaigns
The Jewellery market is big and growing and the pricing situation has become more comfortable now than it
ever was. Retailers can get hold of new space at more favorable terms than before. New operating models
such as daily rental model, revenue sharing arrangements and minimum guarantee amount have now
been worked upon by mall owners to lure retailers towards their malls. Market is also expected to witness
more quality space as developers are placing increasing importance to mall planning and management
than just creating mall based on euphoria and hype, which the market saw in 2006-07. The markets are
also witnessing revival in customer demand and confidence. The slowdown has helped in maintaining a
good supply demand equation, especially for markets which were staring at an oversupply situation.
Similarly the other costs such as manpower have shown stability, which would favorably impact the industry.
Employment scenario becoming gloomy on the wake of slowdown coupled with decline in terms of salary
increments and incentives in 2009 has helped the companies in controlling their payroll cost structures.
Job instability in the market also reduced the attrition rates of employees in the industry. The share of
manpower costs in the total operational expenses have reduced in 2009, they had increased substantially
in 2007-08.
Exhibit 10 State of the Retail Real Estate Market
City Micro Market Rental Values (INR/Month/sqft) % Change from 1 year ago
Mumbai
Goregaon
Vashi
Ghatkopar
290
185
215
-24%
-38%
-36%
NCR
Noida
South Delhi
Gurgaon
310
490
250
-35%
-26%
-35%
Bangalore
Koramangala
Cunninghum Road
Magrath Road
400
210
350
-18%
-7%
-5%
Chennai Chennai Central 220 -14%
Hyderabad
NTR Garden
Himayatnagar
Banjara Hill No 1
100
90
130
-9%
-28%
-42%
Pune
Bund garden Road/ Koregaon Park
Ganesh Khind Road
Nagar Road
240
140
170
-31%
-36%
-6%
Kolkata
Rajarhat
Salt Lake
Elgin Road
120
425
315
-1%
-15%
-22%
Ahmedabad
Kankaria Lake
SG Highway
Drive in Road
45
90
70
-55%
-41%
-33%
Source Cushman and wakefield Research * Rentals mentioned are for ground floor premises on carpet area, for vanilla retailers
Challenges
Competing for Share of Wallet Expenditure and Investments
The inaction in the past by the industry has lead to
gems and jewellery taking lower share of growing
wallet of the Indian consumers. The increased
activities and vibrant industry in other categories like
Telecom, Apparel, CDIT, Entertainment, Watches,
Vacations and other lifestyle products have possibly
taken away some money from the gems & jewellery
brands /retailers. This is especially true for younger
consumers.
The approach so far has been one size fit all
(barring few) -traditional designs being served to all
sections of the society. The new segments which are
emerging like the BPO /Service oriented young middle
class require a) Affordable , b)Fashionable c)
which can be purchased Frequently d) Available
off the shelve with e) Certification for providing the
much desired assurance . There has been a shift in
consumer preference from heavy gold jewellery to
a well made, light and more trendy jewellery such
as indo western fashions with high quality and good
designs. These kinds of products are by and large
missing from the market. As a result the industry is
losing traction relative to other emerging categories
like watches, mobile phones and other lifestyle
products. Players in the industry need to look at
ways and means bridging the gulf between what is
in demand and what is being offered by constantly
innovating and coming up with new products,
designs and indigenous formats. Opportunities for
jewellery chains rely in the proposition of differentiated styles at good prices, creating product standards
and generating trust and offering products beyond traditional jewellery into lifestyle products.
Similarly there is a business case for catering to the consumers in the upper tier of bottom of the pyramid.
The reason is that unlike others segments they do not have any avenues but jewellery to invest their money.
Innovative measure such as gold exchanges, making affordable branded /certified products, and gold
asset monetization possibilities could really help in unlock the potential for this large segment.
Indian consumer space is getting slowly but surely better defined, more experimenting and ever more
discerning. The desire to own a unique or signature piece does not exist just among the upper echelons of
society but is also permeating the middle and upper middle class. The customer wants something new and
different all the time. The older generation preferred to look at jewellery as an investment but the younger
generation sees it more from fashion than investment standpoint.
Exhibit 11
Source Technopak Analysis
Sectoral Rankings by Market Size
Ranking 2009 Retail Categories
1 Food & Grocery
2 Healthcare
3 Apparel & Home Textiles
4 Education (K-12, Higher Ed. & Vocational)
5 Telecom
6 Jewellery
7 Personal Transport (Vehicles+Fuel+Repairs)
8 Travel and Leisure
9 CDIT
10 Home - Furniture, Furnishing etc
11 Personal Care
12 Eating out
13 Footwear
14 Health & Beauty Services
Competing for Share of Wallet Expenditure and Investments
Various sections of society differ in their needs and jewellery
preferences.
Shift in consumer preference from heavy gold jewellery to a
well made, light and more trendy jewellery of good quality and
designs
Opportunities for jewellery chains in terms of understanding
different customer segments and creating customized
propositions and differentiated styles at good prices
Creating more options for individuals to get credit using gold as a
mortgage to make it a lucrative investment option
Brands and Retailers also need to keep in mind
the regional differences while creating their product
proposition. India has great geographical diversity
and cultural differences for jewellery. While northern
and southern Indian jewellery is made from the purest
of gold, Rajasthan delights in silver, precious stones,
shells and mirror work. Likewise, Kashmiris are fond
of silver ornaments set with semi- precious Ferozas.
The imperative for brands and retailers is to
understand the various consumer segments and
make customized propositions and suitable designs
which have been missing, resulting in its lower
preference in comparison with other emerging
categories. In this regards, the industry can draw
significant learnings from other similar industries like
watches, which has very successfully positioned itself
as s lifestyle accessory and a fashion statement ( as
opposed to functional positioning), thereby creating
significant value. As exhibit 13 depicts, the maximum
value addition typically happens at the retail end.
In the last two decades several alterative investment
options such a stocks and real estate have emerged.
Gold as an investment option is facing competition
here as well. As per The World Wealth Report
the investment in gold is less than 10% of the total
investments for HNIs. Options have to be created for
individuals to get credit using gold as a mortgage to
make it a lucrative investment option.
Watch Industry A Case Study
India is an under-penetrated market for watches,
with only 27% of Indians owning a watch, and more
than 80% of the market by volume is below INR
500 per watch. Exhibit 14 gives an idea about the
segmentation of the market:
Given the price sensitive Indian, watches as a segment has taken its time to penetrate the market. HMT was
the first major watch manufacturer in the country, and undisputedly the market leader in this category for a
lot of years. The watch-maker offered sturdiness and reliability at a low price. The focus was not so much
on the design and brand as much as affordability for the average Indian.
However, with the entry of Titan in 1984 as a Joint Venture between the Tata group and Tamil Nadu Industrial
Development Corporation, rules of the industry changed drastically. Designing, Branding and Precision at
120%
100%
80%
60%
40%
20%
0%
% Value Addition
72.3%
Retail-Diamond Jewellery
Value of diamond content in
retail
Value of polished from local
production
Net rough used in local
production
Rough sales to cutting
centre
Rough production value
Rough production
Mine sales
Exhibit 13
Source International Diamond Exchange, 2007
International Diamond Jewellery
Value Chain
Shift in Consumer Behavior Exhibit 12
Source Geetanjali Group Presentation
Urbranded from family
jeweller
Branded
Plain metal
jewellery
Gems studded
jewellery
Jewellery for
investment
Jewellery for
fashion
Traditional ethnic and
chunky designs
Fashionable lightweight &
innovative designs
Marriage and festival
season as peak seasons
Wearability & gifts
spreading the demand
throught the year
jewellery sold on
commodity basis with
labor charges
jewellery being sold
on a per piece bais
Yesterday Topday
a reasonable price was the USP of Titan, which has
made it the worlds sixth largest watch manufacturer
in the world, and the largest in India. Today, it has
more than 50% share in the organized watch market
in the country. It offers brands such as: Steel, Edge,
Raga, Sonata, Fasttrack, Regalia, Bandhan, Sonata,
Nebula, Flip.
Titan has been christened as the most admired
consumer durable company (A&M magazine),
Superbrand 2003, Brand Equity Award (PHDCCI),
and Images Fashion Award to name a few. Titan was
able to achieve this distinction for itself in the market,
while making it still reasonably priced, and supporting
this with a vast network and efficient operations. In
short it created a great brand extracted a more value
out of the Indian consumer than HMT.
A number of premium and luxury brands have entered
India in the recent past, such as Rado, Tommy
Hilfiger, Evidenza (from Longines) and Rolex, which
are trying to catch the upmarket, urban, western
minded youth. These brands further offer a sense of
exclusivity and style as their products are distributed
through some select outlets, and use high society
and style icons such as Shahrukh Khan, Aishwarya
Rai, Yana Gupta and Lisa Ray. Exhibit 15 gives an
overview of the brands in the market today:
The mindset in the Gems & Jewellery sector has been that of cost plus markup (adding making charge
to the material, along with a margin), which is not very different from what was in watches until several
years back, When it was sort of a commoditized product. Today however, watches are sold basis on more
intangible factors. Thus, Gems & Jewellery sector can also think of breaking away from the traditional
markup model and increasingly focus on innovative products driven by designing & branding.
Share Segmentation Price bracket (INR) Brand
11% Mass <400 Grey Market, Chinese
13% Premium >5000
Swiss brands: Tissot, Omega,
Rolex Fashion brands: Fossil,
Calvin Klein, Giordano, Esprit
33% Mid-Upper 1000-5000
Titan, Citizen, Timex, Swatch,
Espirit
43% Low End 400-1000 Sonata, HMT, Maxima
Exhibit 14
Source Titan Corporate Presentation
Watch Market Segmentation
Exhibit 15
Source Titan Corporate Presentation
Brand Spread in Watches
Sonata, HMT
Maxima
Raynold, Well,
Tissot
Nebula
XYLYS
Omega, Rado,
Longines
Espirit, Swatch,
Fossil Giordano, DKNY,
Carrera, Tommy Hilfiger,
Accent
Tag Heuer,
Hugo Boss,
C Dior
Formal/ Classic
Fashion/ Sporty
Price
500 1000 2000
Titan Citizen
Timex
4000 5000 10000 20000+
Fastrack
Mindset and Manpower
The Jewellery industry has traditionally been a
very closely guarded industry, where skills of the
trade have been passed on within a family from
one generation to the other and restricted entry of
outsiders. Although this has its own advantages, this
structure of the industry has not allowed it to gain the
scale benefits, and in professionalizing it to remove
inefficiencies.
In order to tap the growing opportunity, the sector needs to attract and groom professionals at all levels
Managerial and Skilled workers. The sector so far has not caught the attention of the managerial resources
be at senior level or at entry level unlike other consumer product segments like FMCG, Durables or Retail
for that matter. The issue perhaps also stems from the fact that the majority of players operating in the
sector have still not adopted the best practices from the corporate culture.
The sector currently employs close to 1.8 million people and in the next 6 years a further 1.1 million people
will be needed. As a large section of the workforce is employed in skill-based jobs such as diamond
cutting, jewellery making, retail selling etc we need a large number of vocational training institutes spread
all across the country.
We can look at the apparel industry for solutions. It grew tremendously due to combined effort of favorable
government policies, investment in capacities, entry of multinationals, and the introduction of Fashion
designers through a vast network of educational infrastructure. Thus, institutes like NIFT which have done
exceedingly well for their respective sectors, are more than just a need of the hour for the Gems & Jewellery
industry today.
National Institute of Fashion Technology was
set up in 1986 under the aegis of the Ministry of
Textiles, Government of India. It has emerged
as the premier Institute of Design, Management
and Technology, developing professionals
for taking up leadership positions in fashion
business in the emerging global scenario. NIFT
has been granted statutory status under the act
of Parliament of India in 2006, empowering the Institute to award degrees
and other academic distinctions
The number of stores a Jeweller
has in India is equal to the number
of sons - An industry leader
requesting anonymity
There needs to be wholesome change, with the development of every skill set at every level of the industry,
such as designing, marketing and management, apart from technical skills of workers. Government and
Apex bodies could act as facilitators in broadening the outlook of the exporters /players and help them in
familiarizing with the changing scenario both in the domestic and international fronts, where moving up the
value chain and adoption of modern practices has become compelling imperatives.
Financing
In the Gems & Jewellery sector the government does not provide many innovative financing options for
the retailers and the wholesalers (refer Exhibit 17). Even though there are vanilla financing products for the
jewellery retail sector, most of the retailers cant avail the facility since they are unorganised.
The need of the hour is to develop some innovative solutions such as those available to the non-retail
players and ensure access of the same to small unorganised retailers.
Apparel Gems & Jewellery
Both are sizeable sectors with a large export component
Both largely dominated by unorganized sectors
Both employ large chunks of the Indian population
Excellent educational infrastructure:
India textile and apparel education sector is largest in the world with
36 degree level engineering colleges, 56 diploma level institutes
imparting education in textile technology dealing with yarn and fabric
manufacture, and more than 100 institutes offering education related
to garment and fashion design and technology. The shining star in this
gallery is National Institute of Fashion Technology (NIFT); in May 2006 it
was recognized by an act of Parliament as an Institute of Excellence of
Design, Management and Technology in India.
Good educational infrastructure is limited
There is a need for a National Institute
of Gems & Jewellery and numerous
vocational training institutes
Exhibit 16
Source NIFT Website, Various Internet Sources
Learnings for Gems & Jewellery from the Textile & Apparel Sector
Exhibit 17
Source FICCI
Financing Options in Gems & Jewellery
Financing Options
Raw Material
Sourcing
Raw Material
Processing
Raw Material
Trading
Jewellery
Manufacturing
Wholesaling Retailing
Packing Credit (for diamond exports
only)
Available for 180 days pre-shipment
and 180 days post-shipment
Gold Loan
Available against bank guarantee
Upto 90 days pre-shipment and 180
days post-shipment
LC on gold is also available for 90
days though nominated agencies
Cash Credit for Domestic Consumption
Working Capital demand Loan
LC 180 to 364 days
Also, since the sector lacks an industry status it
does not qualify for obtaining friendly-terms financial
assistance or any external financial aid in the
domestic market from banks or International funding
bodies.
An important requirement would be to make
the unorganised players more professional and
transparent in their dealings.
Upgradation /Modernization
As mentioned earlier, the industry needs to modernize itself. This is in light of the fact the industry is also
highly fragmented with minimal benefits of economies of scale, latest production techniques or design
centers. All of them are critical for the industry to grow rapily and move towards the higher ends of the
value chain.
In such a scenario the government could help with the creation of a Technology Upgradation Fund (TUF)
for this sector. Such schemes have worked well in other sectors such as Textile & Apparel. Highlights of the
Textile & Apparel TUF are given below: -
At the end of the last decade the apparel sector was in dire need of up gradation of technology to remain
competitive internationally.
However, the player specifically the small scale industries lacked both the funds as well as intent.
TUFS was introducted with the intention of upgradation of technology.
Under this scheme a capital subsidy of 10% and interest subsidy of 5% was provided for technology
upgradation initiatives.
It was a grand success since during the period the ministry has disbursed INR 66,275 crore under the
scheme, while it propelled investment of more than Rs. 1,16,981 crore.
The Indian industry can perhaps learn significantly from Turkey where the industralization of the jewlery
segment has transformed it into one representing the modern flexible production techniques, supreme
craftsmenship, excellent quality and immense variety.

An example of the benefits of focused structural support is the
domestic Film industry, which after the grant of Industry status in
2000 has grown at a CAGR of 18% in the last 9 years, driven by
greater organization of the industry and better access to organized
sources of financing. IDBI Bank alone raised its film financing from
zero in 2000 to INR 500 crore in 2009. The government decision
to grant Bollywood the industry status has also helped in stemming
the flow of legitimate and appropriate funding to the sector.
Case Study Indian Film Industry
Turkey Gold Jewellery A Case Study
Turkeys Gold exports have been on a strong vertical growth trajectory
for the past 10 years reaching almost US $ 1.6 billion in 2008. Turkey
is expected to dethrone Italy as the largest exporter of Gold Jewellery,
as it continues to grow strongly while Italy falls behind.
The Turkish jewellery sector traditionally was beset with problems,
such as low usage of technology, high fragmentation, poor emphasis
on design etc. These problems were similar to the ones plaguing the
current Indian industry. During the 90s, the sector finally opened up
financially due to several reasons, most notably technology, design,
investment in production capacities, and government initiatives to
liberalize the gold market. Since then the jewellery sector has charted
a blazing path which has borne great fruit in the last decade.
Exhibit 18 Turkey Gems & Jewellery
Exports (US $ Million)
0
500
1000
1500
2000
207
285
284
431
568
708
932
1127
1095 1490
1585
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source Undersecretariat of Foreign trade (Turkey)
Key Drivers of Turkeys Growth
Technology Centric Large Scale Manufacturing In the 90s
Turkeys organised sector only had a couple of workshops with
100-200 workers. Today there are at least 15 factories with
1000 plus workers. Total production capacity in Turkey for Gold
Jewellery is 400 tons per annum. The machine park of the industry
has upgraded to adopt the highest level of technology. Allowing
it to meet the international customers requirements for intricate
designs, quality and reliability of supply.
Focus on Designs In the mid 90s jewellery companies also started
employing designers in a big way and now most of the worlds largest
design teams work in Turkey. To promote jewellery designing Wold
Gold Council has been organising design competitions since 1994
and there is a plethora of courses from universities to vocational
institutes for churning out well-trained designers. Use of Computer
Aided Design (CAD) is now omnipresent.
Leveraging Tradition Like India Turkey too has a rich heritage of indigenous designs and craftsmanship. Well-known techniques include filigree,
niello & wickerwork. So while Turkey made a name for itself by excelling in international designs it then used the respect and attention it gained
to propagate its unique heritage and strengths as well. Sales to tourists and luggage traders account for a whopping 70% of the total produce.
Besides, international style jewellery many tourists refer to buy the intricate local designs for their uniqueness and as souvenirs.
Infrastructure in 1995 a gold exchange was started by the Turkish Government. Today it has 62 members comprising of banks, precious metal
companies, currency offices etc. A state of the art Istanbul Gold Refinery commenced operations in 2002 augmenting supply of quality gold.
It has the technology to produce 9999 purity gold and convert scrap or Dore bullion into 9999 purity in four hours. Istanbuls famous Grand
Bazaar which has been a historical centre for gold trade has been developed and positioned to attract buyers and tourists from the world over
in a distinct yet friendly retail and wholesale environment. Istanbul boasts of the worlds largest integrated jewellery centre Kuyumcukent. The
construction was started in 1996 and it has 328,000 square metres of built-up area with 2800 production units and shops. Besides designers,
traders, retailers and manufacturers there is also a gold refinery branch and a branch of the gold exchange is expected soon.
Fairs & Journals Four large scale jewellery fairs are organised in Turkey every year. The well-known Istanbul Jewellery Show takes place twice
a year. Gold News is a widely circulated periodical which is published 6 times a year by Istanbul Chamber of Jewellery. Besides this the industry
players, industry associations and Turkish Government regularly organise events and road-shows across the world to promote Turkish gold
jewellery.
Exhibit 19 Kuyumcukent
04
Gems & Jewellery exports are the back-bone of the
sector and also of our overall exports. The sector is
expected to grow at a CAGR of 15% to reach a size
of US $ 58 billion by 2015 from the current US $ 25
billion.
In the export market, India has gained a competitive
advantage because of its ability to deliver good
quality at low cost. For example, cost of cutting a
diamond in India is 7% of that in Belgium and 60% of
that in China. Highly skilled and low cost manpower,
along with strong government support in the form
of incentives and establishment of SEZs have been
the major drivers for the rapid growth of Indian gems
and jewellery exports. The industry thus plays a vital
role in the Indian economy as it is the top 5 foreign
exchange earner in the country surpassing even
the US $ 22 billion earned by the textile and apparel
sector.
The current global economic crisis came as rude
interruption to the exports growth story. Exporters
were doubly hit by falling demand and fluctuating
exchange rates. The Fiscal Year 2008-09 saw Gems
& Jewellery exports decline by 1.5% in dollar terms
and 13.5% in Rupee terms. However, the exports
have already bounced back in recent months and
are expected to resume a near vertical march to double its foreign exchange earnings in the next 5 years.
If we study the recent export data we find that our core strength continues to be cut and polished diamonds
but gold jewellery is also now a sizeable share and indicates that we are diversifying expanding our offerings
to the world.

Moving Up the Value Chain
With regards to Exhibit 22 India currently lies on the 2nd level in the value addition ladder of the gems and
jewellery sector. This position has cushioned India a bit during the economic crisis as compared to other
exporters like Italy. This is because the higher value Gems & Jewellery products were hit much harder than
the mass low value products
Te Export Market
Gems & Jewellery Exports
(US $ Billion)
Exhibit 20
Source GJEPC, Technopak Analysis
2009
25
58
2015
0
10
20
30
40
50
60
Apr-Nov 2009 Exports (%)
Exhibit 21
Source GJEPC Statistics
Cut & Pol Diamond
Gold Jewellery
Rough Diamond
60%
34%
3% 2%
Others
Being on this position also shows that India has a great opportunity to move up and be present across all
the points in the value addition chain. Doing so can generate the next wave of growth and profitability as
we consolidate our position in low-value gem processing and capture a greater share of high-value gem
processing and Jewellery making .This move is also important as other low cost countries like China are
striving hard to wrest share from India in our current areas of strength.
However, the industry needs to modernize itself to move up the export value chain. As stated earlier, it is
highly fragmented with minimal benefits of economies of scale, latest production techniques or design
centers. All of them are critical for the industry to move towards the high end of the value additions ladder.
There is also a significant opportunity to create additional value through higher margins which are possible
through differentiation and branding.
New Markets
In terms of finding new markets for export, one could look at SE Asia, Latin America and China which are
becoming significant consumption centres due to 7% plus growth.
In fact, GJEPC is already exploring markets like China, West Asia and Russia for exports of diamonds and
diamond jewellery from the country. China is currently the worlds second-biggest gold-consuming country,
the worlds fourth-largest diamond-consuming country and Asias largest jade, jadeite and pearl consumer.
Buoyed by the continuing improvements in income, Chinas domestic jewellery market is expected to see
solid and sustained growth presenting a lucrative market for us.
Key Enablers of Growth
In order to sustain high growth in exports, what India necessarily needs is
Strengthened export incentives, policies and schemes. This is targeted especially at the tax and duty
benefits.
In addition to this, there is a requirement of skilled manpower, especially jewellery designers and
manufacturing technologists.
The requirement for infrastructure, such as more export SEZs, is also essential in order to compete with
China and meet the growing needs of the exporters
Gems & Jewellery Value Addition Ladder
Exhibit 22
Raw
Materials
Processed Raw
Materials- Low value
Processed Raw
Materials- High
Value
Mass
Jewellery
Designer
Jewellery
Branded
Jewellery
Indias Current Dominant Position
05
Recommendations
Recommendations for the Industry
Potential Assessment and Strengthening Consumer Understanding
Unlike other consumer goods sectors such as FMCG, Apparel & Consumer Electronics there have been no
comprehensive studies done so far with regards to gaining insights into the gems & jewellery consumer.
The domestic market holds a significant opportunity and its potential needs to be fully explored.
The consumers have evolved rapidly and the traditional ways of segmentation & usage have failed to provide
any meaningful results to the brands and retailers. There is dire need for the industry to first understand the
various segments of the consumers so that the transformations shown in Exhibit 5a can take place
Thus we recommend a comprehensive consumer-insight study to be commissioned by the various industry
bodies with the objective of facilitating above transformations. The collaboration of all industry bodies is
important so that no sections of the industry are left out.
Invest in Retailing and Brands
The organised retail and brands can provide impetus to the sector. Appropriate investments can potentially
put the category on a higher priority in the consumer basket and can generate the higher margins. An
overall investment of US $ 2 billion is required by the branded jewellery players to achieve 15% share of
the market.
This is not a huge amount if you consider the investing power of Indian corporate houses and international
players. However the investors often perceive this sector to be secretive, closed and tough. We need to
overcome these doubts and fears to promote a more rapid flow of investment.
While investment from outside the industry is welcome and needed there is great opportunity for the high-
performing industry players as well. There are scores of leading family-run jewelers with highly profitable
enterprises. Currently the surplus is invested back into inventory or in other investment avenues such as real
estate and equities. We need to give these rising stars confidence and direction to invest in expansion.
Thus a possible solution here is to create highly active Industry Co-ordination Cells by the industry promotion
bodies such as FICCI, GJEPC, GJF, WGC etc. This would help bring together the outside investors and
industry stars to create high-potential, low-risk joint-ventures and partnerships.
Improve Skill Sets & Quality of People
While we have a large pool of skilled manpower
in the industry, the high growth rate that we aim
both in domestic and export markets means that
skilled manpower will be in great demand. In such
a scenario the traditional father-to-son tutelage and
on-the-job training provided by organizations may
not be sufficient, especially as we try to modernize
and professionalise the industry.
The Gems & Jewellery industry needs to
systematically and collectively invest in up gradation
of the skill sets of its workforce through increased training and manpower development programs. A joint
effort by the Industry to invest in the development of vocational training institutes could be the solution with
Industry captains showing the way forward by leading efforts to underwrite recruitment of graduates and
participate in syllabus design & development. Some key proposed areas for vocational training are shown
in Exhibit 23: -
Enhance Product Design & Manufacturing Quality Standards
A National Institute of Jewellery Design & Development would go a long way in providing the platform
for development of a pipeline of innovative high quality designers that can serve the industry as a whole.
The Institute can play a role similar to NIFT which
ultimately proved to be a fertile ground that gave
birth to a number of marquee design apparel brands
in the country and improved product design and
manufacturing quality. Indian Institute of Gems &
Jewellery (IIGJ) is a step in the right direction but the
scale and reach needs to be even greater to meet
the huge demand. If Industry captains come together
to invest in setting up the institute or expanding
existing ones, efforts can be made to lobby to obtain
Government support and create national centres of
excellence like NIFT with multiple campuses and
courses.
Besides designing there are other high-end education areas which the institute can offer. The proposed
areas are shown in Exhibit 24
Area Rationale
Processing of
Gems
Export of Gems will continue to grow in double
digits
Jewellery
Manufacturing
This is the next area of growth both for exports
as well as the domestic market
Retail Selling
This is a key requirement for Organised
Retailing to prosper
Quality Testing &
Assurance
Quality is a must to improve margins and to
move up the value chain
Exhibit 23 Vocational Training Areas
Area Rationale
Jewellery
Designing
Important for our exports and domestic market
to move up the value chain and improve
margins
Manufacturing
Technology
We will need more hi-tech manufacturing
expertise to excel in the jewellery space
especially with regards to exports
Merchandising &
Retail Management
This is a key requirement for the growth and
profitability of retail
Marketing & Brand
Building
This would be key to transform the domestic
market especially in the minds of the consumer
Exhibit 24 Specialised Education Areas
Promote Adoption of Industry Wide Standards for Gaining Consumer Trust
Enhancement of product quality standards and incentives for increasing adoption of the standards will
go a long way in enhancement of consumer trust and enable the industry to gain share of wallet of the
consumer, in the long run.
Currently various material purity and value certifications are already present in the Indian market such as
Gold Hallmarking, Diamond Certification, Pt950 Certification for Platinum etc. We now need the industry to
widely adopt the certifications as a best practice. We thus need the industry bodies to organize workshops
for educating and motivating the industry. Next there should also be consumer campaigns to improve
the awareness of consumers so that their trust in jewellery purchase gets strengthened. Once a better
understanding and acceptance of the certifications and standards is in place then we can also approach
the government to enact laws and regulations to make certifications and standards mandatory.
Eventually the trust and standardization brought in by the certifications and brands will also help in the
spread of e-selling in India which in recent years has been the most exciting development as far as the
western markets are concerned.
Co-operative Use of Resources
To bring down cost of operation and investments in the sector, industry players should adopt co-operative
use of technology, marketing and retailing. This is an effective way to modernize and strengthen the highly
fragmented industry.
SEZs and jewellery hubs are a good place where common technology-intensive facilities can be setup and
even small players in industry can get access to them.
The success of marketing initiatives by industry bodies and associations has been highlighted in this report
earlier and proves the efficacy of collective marketing initiatives. This needs to be further escalated in India
& abroad for the benefit of Indian Gems & Jewellery.
Even retail space can be hired by co-operatives when foraying into international markets. Thus a single
India-Oriented space with numerous shop-in-shops could be opened in global jewellery destinations
such as the Dubai mall.
Recommendations to the Government
Government and Apex bodies could act as facilitators in broadening the outlook of the exporters /players
and help them in familiarizing with the changing scenario both in the domestic and international fronts,
where moving up the value chain and adoption of modern practices has become compelling imperatives.
Provide Industry Status to Gems & Jewellery
At ~US $15 bn, the domestic Gems & Jewellery industry deserves the same attention and interest as a
number of other industries such as Textiles & Steel. Like the Indian film industry, the domestic Gems &
Jewellery Retail sector could especially benefit tremendously from Industry status as this would help ease
the financing problems substantially. The roadmap for this could be as follows: -
Step 1: Constitute a special cell to look into specific needs of Industry, interacting with all the industry
stakeholders
Step 2: Assess the exact benefits (quantitative and qualitative) that can accrue out of industry status and
also identify the requirements from the industry as they prepare themselves to become an industry (e.g.
transparency). Compile this in a report
Step 3: Get the industry buy-in on the report and jointly work out the details of policy, incentives, financing
and role of Gems & Jewellery Ministry
Step 4: Extend industry status and constitute a Gems & Jewellery ministry
Create a Technology Upgradation Fund (TUF)
This would help in facilitating the modernization of the manufacturing and design facilities. These funds
have been successfully created and implemented in other labor intensive industries like Textiles. The broad
structure of the TUF could be as follows: -
Interest subsidy: A reimbursement on the interest charged by the leading agency on a project of
technology upgradation. This should be not less than 5 percentage points
Capital Subsidy: A re-imbursement of the purchase value for specified processing and manufacturing
machinery. The specified machinery would represent more advanced technology. A minimum subsidy of
10% should be offered
Additional interest and capital subsidies could be granted based on beneficiary size and sub-sector
within the industry to give differentiated focus wherever required.
Creation of Design Centres /Studios, Holding Fairs
The importance of design has been highlighted by us in this report. This can help significantly in moving
the industry from commoditized selling to design based value added selling. These centres/studios can
be setup by the Government in SEZs as well as outside and should have the latest CAD technologies and
other design and visualization equipment.
India International Jewellery Show (IIJS) is a
well known event to showcase Indian Jewellery.
Government should actively promote the designing
part in such shows and perhaps also organize
more shows where designing can be given greater
importance. Designing promotion could happen
primarily through organizing designing competitions
with substantive prizes & awards and subsidizing
design oriented participation.
Asset (Gold) Based Leverage
Traditionally Gems & Jewellery have served a dual purpose of a fashion accessory as well as an investment
vehicle. However the investment appeal of Gems & Jewellery has been steadily dwindling in the wake of
other assets such as equities, bonds, real estate etc, where there is no loss in selling price. When Jewellery
is sold, the individual only realizes the material value and completely looses the making charge or design
value addition.
Banks as a practice do not mortgage jewellery from
individuals as collateral for lending although some
companies in the private sector such as Muthoot
Group do so. If banks also start lending by using
jewellery as a collateral after keeping a safe margin on
the price of the material, then precious metal jewellery
and precious stone jewellery will become more
attractive for their investment value. Two important
things could help action this recommendations: -
Perhaps RBI can think and act on this suggestion and create policy and directives to facilitate this type of
retail lending. The valuation norms should be especially spelled out for metals and gems.
There needs to be widespread adoption of certification because lending institutions will only accept
standard and certified quality material and gems.
Regulatory Laws & Taxation
There are some tax provisions in the new Direct Taxes Code which are detrimental to the industry. The taxes
relate to the following areas: -
Search & seizure laws Should exclude from the powers of the Authorised Officer, the power to seize
during the search operation any bullion, precious or semi-precious stones or jewellery which is held as
stock-in-trade
Minimum Alternate Tax (MAT) MAT Should not be calculated on Gross Assets as it substantially increases
the tax incidence
Tax Deduction at Source (TDS) Should exclude from the liability to deduct tax at source any payments
made for purchase of goods
Benefits of Export Oriented
SEZs
Exhibit 26
Create an environment
for a faster than expected
growth
Help promote
different areas of the
country
Support the future
growth of exporters
Level playing field against
good infrastructure
countries
Export
oriented SEZ
Exhibit 25 India International Jewellery Show
Tax Incentives for units in SEZs AND EOUs - Notably Deduction under section 10A / 10B / 10AA of
Income tax Act should be modified to have a longer period of benefit both for future periods as well as
retrospective effects
As Mumbai is a big hub for the Gems & Jewellery sector, Octroi is a major hindrance to the industry in
Mumbai. The proposed GST regime should remove Octroi.
At the same time there is dire need for standardization in the industry, which can restore the credibility of
the industry.
Modernize Labor Laws
Modernisation of labour laws has been the long-standing demand of all manufacturing industries and the
case is no different for the Gems & Jewellery sector.
This will enable Indian manufacturers to improve efficiencies, serve Indian consumers better and also grow
exports from India by allowing manufacturers to adopt more flexible labor practices.
Increase the Setting up of Export Focused SEZs
This would help to meet the growing needs of exporters and create the infrastructure for even faster export
growth. The policy could also help to promote the spread of industry across India besides the current
pockets in western & southern India. It will also provide a level playing ground to the Indian industry which
is increasingly facing tough competition from countries such as Turkey & China where a good infrastructure
support is available.
Gold Exchange
In the last few years Indian banks have started retailing bullion. This has helped to some extent re-invigorate
the investment habit in precious metals of Indians which has time and again proved to be a safe instrument
with good returns.
However while this has made buying gold from trustworthy sources easy, the buying still occurs more on
festive occasions rather than as a regular trading activity. Furthermore banks do not buy-back the gold
from individuals as a practice. Jewelers too are not very keen to buy-back the gold at competitive prices
especially if it is not sold by them.
In such a scenario a physical or internet based exchange to trade precious metals could promote the
Indian population to rediscover their age old investment preference for Jewellery and precious metals
Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is
closely interwoven with Indias struggle for independence and its subsequent emergence as one of the
most rapidly growing economies globally.
FICCI plays a leading role in policy debates that are at the forefront of social, economic and political
change. Through its 400 professionals, FICCI is active in 39 sectors, 8 Forums and 13 Task Forces/Working
Groups of the economy. FICCIs stand on policy issues is sought out by think tanks, governments and
academia. Its publications are widely read for their in-depth research and policy prescriptions. FICCI has
joint business councils with 79 countries around the world.
A non-government, not-for-profit organisation, FICCI is the voice of Indias business and industry. FICCI
has direct membership from the private as well as public sectors, including SMEs and MNCs, and an
indirect membership of over 83,000 companies from regional chambers of commerce.
FICCI works closely with the government on policy issues, enhancing efficiency, competitiveness and
expanding business opportunities for industry through a range of specialised services and global linkages.
It also provides a platform for sector specific consensus building and networking.
Partnerships with countries across the world carry forward our initiatives in inclusive development, which
encompass health, education, livelihood, governance, skill development, etc. FICCI serves as the first port
of call for Indian industry and the international business community.
FICCI-Western Regional Council is the western regional arm of the Federation of Indian Chambers
of Commerce & Industry. In addition to supporting FICCI, New Delhi, FICCI-WRC organizes its own
conferences, seminars, workshops and networks with visiting delegations from several developed and
developing countries.
FICCI WRC actively provides sectoral services in Brand Protection, Boating, Business Matching, Design,
Gems and Jewellery, Nutraceuticals, Progressive Maharashtra, Textiles, Technical Textiles and Wellness.
FICCI-WRC has been playing a pro-active role in bringing to the fore Indias potential in the Gems and
Jewellery sector and has been researching the possible future strategy for developing this sector in which
India has a distinct edge. We believe that with the right policy and regulatory framework India could establish
itself as a brand in the international Gems & Jewellery market, increase employment and create new breed
of entrepreneurship.
For more details contact
Dr. Vaijayanti Pandit, Director
FICCI Western Regional Council
Krishnamai Cooperative Housing Society Ltd
Ground Floor, Plot No. 33-B
Sir Pochkhanwala Road, Worli
Mumbai - 400 030
Phone: +91 022- 24968000, Fax: +91 022-24966631-32
Email: drvpandit@ficci.com, or Mr. Ankesh Jain: ankesh.jain@ficci.com
About FICCI
We are a management consulting firm with a difference. Founded in 1991 on the principle of concept to
commissioning, we are in the top 5 consulting firms in India by revenues. We are strategic advisors to
our clients during the ideation phase, implementation guides through start-up phase, and trusted advisors
overall. The industries we serve include Retail, Consumer Products, Fashion (Textiles & Apparel),
Healthcare, Hospitality & Tourism, Leisure & Entertainment, Food & Agriculture and Education.
Our clients are leading Indian and international businesses, entrepreneurs, investment houses, multilateral
development bodies and governments. Our 600+ clients include Aditya Birla Group, Apollo Hospitals,
Arvind Limited, Asian Development Bank, Asian Paints, Temasek Holdings, Essar, GMR Group, Godrej
Group, Gujarat Government, Hospital Corporation of America, ICICI Limited, Hindustan Unilever Limited,
International Finance Corporation, Lenovo International, Mahindra Group, Marks & Spencer, Mother Dairy
Foods, Ministries of Food Processing, Textiles & Commerce, Raymond, Reliance Industries, Samsung,
Sequoia Capital, Starwood (Sheraton), Tata Group, United Nations Development Program, Walt Disney,
Warburg Pincus and many other Indian and international leaders.
At Technopak, we foster innovation and creativity which challenge conventional thinking and generate
practical and far reaching solutions for our clients. In 2008, we worked with over 130 clients across 180+
projects, in 20 countries besides India, across 5 continents.
Our key services are:
Business Strategy. Assistance in developing value creating strategies based on consumer insights,
competition mapping, international benchmarking and client capabilities.
Start-Up Assistance. Leveraging operations and industry expertise to commission the concept on
turnkey basis.
Performance Enhancement. Operations, industry & management of change expertise to enhance the
performance and value of client operations and businesses.
Capital Advisory. Supporting business strategy and execution with comprehensive capital advisory in our
industries of focus.
Consumer Insights. Holistic consumer & shopper understanding applied to offer implementable business
solutions.
Services We Offer in Management Consulting
About Technopak
Services we offer through our Group Companies
Holistic consumer understanding applied to offer implementable business solutions revolving around
shopper insights, trend insights, design and innovation insights, marketing communication and measuring
customer delight.
www.indiamindscape.com
Insights and innovation led product, packaging, space and strategic design, including design research,
concepts, engineering and prototyping. A blend of unique, contemporary and relevant concepts and
solutions.
www.foleydesigns.com
Planning, implementation and project management of plants, warehouses and entertainment centers with a
focus on modernization, process improvement, technical valuation, power & water audit and environmental
engineering.
www.technopak.com/engineering
Engineering
Strategizing, planning and managing creation, development and growth of brands through a scientific,
transparent and process-driven methodology.
www.vertebrand.com
Services we offer through our Strategic Partnerships
Worlds largest privately held real estate services firm. We offer, through them, comprehensive retail real estate
solutions to our clients.
www.cushwake.com
UKs leading design consultancy for developing brand environments. We offer, through them, design solution
for retail environments.
www.dalziel-pow.co.uk
Global research and consulting firm specializing in the study of human behavior in retail, service, home, and on-
line environments. We offer consumer and shopper insights.
www.envirosell.com
Partners with Technopak for delivering Projects in India. They are one of the top architectural practices in the UK
with extensive experience in architectural and urban design projects in UK and internationally. The practice has
major specialisms in Healthcare Architecture
www.devereuxarchitects.com
D E V E R E U X
A R C H I T E C T S
Technopak Advisors Pvt. Ltd.
Gurgaon
4th Floor, Tower A, Building 8, DLF Cyber City, Phase II,
Gurgaon 122 002, (National Capital Region of Delhi)
(India)
T: +91-124-454 1111, F: +91-124-454 1199
Bangalore
Prestige Solitaire, Ground Floor, 6 Brunton Road,
Off MG Road, Bangalore 560 025
(India)
T: +91-80-4034 8600, F: +91-80-4034 8699
Mumbai
101-105, 2nd Floor, Sunjana Tower,
Sun Magnetica Service Road,
Luis Wadi, Thane West,
Mumbai 400 602
(India)
T: +91-22-2583 2222, F: +91-22-2583 8408
Website: www.technopak.com

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