Consumers of gold jewellery have something to look forward to as the government is expected to reduce import duty on machine-made jewellery from the current 20 per cent to around 10 per cent.
The estimated Rs 60,000 crore (Rs 600 billion) per annum jewellery industry in India is the second largest domestic industry, after the fast moving consumer goods sector. Of this, branded jewellery accounts for just Rs 2,000 crore (Rs 20 billion).
If the duty structure is altered, jewellery that is being mass-produced in countries such as Italy, Turkey and Malaysia can be imported at almost half the cost.
Import duty on semi-finished pieces is also likely to come down from the current Rs 25 per gram. This would result in making charges coming down to around Rs 50-60 per gram from the current average rate of Rs 150 per gram.
According to RK Nagarkar, general manager, Tribhovandas Bhimji Zaveri, a reduction in import duties will be a welcome initiative for the retail jewellery industry.
He added, "This will definitely widen the variety for the consumers. It may, however, hurt goldsmiths' prospects as machine manufactured jewellery largely comes in the lower price bands."
The retail jewellery sector is expected to get a major boost over the next three to five years.
"At the moment, Indian artisans are looking inwards and their margins are thin. A reduction in import duty could prove to be good for competition. It will help lower rung retailers to explore and branch out as well," said Sanjeev Agarwal, managing director - Indian subcontinent, World Gold Council.
Currently, the mark up on Indian made jewellery is only around 13-15 per cent, while it is around 150 to 200 per cent in Europe on an average.
Mehul Choksi, chief executive officer of Gitanjali Group, is of the view that though India is one of the largest producers of gold jewellery, the focus is currently on traditional diamond and gem set jewellery, rather than non-diamond jewellery.
He added that the country does not have adequate facilities to produce machine-manufactured jewellery as yet, so a reduction in import duty would definitely help the retail sector grow.
India also has the potential to increase its jewellery exports. In 2003-04, Indian jewellery export accounted for $2.3 billion of the total world market of $40 billion. This is a substantial rise from the $1.6 billion worth of export last year.
