Indian gold jewellery exports down 47% in Feb on lower offtake from Gulf
Mumbai (Mar 28) India is gradually losing its luster in terms of gold jewellery exports due to higher manufacturing cost arising out of a 10 per cent import duty levied on gold. Over and above 5 per cent import duty levied by the government of the United States Emirates (UAE) effective January 1, has hampered India's gold jewellery exports routed through the Middle East.
Consequently, after an over 24 per cent decline in gold jewellery exports in January, India's shipment of ornaments plunged by a staggering 47.52 per cent in February. Experts believe that the UAE has witnessed a sharp rise in new manufacturing units since January. These manufacturing bases are largely dominated by Indians who own similar units in India.
Whatever the case might be, India has been losing out on jewellery exports rapidly to competing countries including China. Most importantly, India's skilled workforce has also migrated to the UAE, resulting in a proportionate decline in job creation here. UAE contributes to nearly 20 per cent of India's overall jewellery exports.
"Dubai is no longer a free trade centre. The immediate need of the hour is to reduce import duty on gold. Import duty on gold beyond 5 per cent is counterproductive. Hence, the government should immediately cut import duty on gold to below 5 per cent to arrest the fall in gold jewellery exports," said Praveen Shankar Pandya, Chairman, Gems and Jewellery Export Promotion Council (GJEPC), the premier jewellery export promotion body under the Ministry of Commerce.
Data compiled by the GJEPC showed gold jewellery exports at Rs 2,810.60 crore for February 2017 compared with Rs 5,355.47 crore for the corresponding month last year. In dollar terms also, gold jewellery exports from India reported a decline of 46.61 per cent to $418.99 million for February 2017 as against $784.80 million for the same month last year.
In January 2017 too, gold jewellery exports from India had plunged to Rs 2,707.58 crore ($397.71 million) from Rs 3,566.49 crore ($530.33 million) in the same month last year. A majority of the gold jewellery that goes to the UAE is exported further to other destinations including Sharjah, Tunisia, Turkey and a host of African and European countries. Since January 1, however, this re-routing has stopped.
The government had increased import duty on gold steadily to 10 per cent in 2013 to bring the current account deficit (CAD) under control. Despite the fact that CAD now stands at a comfortable level, the government continues with 10 per cent duty.
"So far, no major Indian manufacturing units have shifted to the UAE to save import duty. But, we cannot rule out such a possibility if the current trend continues. The other option lies with Indian exporters is the direct export to consumers outside UAE which is currently being worked out. But, the future is not encouraging for gold jewellery exporters from India," said Pankaj Parekh, former Vice-Chairman, GJEPC, and a Kolkata based jewellery exporter.
The latest move of one per cent excise duty levy and others such as supply restriction have certainly acted against the gold jewellery industry. Apparently, the government wants to lower gold import and increase jewellery exports.
Indian jewellery exporters, however, claim duty drawback from their manufacturing bases in the UAE against import of similar jewellery from India. The decline in UAE's share has pulled down India's overall gold jewellery exports in January 2017 to $398 million, a decline of over 25 per cent from $530.33 million in the comparable month last year.
Source: BusinesStandard
