‘Stability in gold prices can revive demand even at higher price points’

07:55 AM Nov 02, 2019 |

Sabyasachi Ray joined The Gems & Jewellery Export Promotion Council (GJEPC) on 2nd of August 1999, as Director, Eastern Region at the Kolkata office of the Council. Being professionally qualified in Business Management with specialisation in marketing and having prior experience in marketing in various firms, his entry into GJEPC was quite justifiable.

With the passage of time, his 12 years of professional excellence led him to become Executive Director of GJEPC.


He earned it by way of his dedication and devotion to his work and the organisation. Sabyasachi Ray was not only managing and promoting the cause of the entire Eastern Region of India, but later was made the Director, Exhibitions & Trade Promotions and the Senior Director.


He was also the architect who transformed India International Jewellery Show (IIJS) to a what it is today - a mega world class show. Ray has earned a lot of appreciation for the proactive role that the Council took to guide the industry out of the great economic downturn in 2008-09.

He also was the force behind the creation of Gem & Jewellery Skill Council of India (GJSCI). Ray was successful in looking after employee welfare and keep abreast with the changing times and adopting modernisation of the Council in every sense.

FPJ’s R. N. Bhaskar and gold columnist Sanjiv Arole spoke to Sabyasachi Ray on various issues pertaining to the Gems & Jewellery trade.

The Gems & Jewellery Export Promotion Council (GJEPC) is the apex body for exporters of gems & jewellery. What is your roadmap for this segment?

We feel that data on this segment is not available. What we have are estimates of number of artisans, retailers, designers, et al. We have embarked on an ambitious plan of mapping all the karigars/artisans, goldsmiths, etc. in the industry.

For this, we have introduced the `Parichay’ card. In the organised segment of the industry we have already issued the card to 5 lakh workers who work for our members.

We have introduced a health insurance scheme for these workers and their families with insurance premium contribution being 75% from the firms and the council’s contribution being 25%.

The scheme is now in place for three years. Now, we move to the next phase where workers in the unorganised sector and contract workers in this sector will be mapped and issued `Parichay’ cards. We hope to reach 2 million workers in the next 6-12 months.

Here the trade and council will contribute 75% and the workers 25%. After mapping all workers, it will become easier to implement schemes for them and even have a better understanding of not only the export industry, but the retail domestic segment as well.

It must be noted here that the health insurance schemes for workers and their families is already functional with disbursement having taken place over the last couple of years.

Then, we are also simultaneously looking at developing infrastructure for the trade and even the smallest entity getting access to modern techniques, tools, designs and equipment.

Towards this we are setting `common facility centres’ as well as Model factories in various sectors across regions so that all can benefit from the modern facilities.

We are also conduction workshops and conferences to smaller centres across the country to help the MSMEs in their endeavour towards exports, marketing, manufacturing and even help in obtaining finances for them.

We feel that all of the above needs to be done if we are to achieve the target of $75 billion in exports from this sector over the next few years.

The image of the Gems & Jewellery sector has taken a battering in recent times. What steps has the GJEPC taken to improve that image?

We have constantly been in touch with various government department and ministries on a continuous basis. Therefore, we are proactive to any issues pertaining to the industry.

We were instrumental in the government banning import of gold coins as we felt that it amounted to harming the domestic coin manufacturer and drain on the foreign exchange reserves.

We have also alerted the ministries on various other issues as well. Even before the big scams pertaining to misuse of LOUs by some players, we have been conducting Banking Seminars over the last few years.

My personal opinion about the big scams that rocked the diamond world a couple of years ago is that this industry is based on trust and it will take a long time to mend it and recover the lost image of the industry.

We are striving towards it and have even formed a core committee with bankers and council members to look into bank finance to the gems & jewellery sector.

We have formed a diamond policy for bank financing where industry norms are spelt out so that the banking sector is better informed about how the trade cycle functions what are the finance requirement and so on. We are also coming out with a jewellery policy for bankers as well.

Then, we have the MyKYC bank initiative that should act as a detailed registry about any entity in our industry for all. The gem & jewellery trade has to register with MyKYCBank and approach lenders/ GJEPC on a timely basis to mitigate liquidity/ credit risk.

MyKYCBank has 3,300 registered profiles and the industry bodies enrolled with MyKYCBank are GJEPC, Bharat Diamond Bourse (BDB), Dubai Diamond Exchange, UAE (DMCC) and Antwerp World Diamond Centre, Belgium.

The trade has to ensure total transparency in exchange of information and business operations with bankers. The trade has to adopt stock maintaining tools for valuation of inventory and participate in seminars and share feedback.

They have to accept and understand the importance of external credit rating. We also realised that it would take a long time for the trade to correct its sullied image.

But, viewing it differently, I would venture to say that the scams have cleansed our banking systems and given the trade a thorough working over and woken all from their stupor. Hope this dose is sufficient to remove the malady permanently.

What do you think about RCEP?

We are apprehensive about it in view of our experiences with South Korea and Thailand as far as gold is concerned. We have sent our views to the ministry as well. We are relieved that only recently the minister has said that India would not rush into Free trade agreements.

What is your view of the state of gems & jewellery sector in the country with special emphasis on gold?

The high price of gold in 2019 to all-time high levels of nearly Rs.40,000 per 10 gm and coupled with 12.5% import duty and 3% GST has impacted demand for jewellery in the last quarter.

Doomsday predictions about global recession, trade war, sanctions, geo-political tensions and heavy buying by central banks all over the world have contributed to the high price.

The state of the domestic gold market can be gauged from the fact that even Tanishq reported a decline of 2% in the quarter ending September 2019. Price stability could revive some demand even at higher price points.

With the gold predicted to go even higher during the remainder of the year, investment demand has returned in global markets. The Indian gold market is no different. However there is a thin line between jewellery and investment in India.

For, most Indians have been buying jewellery as a form of investment. Currently, jewellery accounts for 60% of all demand and the remaining 40% is as investment. It has been observed that the younger generation seems only interested in investments.

They are interested in white gold and studded jewellery. As far as investment in gold is concerned, the interest is more Sovereign Gold Bond, digital gold, bars and coins.

Moreover, with the domestic gold market at a discount of around 5%-6% the demand has been hit. Now, the demand for gold is still around 60% from rural India. The other big demand for gold is the gold jewellery demand during the marriage season.

Now marriages are a huge industry as apart from the jewellery sector, other allied sectors like apparel, foot-ware, packaging and white goods, etc. as well as the various smaller units involved in jewellery making all benefit from the demand for gold. Therefore, poor demand for gold impacts all these allied industries and causes huge loses and indirectly impact the economy as well.

What is the scenario in promotion of generic diamonds and studded jewellery now in India?

The DPA increased its budget for 2019 to around $80 million globally. Indian market gets around $10 million at least.

GJEPC too contributes $2 mn to the promotion of diamonds and studded jewellery in India. De Beers too increased its annual budget to $186 mn, with a small fraction earmarked for India.

What must be understood here is that the promotion is not only for diamonds but for studded jewellery and benefits the overall jewellery segment.

After a prolonged period when no promotional activity in diamonds and jewellery was seen, this is a welcome step towards improving demand for studded as well as plain gold jewellery.

There was a time when around a fourth of India’s jewellery exports were from around the Zaveri Bazaar and Bhuleshwar region. What is the scenario now?

Very little of India’s jewellery exports now originate from the domestic tariff area. The replenishment scheme for gold exports has only recently been reinstated after it was withdrawn over three years ago.

Do you think there is any chance of any reduction in import duty on gold and reduction of GST?

I think GST on gold cannot go below 3%. Then, import duty contributes heavily to the exchequer. So, any reduction could only come when a revenue stream is guaranteed.

It is equally true that high import duty brings with it a parallel market in gold. Moreover, it has killed the NRIs buying their gold in India when they come during the year end.

Probably, even the growth of the organised retail sector estimated around 30-40% of the retail business in gold is stunted due to sustenance of the unofficial trade in India due to higher import duty on gold.

How is the credit to the trade affected in recent times?

India’s credit requirement for the jewellery sector is around Rs.400,000 crore. However, what is available is just around Rs.40,000 crore.

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