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					                                                    GEMS AND JEWELLERY
  Gems And Jewellery Sector and Affect of Recession on the Sector


 Index

1.    Evolution of Gems and Jewellery Industry
2.    Intro to diamond & Jewellery industry
3.    The Current Industrial Sector
     Diamond processing
     Jewellery fabrication
     Retail jewellery
     Gemstones
4.    Lab Created Diamonds
5.    Indian Exports of Gems and jewellery sector
6.    Government Policy
7.    Effect of Recession on the Sector
8.    Recommendation and strategies
9.    Future prospect
10.   Conclusion




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                                                              GEMS AND JEWELLERY




Evolution of Gems and Jewellery in India


The Indian sub-continent has the longest continuous legacy of jewellery making
anywhere since the Ramayana and Mahabharata times. While western tradition was
heavily influenced by waxing and waning empires, India enjoyed a continuous
development of art forms for some 5000 years. One of the first to start making
jewellery was the people of the Indus Valley Civilization. By 1,500 B.C people were
creating gold earrings and necklaces, head necklaces and metallic bangles. Before
2,100 B.C prior to the period were metals when metals were widely used, the largest
jewellery trade in the Indus Valley Civilization was bead trade. Beads in the Indus
Valley were made by using simple techniques. Firstly, a bead maker would need a
rough stone, which would have been brought from an eastern stone trader. The stone
would then be placed in a hot oven where it would be heated till it turned deep red, a
color highly priced by people in the Indus Valley. The red stone would then be chipped
to the right size and a hole drilled through it with primitive drill. The beads were then
polished. Some beads were also painted with designs. This art form was often passed
down through the family; children of bead makers often learned to make beads from a
young age.

Jewellery in the Indus Valley was predominantly worn by females, who wore
numerous clay or shell bracelets on their wrists. They were often shaped as doughnuts
and painted black. Over times, clay bangles were discarded for more durable ones. In
India today, bangle are made out of metals or glass. Other pieces that women
frequently wore were thin bands of gold that would be worn on the forehead, earrings,
primitive brooches, chokers and gold rings. Although women wore jewellery the most,
some men in the Indus valley wore beads. Small beads were often crated to be placed
in men‘s and women‘s hair. The beads were about one millimeter long. A female
skeleton (presently displayed at the national Museum, New Delhi, India) wears a
carlinean bangle (a bracelet) on her left hand.

India was the first country to mine diamonds; with some mines dating back to the 296
B.C. India traded diamonds, realizing their valuable qualities. This trade almost
vanished 1,000 years after Christianity grew as a religion, as Christians rejected
diamonds which were used in Indian religious amulets. Along with the Arabs from the
Middle East restricting the trade, India‘s diamond jewellery trade lulled.

Today, many of the jewellery designs and traditions are still used and jewellery is
commonplace in Indian ceremonies and weddings.




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                                                               GEMS AND JEWELLERY



Introduction to Diamond and jewellery Industry


Precious metals and gemstones have been an integral part of the Indian civilization
since its recorded history. Gems and Jewellery (G&J) has been consumed by Indians
for ages for both its aesthetic as well as investment value. India has the distinction of
being the first country to introduce diamonds to the world. The country was also the
first to mine, cut & polish and trade in diamonds.

The Indian G&J industry can be classified into various sub segments like diamonds,
colored stones, gold and silver jewellery, pearls, etc. However, the two major segments
in India are gold and diamonds, India dominates the diamond processing trade with 11
out of 12 diamonds being cut and polished in India. India also dominates the gold and
silver consumption globally with consumption of approximately 700 tones (gold) p.a.
A major foreign exchange earner, the industry is also notable in providing employment
to 1.5 million people directly and indirectly.

The industry is characterized by a significantly large unorganized sector, labour-
intensive operations, high working capital & raw material intensiveness, gold price
volatility and export orientation, The demand for gold and diamond jewellery is driven
by festivals, weddings and gifts, the increasing affluence of the middle class
population and the increase in per capita spent on luxury items.

Though India plays a dominant role in the G&J industry in terms of processing and
consumption, mining of gold and diamond is amongst the lowest in the world. India
imports gold and rough diamonds along with other precious metals, Gold is purchased
from countries like Switzerland, South Africa, Australia and UAE, and rough
diamonds are sourced from Belgium, UK, Israel and UAE. There is an impact on the
demand for gold given the record high price of gold in the last couple of years, but
consumers have remained bullish on the precious metal and there is an increased
investment-related demand for gold.

The authors expect organized retail to grow because of the changed buying preference
of the increasing younger population through the introduction of hallmarking and
certifications. The key drivers for growth in the industry are increasing disposable
income, conscious marketing efforts, rising young population with the urge to spend
on jewellery since it‘s regarded a fashion accessory. Indian G&J players are
recognizing the importance of diversifying their business to emerging markets like
China and the Middle East and not completely relying on the US as was the case
before the financial crisis. However, it will be difficult to replace the US which is still
the largest diamond market in the world. We now expect emerging market countries to
be the engines of future growth for the diamond market as the demand from developed
countries will remain subdued for some time to come.

Based on the gradual recovery in the global markets, the authors have investigated
some of the leading indicators that signal a growing momentum in the Indian G&J
sector. Factors like significantly lower inventory levels as compared to the period of
financial crisis, a huge jump in export numbers, lower unemployment levels and stable
                                                                                         3
                                                          GEMS AND JEWELLERY
rough diamond prices, all reveal a resurgence in the sector which was so critically
impacted during the financial crisis when demand from developed countries
plummeted.




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                                                             GEMS AND JEWELLERY


The 4 key industrial components




Diamonds:
Diamonds have always enjoyed a special place among precious gemstones,
contributing about 47% to the total industry size, in value terms. In the past, diamond
jewellery was limited to a very small elite segment of the global population. However,
over the past 50 years, diamonds have seen increasing democratization. Diamond
jewellery has, therefore, emerged as a segment showing significant growth in some of
the emerging markets.




Gold:
Gold has always been a jewelers favorite metal, given its intrinsic luster and ease
fabrication. Gold jewellery enjoys the leading position in most market across the
world, and in many forms the backbone of the precious jewellery industry. Given the
fact that gold is also one of the most traded metals, gold jewellery consumption is also
impacted by gold price movements. This segment today forms about 42% of the total
industry, in value terms.




                                                                                      5
                                                             GEMS AND JEWELLERY




Platinum:
Platinum forms a niche but integral form of the gems and jewellery industry, catering
mainly high-end segment. However, due to extreme high and volatile prices, the
demand for platinum jewellery fabrication has been decreasing. Currently, plain
platinum jewellery accounts for above 6% of the total industry, in terms of value.




Colored Gemstones:
This segment includes all other forms of jewellery- precious gemstones (emerald,
sapphire, rubies and tanzanite) and semi- precious gemstones, silver, pearls etc. the
industry is highly fragmented, making it difficult to track supply, demand and global
trade. Our estimates indicate that the segment constitutes about 5% of the global retail
sales of jewellery in terms of value.




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                                                                              GEMS AND JEWELLERY
               The Gems and Jewellery Industry Value Chain

               In order to facilitate an in depth and structured analysis of the industry, we have used
               the value chain approach and divided the industry into its key value chain components.
               Each of the different constituents has been broadly grouped into three major value
               adding stages:


              Sourcing of precious stones and metals:
               This stage covers the upstream end of the value chain i.e., the mining, extraction, and
               processing of precious stones and metals.
              Jewellery Fabrication:
               This stage covers activities related to the fabrication of jewellery and combining
               precious stones and base metals in different proportion.
              Jewellery retailing:
               This stage covers the activity related to jewellery retailing. The report covers snapshots
               of the key consumer markets and various retail trends witnessed by the industry



Diamond
Mining



                                            Gemstone
Coloured                                    Processing
Gemston
e Mining
                                                               Jewellery                   Jewellery
                                                               Design &                    Retailing
                                                               Fabrication
Gold
Mining


                  Ore Processing            Precious
                  Recovery                  Metal
Platinum                                    Trading
Mining
                  Recovery of
                  Silver




                                                                                                       7
                                                              GEMS AND JEWELLERY



                           Industrial Scenario

Current Scenario:

With consumer consciousness increasing, the future of organized retail in India is very
bright. The organized sector of the gems and jewellery industry in India is estimated to
grow at 40 per cent per annum to US$ 2.2 billion by 2011.

The Gem and Jewellery Export Promotion Council's (GJEPC) performance figures for
the financial year 2009-10 showcased the true resilience of the Indian industry over the
last year whence it continued with its consistent plans of building trading relations and
penetrating newer markets.

In its bid to enhance the market strategy, a gems and jewellery special economic zone
(SEZ) sprawling over 40 acres with an investment of US$ 441.1 million is being
planned to be set up by Gold Souk, the jewellery mall developer. The company plans
to have residential apartments named Gold Souk City, apart from having gems and
jewellery manufacturers from Thailand and Dubai who will open their units in India.

Total net imports of gems and jewellery in April 2010- March 2011, touched US$
27.49 billion (provisional figures) posting a growth to the tune of US$ 19.9 million
over corresponding month in the previous year, according to the GJEPC.


The industry is divided into diamond manufacturers, traders and jewellery
manufacturers.
The Diamond manufacturers are divided into people having direct supply from minors
and from dealers.




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                                                              GEMS AND JEWELLERY




Sources of Precious Stones and Metals

The gems and jewellery value chain begins at the point at which precious stones and
metals are excavated from the earth for further refining and processing. At the supply
stage, each sub-segment of the industry is distinct, in other words each segment of the
industry (diamonds, gold and platinum) is unique as far as the profile of producer
countries and player is concerned.

Given the fact that precious stones and precious metals are rare, supply is usually
constrained and hence, supply conditions play a significant role in influencing prices
and consequently demand.

The supply of gems and jewellery value chain can be further divided into 2 segments:

Mining:
Globally, mining as an industry has been pivotal to the growth and development of
various civilizations. Gold, diamonds and platinum group elements (PGE) are the most
sought after commodities globally.

Mining takes place in every continent (except for Antarctica). USA, Canada, Australia,
Russia, China, and Southern Africa dominates the global mining industry I terms of
output and mining and exploration method and technology.

Mining operates for most precious metals and gemstones are typically very capital-
intensive operations and also carry a higher financial risk.


Refining/ recovery of metals and processing of stones:
Metals produced from the earth and processed at the mines are typically of 85-90%
purity.
The ore is further purified at the refining stage where methods such as electrolysis are
employed to remove impurities. At the refining stage, 99.99% purity is achieved. After
this, the metal is then casted into bars or coins which are then traded at various
exchanges across the world.

Diamonds and colored gemstones processing typically involves cutting the rough
stone(splitting and cleaving) into various shapes, polishing, and shaping the stones to
maximize its visual appeal and showcase its intrinsic clarity and brilliance.

When similarities exist between the sourcing the processing of metals and precious
stones at high level, their distinct physical properties necessitates a different process
flow at the micro-level. Therefore, while a precious stone like a diamond has topass
through multiple stages before it can be use in jewellery fabrication, the journey of
precious metal is much simpler. In addition, the demand supply dynamics behind each
of the constituents vary on their own, therefore influencing the force of each one of
them independently. However, we begin to look at the more complicated and

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                                                          GEMS AND JEWELLERY
interesting part of sourcing chain – sourcing of diamonds, gold, platinum and
gemstones


Diamond- The King of Gems

Diamonds are essentially a crystalline form of carbon. Carbon acquires this lustrous
form under conditions of enormous temperature and pressure. Typically, diamonds
move up to the surface of the earth due to seismic activities and are found near the
surface of the earth in what are called ‗Kimberlite Pipes‘. Diamonds need to pass a
number of stages ranging from mining to cutting and polishing before they can be set
into jewellery.




                                Sources of Precious
                                 stones and metals




                                       Rough                          Polished
     Mining          Sourcing                         Processing
                                       Trade                           Trade




Expanded diamond sourcing value chain




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                                                                 GEMS AND JEWELLERY




    The Journey of a Diamond


   Mining:
    Given the nature of stone, diamonds are essentially are essentially available in 2 types
    of formation: - Alluvial formation along riverbeds or oceans and Kimberlite formation
    or ‗slopes‘. The mining of diamonds therefore, varies depending upon the source.

   Alluvial Mines Source: -
    Alluvial diamond mining is undertaken essentially in places where the diamonds have
    washed onto the surface of the earth, in riverbeds and on ocean beaches.

   Pipe mining: -
    Pipe mining is typically used to extract diamonds embedded in Kimberlite pipes and
    refers to the extraction of diamonds from volcanic pipes using sophisticated
    machinery.

    Diamond ore once mined must be processed to extract diamond rough from it.

    Rough Sourcing and Trading:-
    Rough is purchased by processors or traders (and a few jewellery manufacturers) from
    the mines or marketing arms of mining companies. The processors send it to their
    processing factories and rough traders channel it to the different rough trading
    company.

    Processing and polished trading:-
    The rough is then sent for cutting and polishing to centre across the world, where
    rough is converted into polished diamonds that can be set in jewellery.

    Jewellery Fabrication:-
    The cut and polished diamonds finally reaches the jewellery fabricator, who then sets
    these in precious base metals along with other gemstones as required and creates
    studded jewellery.




                                                                                         11
                                                             GEMS AND JEWELLERY




                                 Diamond Mining




Exploration and commercial mining of diamonds is extremely capital intensive and
carries an inherent risk. While modern technology has reduced the time between initial
exploration and commercial production of diamonds, anecdotal evidence suggests that
it still takes anywhere between five and seven years for a mine to start commercial
production.

Mining costs vary from country to country and is dependent upon the levels of
automation, type of terrain, cost of labour, and the type of mining operations. Mining
across the world differs on two accounts- gem quality (grade) as well as size of the
rough output.

The world production of diamond rough in volume terms grew by 31% in value terms
the increase was over 70%. This clearly highlights the increase in the average price per
carat of rough diamond over the last few years.




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                                                                        GEMS AND JEWELLERY
Major Mining Centres of Diamonds




Although diamond mining occurs across the globe in over 25 countries, major part of
the supply comes from only a handful of countries namely Russia, Canada, Botswana,
Congo and South Africa, Australia and Angola. These countries account to about 885
of the world‘s production in terms of value and 96% of the world‘s volume in terms of
volume. Productions in most of these countries involve Kimberlite or pipeline
operations.

Market Share of Key diamond producing nations

             Market Share of key Diamond producing nations


                               Congo
                                6%              Russia
                    Canada                       17%
                     11%




                                                         South Africa
                                                            13%
              Botswana
                25%

                                                         RoW
                                                         12%
                             Aus
                                       Angola
                             4%
                                        12%




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                                                            GEMS AND JEWELLERY


The structure of the diamond mining industry has changed several times over the last
400 years due to emergence of new mines and the depletion in production or quality of
older mines. In fact, through much of their history, diamonds were procured primarily
from alluvial sources in India and in the early stages of the 17th century from Brazil.

Today, India and Brazil have virtually moved off the ‗diamond mining‘ map, while
seven key countries located in the various corners of the world have emerged as the
‗Big Seven‘ in diamond mining.




Diamond Grading Chart


                                                                                    14
                                                                      GEMS AND JEWELLERY

         Sourcing and trading of Rough Diamonds

         The sourcing and trading stage of the diamond industry for ages has been a discreet
         and non-transparent stage in the diamond value chain. Today, due to adoption of more
         professional business practices, transparent financial reporting, and increasing
         consolidation among players, this part of the industry is also undergoing a change.

         This stage of the value chain has seen the maximum number of changes over the past
         few years and is likely to see more in the structure as well as business models followed
         by players.


         Structure of the rough sourcing and trading sub-segment of the
         industry



         Mines                 Marketing arms of                    Designated customers of
                               mining companies                        mining/ sourcing
                                                                          companies


                                      Brokers


                  Open market                         Rough                    Diamond
                 actions/tenders                   Traders                    Processing
                                                                              Companies




                                                 Brokers



                                                                     Local-in-House
                                                                    processing centres




Illegal trade/

Black
market



         The current industry has four different types of channels where each player adds value
         in their own distinct manner:

                                                                                              15
                                                                GEMS AND JEWELLERY

   Centralized Distribution
   Direct Selling
   Rough Trading
   Brokerage


1. Centralized Distribution:

   Conglomerates with large presence in mining have their marketing division/companies
    which work as separate profit centers.
   Such marketing companies market their production usually through a selected list of
    customers on a fixed price basis.
   There are currently six main players in the diamond mining industry that command
    over 90% of this market in contrast to 5 years ago when there was a single dominant
    player with70% share.

2. Direct Selling:
   Mining companies sell directly to processing companies through a sales network.
   This model is preferred by some of the smaller mining companies.
   The margins in this are lower than a centralized marketing network but higher than
    those in trading.
   Auctions and Tenders are emerging channels of distribution with a number of mining
    companies.

3. Rough Trading
   Rough traders play a very significant role in the industry. They buy from various
    mining companies or from the government and market it to different player‘s viz.
    manufacturers, other dealers and brokers.
   Margins are the lowest, but given the smaller investments required and a larger number
    of transactions, they are still viable. Typically, traders provide flexible commercial
    terms and work predominantly on credit.

4. Brokerage:
   Brokers act as commission agents for various dealers and mining companies.
   Brokers typically earn a small commission on the sales made.




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                                                            GEMS AND JEWELLERY

Changes in diamond trading centre, trading channels

Historically, the main centres of diamond were concentrated in Western Europe and
Israel. In recent times, the industry has made a gradual move towards the east.

Dubai:
Dubai is an emerging trade centre, attracting trade from various production centres
mainly due to its tax-free policy and its centralized location and geographical
proximity to all major diamond hubs (Africa, India, Europe, and Australia). A number
of diamantaires have set up trading offices in Dubai.
The Dubai rough market is estimated to be approximately USD 2 billion. Coupled with
the liberal taxation regime, this centre is likely to emerge as a significant player in
rough trading landscape.

London:
London is losing its significance as a major diamond hub mainly due to the declining
market share of a large diamond marketing company. This trend could be strengthened
if several companies move their sorting and marketing operations to Africa as expected
by several analysts.

Israel and Antwerp:
The market shifting eastward from these erstwhile centers‘ can be attributed to the
declining share of secondary diamond trading segment in the value chain as
increasingly, mining companies are dealing directly with the diamond cutting and
polishing players.




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                                                                          GEMS AND JEWELLERY
PROCESSING (Cutting and Polishing) of Diamonds
‗Processing‘ or ‗manufacturing‘ diamond in essence refers to cutting and polishing of
rough diamonds. Cutting refers to operations which size the rough diamonds into
shapes that maximize yield from the rough diamond, while ensuring that the shape
allows maximum refraction of light. Polishing on the other hand refers to the act of
finishing various facets to ensure the requisite level of polish and smoothness to
enhance the ‗brilliance‘ of the stone.

The art is deemed to have originated in India and from thereon moved to European
destinations like Venice, Italy, and other parts of the world. Today, India processes
over half of the worlds stones, a large portion is processed by Israel, Russia and now
China. Key prerequisites for a successful polishing industry are the availability of the
requisite processing skills, rough at competitive prices and cheap labour.

Once polished, most diamonds are sold and traded in the 24 registered diamond
bourses around the world, as well as in the open market.


Output of key diamond Processing areas:



                                      World Output

          India    Israel        Belgium   Russia   South Africa     US    China


                                     10%

                            4%
                       4%


                  7%


                  3%
                                                                   57%


                       15%




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                                                                    GEMS AND JEWELLERY
  The CPD industry today

  The global output of cut and polished diamonds stands at USD 19.3 billion, a 7.4%
  increase over the previous year.

  In the recent years, the industry has witnessed a number of changes in its structure and
  nature due to the emergence of newer processing centres and the diminishing output
  from the older traditional centres. Different diamond processing countries vary on the
  basis of type of stones polished; nature of skills available, level of centers also varies.


  Critical success factors for the diamond-polishing business


1. Rough sourcing:
  Access to a regular supply of rough is attributable to mutual beneficial relationships
  with governments of mining countries or activity in regard to this, with government
  aided trade associations and individual players seeking to develop direct sourcing
  agreements with mining countries.


  Comparative costs of processing a diamond




                120
                                                    100
                100
       USD                                                          80
                 80        70
       per
       carat     60
                                40   40
                 40                                            30
                                          20   25
                                                          17
                 20   10
                  0




2. Labour cost:
  Being the largest cost component in diamond processing, availability of labour at
  competitive prices is a critical success factor. Labour cost is also an indicator of the
  typical size of stones that are polished in a country. As the price of a diamond
  increases disproportionately with increase in size, only larger stones can absorb the
  high labor costs offered by centres like Israel and Belgium. Other stones are passed on
  to low-cost cutting centre like India and China.


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                                                                      GEMS AND JEWELLERY
3. Technology:
   Technology has yet not entirely replaced the human element in diamond processing.
   However, employing state-of-the-art laser cutters and polishing machines is a
   significant advantage. Developments on this front are changing the nature of the
   industry in a big way.

4. Availability of skilled labour:
   This particular factor has to elements skilled labour i.e. labour trained in the fine art of
   cutting and polishing stones, and availability of labour. Availability of labour is a
   function of total labour supply in the country and relative local attractiveness of the
   industry as an employer.

   Country wise availability of skilled labour




                                 Estimated number of processors

                 Armenia       30000
                 Thailand            70000
                      USA     7500
                    China              110000
                   Russia            70000
                  Belgium     10000
                     Israel   15000
                  S. Africa   20000
                     India                                        500000




5. Industry thrust and regulatory support:
   Political and operational support provided by the government and by various trade
   associations is an added competitive advantage enjoyed by players in a number of
   processing centres today.




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                                                                           GEMS AND JEWELLERY
        Polish Diamond trading
        In the past, the existence of a multitude of small diamond polishing companies and
        geographical spread of buyers of diamond necessitated the existence of an
        intermediary that could match the demand with supply. Polished diamond traders
        emerged to fill the gap, leveraging their associations within this closely-knit industry,
        and providing buyers access to polished diamond from multiple sources. In addition,
        they also provided value added services like extension of credit, diamond bagging &
        fluting, and other pre-manufacturing operations.

        Polishing traders diminishing value preposition




                  Slow demand Growth
                  Shrinking margins     Globalization reduced
Strength of                                ,
                                        Need for intermediaries
value
proposition
                                                        Structural Change in CPD segments

                   Value Proportion:
                                                                           Difficulty in
                      Diversified Sourcing                                obtaining finance

                      Longer credit period

                      Value Added Services




                                                 Time


        However, recent trends experienced by the Industry in the new millennium have posed
        a threat to the value proposition that polished traders have offered in the past.

        The advent of globalization, and with it improved access to players across the world,
        has meant that the need for intermediaries to match demand and supply has reduced.
        The same can now be achieving through global diamond bourses and partnership with
        suppliers in different countries. A slow growth in demand for diamond jewellery has
        aggravated the situation further with polish traders fighting for trade volume.
        The ongoing and impending change in the structure of CPD segments-consolidation-is
        likely to put even more pressure on the polished traders as suppliers gain size and look
        to build independent relationships with buyers, bypassing the polished traders in the
        process. The inability to access finance, which is likely to continue in future also, has
        prevented the polished traders from expanding and acquiring size, which is critical in a
        trading environment.

                                                                                                21
                                                                GEMS AND JEWELLERY



  Global Demand for Polish Diamonds in witnessing an upward trend

  Global sales of diamonds at polished wholesale prices (PWP) and diamond jewellery
  have been witnessing a steady increase over the past five years with a year on growth
  rate of 6.3 and 5.0% respectively.
  Most of the key diamond jewellery consuming markets witnessed a rise in overall sales
  diamond jewellery, a trend attributable to the growing economies of these markets as
  well as the successful marketing campaigns stared by key players within the industry.

 United States:
   The United States, which is the largest market for diamonds, recorded a total sale of
  USD 31.3billion, worth of diamond jewellery (constituting 45% of the global pie).
  Given that the average price per carat of PWP in the United States is significantly less
  than that of other consumer markets such as Japan, India, Italy and Hong Kong. It is
  estimated that diamonds from about 25% of the retail value of diamond jewellery.

 Japan:
  Japan is the second largest market of diamond jewellery accounting for almost 14%
  share of the market in terms of value. The country is currently witnessing a 0.5%
  growth in diamond jewellery and sales, after experiencing a slump in overall jewellery
  sales for a number of years. Diamonds jewellery constitutes a major portion (77%, in
  value terms) of the jewellery industry and is almost five times that of the next category
  i.e. metals.

 Italy:
  Italy is the third largest market representing approximately 6% of the global diamond
  jewellery
  Sales. The total diamond jewellery sales have been estimated at USD 4.3 billion. The
  diamond jewellery sales have witnessed a negative growth rate over the last six years.
  However, the last four have shown stagnating diamond jewellery sales in Italy.
  Diamonds from about 27% of the retail value of diamond jewellery in Italy.

 United Kingdom:
  In the United Kingdom, growth in diamond jewellery has outperformed the overall
  jewellery market and is becoming a bigger share of the pie comprising of estimated
  43% in terms of value. In the U.K, diamonds from 19% of the total diamond jewellery
  value.

 China:
  China is another major consumer of diamonds, forming an estimated 2% of global
  market. China is a growing market and hence the jewellery market in China is growing
  at a faster rate than the other economies. Diamond jewellery is estimated at 10% of the
  total jewellery market.

 India:
  India is the fastest growing diamond jewellery market (growing at a rate of 19%) in
  retail value terms. In terms of PWP, India is the third largest consumer after US and


                                                                                        22
                                                                GEMS AND JEWELLERY
Japan. The value of diamonds in retail sales of diamond jewellery is the highest in
India (70%).




                                                  UK
                                                  2%
                               Turkey
                                 2%      Middle East
                                            12%
                                   Japan                          USA
                                    9%                            46%

                          Italy
                           5%
                           India
                            6%
                              China               RoW
                                2%                16%




                                  World Diamond Sales


Sale of cut and polished diamonds in PWP terms grows with the increase in retail sales
of diamond jewellery.


           100

            90

            80

            70

            60
 USD
 billion    50                                            Diamond Jewellery
                                                          PWP
            40

            30

            20

            10

             0
                 2005   2006      2007     2008    2009



While considering actual sales of diamond jewellery, it is important to consider the
impact of the weakness U.S dollar, as globally diamonds are traded in U.S dollars
except at the retail stage. Consumers in countries where retail sales happen in other
currencies have in some way been cushioned against rising prices of diamonds.

                                                                                     23
                                                                 GEMS AND JEWELLERY



   Diamond Sourcing is the beset with a number of trends

1. Consolidation pressure building up
   The global diamond industry is undergoing metamorphosis of sorts. The need to fight
   shrinking margins and the need to realize more value from one‘s business through
   horizontal and vertical integration is expected to drive large scale consolidation in the
   industry.
   DIAGRAM


2. Rough prices on the rise:
   De Beers, the world‘s largest rough diamond miner, plans to rise the output of precious
   stones by 26 per cent this year to meet the rise in global demand triggered by a revival
   in American and Asian economies.

   In an e-mail, the company‘s spokesperson said the company‘s rough diamond output
   was estimated at 31 million carats in 2010 as against 24.6 million carats last year. In
   2011, the company plans to raise this to 40 million carats. At the beginning of 2009,
   De Beers dramatically reduced production at its mines in line with the reduced demand
   from DTC Sight holders, which caused a significant reduction in output. But demand
   gradually recovered in the second half of 2009, resulting in an output of 18 million
   carats during the period — an increase of 173 per cent over the first half of the year.
   Still, this was lower than in 2008. In fact, De Beers had reported the 2008 diamond
   output at 24 million carats. As a result, in 2009, total rough diamond output declined
   49 per cent to 24.6 million carats. De Beers accounts for about 45 per cent of the
   world‘s rough diamond output and supplies a majority of them to about 40 Indian sight
   holders. Importers in India, in turn, cut and polish these. According to estimates, India
   processes 92 per cent of all global rough diamond pieces (60 per cent by value).




                                                                                         24
                                                                GEMS AND JEWELLERY




3. Local beneficiaries in African Countries:
   As mentioned earlier, mining countries are experiencing increasing political pressure
   to promote in-house manufacturing of diamonds to maximize value and augmented
   economic benefits brought by this natural resource to their country. While Canada and
   Russia have always had in-house processing units, the trend is most marked in African
   mining nations like Botswana and Angola, whose economies are highly dependent on
   diamond exports.

4. Emergence of new cutting and polishing centres:
   With the emergence of China as another low-cost cutting and polished centres and the
   political pressure with regards to beneficiation, cutting and polishing industry is
   changing. China has already captured an estimated 10% of the world‘s diamond rough
   (by volume) for cutting and polishing and is likely to increase its share. Belgium, U.S,
   Israel, India, China are also likely to experience a drop in volumes of rough available
   for cutting and polishing due to beneficiation.

5. Marginalization of pure play polished traders:
   The future of polished trading is under significant threat. Pure play polished traders
   operate on gross margins as low as 4 to 7 % and provide value to jewellery
   manufacturers by quick turnaround of assortment needs as well as providing consistent
   assortments. The trade is highly sensitive to fluctuations in margins, inventory
   lock0up, and receivable build-up, because of which the risk is the highest for this
   segment of the value chain. In addition, there is an increasing trend towards
   disintermediation due to greater association of retailers and diamond manufacturers for
   long-term program, allowing manufacturers to plan in advance- rendering the pure
   play polished trader redundant.

6. Problem of conflicts diamond persists:
   While the KPCS has been largely successful in putting a lid on the illicit trade of
   ‗conflict‘ diamonds, several sources in the industry indicate that the scheme is not
   foolproof, and some stones of dubious antecedents enter the legitimate trade. Estimates
   of illegal diamond trade, from various monitoring bodies, range between 1 and 3 % of
   the worlds diamond output.




                                                                                        25
                                                                GEMS AND JEWELLERY
  The jewelers „favorite metal‟
  GOLD
  The ages across the globe, gold has been synonymous with jewellery. Being malleable
  and ductile, jewelers have found it relatively easy to work with and develop intricate
  designs that have fascinated people across the world. The following sub-sections
  examine the sources of supply of gold and its demand for jewellery fabrication.

  World Supply
  The global supply of gold comes from two kinds of sources:

 Mining:
   Mine production has been estimated to be hovering around 2,500 tons per annum for
  the last few years. The gold-mining industry today is a global business, conducted in
  over 60 countries (of which seven have significant output, accounting for over 65% of
  the global production) and dominated increasingly by a handful of international mining
  groups.

 Above ground:
   Gold is virtually indestructible and as a result, nearly all the gold that has been ever
  mined id available for recycling in some form. A significant proportion of above
  ground gold is stored in the form of bullion with central banks across the globe.net
  sales of central bank contributed about 656 tones. Old gold scraps i.e. gold recycled
  from recycled jewellery and other forms contributed about 38% of the overall gold
  supply of about 4,036 tones.




                                Worlds Gold Supply




                           Central Bank
                              Sales
                              21%



                     Scrap Recovery
                          16%
                                                     Mining
                                                      63%




                                                                                        26
                                                             GEMS AND JEWELLERY
World‟s gold suppliers




World‘s supply of gold from primary sources
Production of gold from primary sources has doubled over the last 20 to 25 years.
World gold mining output stood at 2,519 tones. This figure is moderately lower than
2,591 tons of gold in 2000; however it is significantly higher than the 1,311 tons mined
in 1980. Total historical production has been estimated to be close to 200,000 tones.

Gold mining is spilt quite evenly among the seven large producers- with South Africa
leading the way with 11% of the world volume, followed closely by U.S. and
Australia, each with 10%. The share of South Africa and the U.S has decreased over
the time due to number of shafts closing out or reducing outputs.

Gold mining output has shown a downward trend over the last few years. With mining
companies not investing in mines, production is likely to follow this trend in the near
future. This is seen as one of the factors contributing to the rise in price of gold.




                                                                                     27
                                                                                   GEMS AND JEWELLERY

  Gold supply from secondary sources- central banks and scrap
  recovery


1. Bank sales:

  One of the key factors influencing the supply of gold is the freedom of banks to sell
  gold in the open market, which is constrained by the Central Bank Gold Agreement
  (CBGA). However, this has not deterred banks from taking advantage of the upswing
  in gold prices. Since December 2000, central bank has put in about 2,061 tons of gold
  in the market. Over 50% of such sales were affected by Switzerland, pumping in about
  1,162 tons of gold. Other noticeable net selling banks were U.K, Portugal,
  Netherlands, France, Austria, South Africa and Spain. Interestingly, banks from the
  rest of the world were small net buyers of gold bullion


                                                         Tonnes
                  RoW
                 Spain
        South Africa
                Austria
                France
        Netherlands
            Portugal
                     UK
         Switzerland

          -200               0         200         400          600      800         1000      1200     1400
                Switzerlan                         Netherland                        South
                                 UK     Portugal                France   Austria              Spain   RoW
                    d                                  s                             Africa
       Tonnes     1162           202      200         195        168      75          58       51     -48




  Central bank net sales contributed to the world gold supply




                                                                                                            28
                                                                 GEMS AND JEWELLERY




2. Scrap Sales:

  Gold is virtually indestructible; so unless it has been lost, all the gold ever mined still
  exists in some form. It is easily recoverable from most of its uses and capable of being
  melted down, re-refined and re-used. It follows that the supply of recycled gold, or
  scrap, is an important part of the dynamics of the gold market. In the last few years,
  scrap has contributed to about 21 of the overall gold supply to the world.
  Scrap is defines as gold that has [been sourced from old fabrication products, and
  refined back into bars. It does not include jewellery that has simply been traded in and
  resold without being re-refined, or re-sold investment bars and coins. Most recycled
  gold originates from jewellery. Smaller amounts come from recuperated electronics
  components and, at times, from investment bars and coins.




                  1000
                   900
                   800
                   700
                   600
        Tons
                   500
                   400                                              Tonnes
                   300
                   200
                   100
                     0
                          2005    2006    2007    2008    2009




                                                                                          29
                                                               GEMS AND JEWELLERY
Platinum- The new metal
Platinum belong to the Platinum Group on Metals (PGM) consisting of six types of
rare metals, each one them possessing unique qualities and characteristics, lending
them to a variety of applications across sectors-automotive, medicine and jewellery.

Platinum the most commonly occurring PMG, yet 30-35 times rarer than Gold, has for
long been an integral part of the gems and jewellery basket. Given that the metal is
almost indispensable in the industrial sector (particularly in the auto- catalyst industry)
and is valuable raw material for the medical sector, only a portion of platinum is
utilized for jewellery.

 8000

 7000

 6000

 5000

 4000                                                           Scrap Recovery
                                                                Mine supply
 3000

 2000

 1000

    0
          2005       2006       2007       2008      2009



Platinum supply by source

The last few years have witnessed several changes and trends that have tilted the
platinum metal demand-supply equilibrium. Extremely volatile prices have impacted
the investment value of the metal. For the very same reason, demand for the metal for
jewellery fabrication has dropped considerably. The following section presents a
snapshot of these demand-supply dynamics that have shaped up over the years.

World platinum supply
As with gold, supply of platinum comes from two types of sources- primary (platinum
producing mines) and secondary sources like scrap recovery and liquidation of existing
over the ground stocks. Metals from the primary sources today accounts for over 90%
of the world supply.

Mining of platinum ore is concentrated in a limited number of geographies, namely
South Africa, Russia, and North America, with South Africa producing over three-
fourths of the world‘s platinum. Mining companies are generally large co-corporations,
such as Implats, Anglo Platinum, etc with a high degree of vertical concentration.


                                                                                        30
                                                                      GEMS AND JEWELLERY

                               Growth in platinum Mine Production
                 14

                 12

                 10
 USD Billion
                  8

                  6

                  4

                  2

                  0
                        2005          200         2007         2008      2009
               Volume   5.2           5.6           6           6.4       6.8
               Value     3            3.4          3.5          4.5       6.5



Production output of key mining countries

Mainly in three geographical locations, this produces 96% of the total world output of
platinum.

South Africa:
South Africa is the leading producer of platinum, accounting for 78% of the total
production. The country‘s platinum production has been increasing at CAGR of 6.1%

Russia:
 Russia accounts for about 13per cent of the global production of platinum. Russia‘s
platinum production has been decreasing at a CAGR of-4.1%.

North America:
North America accounts for around 5 percent of the global production of platinum‘ and
this has remained constant over the last five years.


World platinum demand
Platinum is considered almost indispensable in the industrial and medical section. The
metal is used in the development of cancer drugs, nuclear resonance imaging raw
material for ammunition, industrial machinery, and, most important, in automobile
catalytic converters [auto catalysts]. Over the last six years, global platinum demand
has risen at a CAGR of 3.3 per cent to reach 7.5 million.




                                                                                           31
                                                             GEMS AND JEWELLERY
                                     Million Oz
   7.6



   7.4



   7.2



     7
                                                                          Million Oz


   6.8



   6.6



   6.4
            2005        2006         2007         2008        2009


The demand for platinum in the industrial segment seemed to be stable. However, the
demand for auto catalysts over the same period grew by 12.4 per cent driven by the
increase in the number of cars produced utilizing modern technology and catalytic
converters using platinum. Global demand for platinum jewellery on the together hand
decreased sharply. This can be attributed to extremely; high and volatile prices,
competition from other precious metals, and a consequential dip in demand from
China.

Over the last few years, platinum demand has exceeded the platinum supply from
mining and scrap recovery. The residual demand is met through above ground
movement of stocks [either through intra-industry trade or releasing of stocks by
financial institutions/ investors, The magnitude of residual demand is indicative of the
pressure on finding new below-ground platinum and consequently on the price of
platinum.
The gap stood at 390,000ounces in 2000 and reached a peak of 500,000ounces in 2002.
Since then it has steadily decreased to 70,000 ounces in2005, which is reflected in the
way platinum price has moved over the last few years.

While the supply of platinum is constrained by the discovery of metal underground and
the available processing capacity, the demand from some of the segments like auto-
catalyst, and sub-segments like platinum bridal jewellery is inelastic. With growth
projected in the sale of diesel cars and stricter emission norms across the global, the
demand from auto-catalyst segment is expected to be strong. Similarly, in the jewellery
segment. Platinum still holds the ‗elite‘ tag among other metals and even with rising
prices the demand for bridal jewellery is unlikely to disappear overnight.

 Therefore, even though the demand for platinum in overall jewellery fabrication is
expected to ease off in the future, an upward pressure on platinum price is expected to
continue

                                                                                       32
                                                                  GEMS AND JEWELLERY
    Jewellery Fabrication
    Jewellery manufacturing or fabrication is, by far, one of the most important stages in
    gems and jewellery value chain. Jewellery fabrication plays a key role in bridging
    customer needs with the availability mix of precious stones and base metals.

    Precious stones can be broadly categorized into two segments:
   Precious plain metal jewellery- primary value is derived from the base metal- gold,
    platinum, silver, etc

   Precious gems studded jewellery- primary value is derived from gemstones rather than
    the base metals, i.e. diamond and/or gemstones etc.

    The jewellery fabrication industry has developed across the world and every time has
    resulted in specific geographies specializing in different forms of jewellery. Each
    country therefore, has a distinct identity based on design specialization, choice of
    fabrication material, use of technology, method of production (hand made v/s machine
    made), quality, finish of the final product, etc
    Growth in global jewellery fabrication

                                     USD billion
       90

       80

       70

       60

       50

       40                                                             USD billion


       30

       20

       10

        0
              2005       2006        2007          2008    2009


    Jewellery has seen a steady rise over the first few years, and or estimates indicate that
    the total value of jewellery fabrication has touched USD 79 billion.
    India is the biggest fabrication centre in terms of volume of gold used for jewellery
    fabrication. It converts over 630 tons of gold into jewellery. China, Italy, Turkey are
    the other fabrication centres with substantial usage of gold for jewellery fabrication.
    Italy, which consumed over 500 tons of gold for jewellery fabrication in the year 2004,
    has seen a steady decline in jewellery fabrication. In 2007, the Italian industry is
    estimated to have converted less than 300 tons of gold into jewellery. During the same
    period, the demand for gold for jewellery fabrication from Turkey and China registered
    a strong positive trend, indicating a distinct shift in manufacturing.


                                                                                          33
                                                        GEMS AND JEWELLERY
As a result of emerging technology, competitive labour costs, and changes in
regulation, a number of traditional manufacturing centres have been losing out to
newer players, thus changing the jewellery manufacturing landscape.

Emergence of new fabrication centres



 Traditional Centres                         Emerging Centres




             Italy
         Thailand                                    India
            USA
                                                   Turkey
      China and
      HK




                                                                              34
                                                                 GEMS AND JEWELLERY
   Trends in jewellery fabrication


1. Consolidation:

   As with other parts of the gems and jewellery value chain, the jewellery fabrication
   industry too is passing through a consolidation phase. Historically, this has been a
   highly fragmented sector. The consolidation is the result of the following efforts to
   capture a greater share of the value.

   Forward Integration: Large diamontaires have started setting up jewellery
   manufacturing units influenced, in some cases, by powerful compelling programmes.
   Backward Integration: Upstream movement of retailers either through in- house or
   outsourced manufacturing.
   ‗Book-ends‟ model: There have been instances of mining companies acquiring or
   investing in manufacturing units and acquiring retail stores and retailers trying to gain
   a presence in mining.

2. Increasing sophistication and professionalism:

   Players in this part of the value chain have been making significant amount of
   investments in technology up gradation, sophistication of manufacturing techniques,
   and building of managerial capabilities.

3. Growing importance of „Economies of Scale‟:

   Jewellery fabrication has also seen the emergence of volume producers who use
   industrial production techniques to maximize efficiency as opposed to techniques used
   by traditional artisans.

4. Design and quality as the dominant base of competition:

   One of the main concerns of any jewellery manufacturer is to give the consumer the
   product he/she wants, while ensuring the costs are under control and the business is
   sustainable and profitable.

   However, competition and slow growth in the industry have eroded margins. The
   average consumer demands quality, finish, and innovative design but at ‗reasonable‘
   prices.

5. Technology as the silver lining:

   Adopting the latest in technology today, and effective usage of information
   technology, can provide a manufacturer a number of advantages, making a marked
   difference to the company‘s bottom line.
   Besides enabling the manufacturing to reduce manufacturing time and cost, technology
   has also enabled the fabrication of different types of jewellery, which would have not
   been possible using traditional means.
   Another advantage to the manufacturer is the flexibility to quickly chum out new
   designs in smaller batches to keep up with highly volatile design trends.



                                                                                         35
                                                                  GEMS AND JEWELLERY
   High-tech manufacturing is the need of the hour. Players in the manufacturing space
   need to recognize the benefits and invest in technology to sustain their position in a
   highly competitive environment.

6. Changes at the retail end:

   A number of trends in jewellery retail are likely to have an impact on the fabrication
   industry. Besides enabling the manufacturer to reduce manufacturing time and cost,
   technology has also enabled the fabrication of different type of jewellery, which would
   not have been possible using traditional measures.

   Another advantage to the manufacturer is the flexibility to quickly churn out new
   designs in smaller batches to keep up with the highly volatile design trends.

   Evidently, high- tech manufacturing is the need of the hour. Players in the
   manufacturing space need to recognize the benefits and invest in technology to sustain
   their position in a highly competitive environment.

7. Entry of „synthetic‟ diamonds

   Technology has penetrated even areas like the manufacturing of diamonds. Complex
   technology that has emerged over the last couple of decades such as Chemical vapor
   Deposition and the High Pressure- High Temperature (hpht) technology have made
   lab-made or ‗synthetic‘ diamonds a reality. These diamonds, although created under
   simulated conditions possess the same chemical, thermal and optical properties of
   natural or mined diamonds.

   Given the relative high availability of diamonds (compare to natural pearls);
   stakeholders feel that while synthetic diamonds pose a threat, it is unlikely to give rise
   to a survival issue.

   The industry is conscious of the need to create safeguards to prevent mixing of natural
   and synthetic stones. While for the first trade, identification methods such as laser-
   encryptions will help in identification and differentiation, players are concerned if the
   identical will be available for secondary sales. Unscrupulous elements could mix
   synthetic and natural stones, posing a very serious threat.

   A present, the synthetic diamonds (cultured diamonds as the manufacturers prefer to
   call them) have only minor presence in the market. Most consumers are not aware of
   their existence. All the producers of synthetic diamonds have adopted a very cautious
   entry strategy, and they are introducing their products very slowly, taking care not to
   erode consumer confidence and establishing safeguards for easy identification.

   The general consumers, analysts, industry player, and trade bodes believe that
   synthetic diamonds will create a new segment in the market and will co-exist along
   with natural diamonds.




                                                                                          36
                                                                    GEMS AND JEWELLERY



Jewellery Retail
Global retail sales of jewellery are estimated to have grown at a steady CAGR of 5.2
%., over the last few years, to reach USD 146 billion.

The market was marked by intense competition between diamond and plain gold
jewellery for a share of the consumer‘s wallet. While goods regained its share from
low 37% to 42%, diamonds increased its penetration in traditional goal markets but
suffered because of platinum jewellery.

Plain platinum jewellery managed a high of 7.3% of the total market share, but since
then slipped back to close to 6%

 160


 140                                                                          7.3
                                                              6.5              9
                                                              9.5
 120                                         5.9
                           5.6               9.1
            5.3             8
 100        7.1                                                               60.7
                                                              54
                                            46.3
  80                       44.4
            41.5

  60


  40
                                            62.5             65.7             68.9
            56.7           59.5
  20


   0
           2005            2006             2007             2008             2009
       Diamond Jewellery   Plain Gold Jewellery    Plain Platinum Jewellery   Others


The U.S continues to be the world‘s largest market for jewellery and accounted for
31% of all jewellery sales. Japan, another key jewellery market of yesteryears, has
seen a steady decline from 10% to 8%. During the same period China has steadily
increased its share in the market, and today accounts for 9% of the global jewellery
sales, in value terms.

The Indian consumer‘s increasing penchant for diamonds jewellery and the rekindling
of her affair with plain jewellery meant that its share I n the world market went up 8%
from a low of 5.5%.




                                                                                         37
                                                                    GEMS AND JEWELLERY
    Diamond jewellery



    World diamond sales were estimated at USD 69 billion. The market for diamond
    jewellery has registered a year – on – year growth of 5% contrast this with the global
    luxury goods market, where the U.S alone accounts for USD billion and the global
    market is expected to grow in excess of 15 % annually. Growth in diamond jewellery
    is attributable to two factors.

   Strong economic growth in key diamond jewellery consuming nations.
   Aggressive marketing effort by large diamond marketing companies.

                           Global Diamond Jewellery Sales
     80

     70

     60

     50

     40                                                     Global Diamond Jewellery
                                                            Sales
     30

     20

     10

      0
           2005     2006      2007     2008     2009



    The U.S constitutes the largest market for jewellery and clocked and estimated USD
    billion in diamond jewellery sales. Japan‘s consumption of diamond jewellery has
    dropped sharply following the country‘s economic condition. Today, Japan
    constitutes% of global sales of diamond jewellery.

    The most impressive growth has been recorded in Asia with India and China leading
    the way. India, which has mainly been a plain gold consuming nation, reported a
    remarkable growth in sales of diamond jewellery. According to our estimates, this
    market is likely to grow to USD 1.65 billion. Demand for diamond jewellery has been
    seen to rise in the Middle East as well.




                                                                                         38
                                                                        GEMS AND JEWELLERY
    Plain gold Jewellery
    Demand for plain gold jewellery in value terms has taken off when the global retail
    sales stood at USD 41.5 billion. The total retail sales of plain jewellery were estimated
    to be USD 60.7 billion. This meteoric rise in the sales of plain golf jewellery is directly
    linked to the rise in gold price, which have grown at a CAGR of close to 13%.
    Therefore, even though the total gold consumed as plain gold jewellery decreased,
    sales have notched p a positive growth in value terms.


                        Global plain gold jewellery retail sales
     70


     60


     50


     40

                                                              Global plain gold jewellery
     30                                                       retail sales


     20


     10


      0
           2005      2006     2007       2008      2009




    Even though the demand for plain gold jewellery is supported by consumption in
    developing economies, its share of the total jewellery market is increasingly under
    threat from studded jewellery. Alternate forms of gold like white gold too are under
    threat from other precious metals like platinum and palladium.

    The U.S and India continue to be the largest markets for plain gold jewellery
    consuming over USD 10.8and USD 10 billion worth of jewellery.

    However, in volume terms, India is by far the largest consumer of gold in the form of
    plain gold jewellery. This apparent contradiction is on account of two factors:

   Us consumes lower carat jewellery(9-14 carat) as compared to India(18-24 carat) ; and
   Retail margins in the U.S are much higher than in India.




                                                                                             39
                                                                      GEMS AND JEWELLERY
Plain platinum jewellery

After growing at a good pace, plain platinum jewellery sales have established over the
last few years. This sudden dampening of the growth in platinum jewellery sales is a
direct result of the increase in the price of platinum (pricing the jewellery out of range
for some consumers) and the reluctance of retailers and wholesalers to carry inventory
due to the higher cost.

Platinum prices have sky rocked over the last few years and have grown at a CAGR of
10.4 %. Prices rose to USD 1,012 pre oz, the highest in almost 25 years.

Plain platinum jewellery sales have tapered off in the last few years


                        Global sales of plain platinum
 10

  9

  8

  7

  6

  5
                                                         Global sales of plain platinum
  4

  3

  2

  1

  0
       2005     2006     2007     2008     2009




China is the world‘s largest consuming market for plain platinum jewellery. It accounts
for more than 75% of the world-wide sales of platinum jewellery.

Japan‘s share of the world market has declined in the recent past. It is estimated that it
now accounts for only 13% of global sales.

Lately, palladium has emerged as an alternative to platinum and has made significant
inroads into platinum jewellery. Demand for palladium for jewellery has multiplied 5.5
times (from 260 tons to 1430 tones) a whopping 54% mainly due to increased demand
for the metal in China.

However, platinum still retains its ‗elite‘ image and its sales in the high end luxury
segment have not declined




                                                                                           40
                                                               GEMS AND JEWELLERY
   Globally, jewellery markets are witnessing new trends in consumer
   preferences

1. Fashion gains precedence- “As long as I get the look right”
       Today, consumers in major markets are more design and fashion conscious than
   ever before. The historical distinction between ‗precious‘s and non- precious or
   ‗expensive‘ or ‗non- expensive‘ jewellery is fading in major markets for fashion and
   adornment jewellery. This trend is more pronounced in the urban markets. Consumer
   are wearing a mix of various metals and stones, their main objective being ‗getting the
   look right‘. Jewellery is now being manufactured with stones that previously have been
   unfit to be set in precious jewellery. Also, non-conventional metals such as copper and
   steel are being used as a base for diamonds. These trends, though not very significant
   in terms of impact at the moment, could be harbingers of more permanent changes in
   consumer behaviors.

2. More of stones, less of metals
     The rising cost of gold and platinum, primary metals for precious jewellery has in
   some way provided a boost for gemstones, including diamonds. The trend, coupled
   with the aggressive marketing but the diamond industry is establishing a foundation for
   the growth of the diamond industry. In consumer segments with a lower purchasing
   power, diamond jewellery with smaller stones (melee or cluster or pave form) is
   making waves.

3. White waves continues
   The demand for white metal continues to move upwards to occupy a larger share of the
   market. White metals (rhodium polished gold and platinum towards the higher end) are
   generally preferred for diamond-studded jewellery in the Western markets and in the
   Far East which houses the largest consuming centres for platinum jewellery. In China,
   demand for palladium jewellery picked up mainly as an alternative for platinum. In
   India, white gold is typically preferred by urban women, associating it with western
   fashion. Yellow gold still dominates the traditional bridal segment.

4. More buying for oneself:
   In almost all key jewellery consuming markets, women are seen increasingly
   purchasing jewellery for themselves. Most of these are seen to be impulse purchases,
   generally falling in the low to medium value range. This trend has been seen across
   large markets- from traditional and conservative markets like India to more mature and
   developed markets like the U.S and U.K

5. Branding has assumed significance:
   The industry has seen two distinct ‗branding‘ waves – one at a company (in an effort to
   maximize margins and tap target markets) and the other at an industry level (pushed by
   large upstream players for market expansion and demand generation).




                                                                                       41
                                                              GEMS AND JEWELLERY
Coloured Gemstones

Colored gemstones have been an integral part of the gems and jewellery industry at all
times. Going by contemporary definition, any stone other than diamond is labeled as a
―coloured Gemstone‖ (diamond occupying the position of a separate sub segment due
to its share in the overall global jewellery pie)

Coloured gemstones may be precious or semi- precious
    Stones that qualify as being precious are Emerald, Rubies and Sapphires
    Other coloured stones that are labeled as ‗Semi- Precious‘, however this
       terminology is changing with the term ‗semi- precious stones ‗ being gradually
       replaced by ‗gemstones‘ in common parlance.


Coloured gemstones are more often than not mined using picks, chisels, hammers and
shovels by small scale miners. This is in contrast to diamond mining which usually
comprises of very large, mechanized, highly efficient operations.


Key precious coloured Gemstones:
Emerald:
The wonderful green color of emerald gives it a unique position in the gems kingdom.
The green colour depends on the chromium content of iron traces serve to enhance it.
Emerald often contains inclusions and other flaws. However the finest emeralds are
transparent. Unlike rubies and sapphires which undergo heat treatment for clarity
enhancement, emeralds are not heat treated. Major producing centre for emeralds are
Columbia, Brazil and Zambia.

Rubies:
Ruby is a variety of corundum with chromium as an impurity. Synthetic rubies have
been produces since 1904. Apart from being set in jewellery, rubies are used in space
research in connection with communication systems. Major producing centres for
Rubies are Myanmar, Madagascar, India, Afghanistan and Pakistan.

Sapphires:
Sapphires are available in colours ranging from pale blue to deep indigo, depending on
the quantities of iron and titanium present. Its chemical composition is the same as that
of Ruby- essential corundum, which is the second hardest known natural substance
after diamonds. Apart from jewellery, sapphires are used in the manufacturing of jewel
bearings, gauges, dies and high grade abrasives. The key producing centres are India,
Myanmar, Sri Lanka, Thailand and Madagascar.




                                                                                      42
                                                               GEMS AND JEWELLERY

   Some of the Famous Diamonds in the world
   Some of the rarest and famous precious stones in the world

1. Beau Sancy:

   A wonderful little stone linked to its big brother, the Sancy. It has been in existence
   since at least 1589, making it one of the more ancient famous diamonds. Unlike other
   diamonds, its provenance (at least since 1589) is well known. However, its weight has
   been reported to be from 34-38 carats depending on the reference. The replica here was
   based off of Morel (1988), 34.5 carats




2. Bazu:

   The Bazu was a diamond of 32.62 carats. It was the largest diamond set with the
   French Blue in an ornament called The Order of the Golden Fleece, considered to be
   the most lavish and expensive single piece of jewelry in all of Europe. King Louis XV
   had this piece created around 1749 using the French Blue diamond, the Bazu, five ~5
   carat brilliant diamonds, the 107.88 Cote de Bretagne spinal, three ~10 ct yellow
   sapphires, and several hundred multi-point sized diamonds.

   Bazu was a diamond of 32.62 carats. It has only been mentioned once in history, but
   what a place! It was the largest diamond set with the French Blue in an ornament
   called The Order of the Golden Fleece, considered to be the most lavish and expensive
   single piece of jewelry in all of Europe. King Louis XV had this piece created around
   1749 using the French Blue diamond, the Bazu, five ~5 carat brilliant diamonds, the
   107.88 Cote de Bretagne spinal, three ~10 ct yellow sapphires, and several hundred
   multi-point sized diamonds.




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                                                                   GEMS AND JEWELLERY

3. Black Orlov

   This is the largest black diamond of historical origin. The cutting and symmetry on this
   stone is superb. Thanks to J. Dennis Petimezas, a former owner, in assisting in
   answering        some       technical    questions       that     allowed    modeling.
   The black color is due to inclusions that I personally thought would have been finely
   divided carbon. However, they are predominantly iron-based, such as free iron,
   magnetite, and hematite. Diamonds with high enough concentrations of these materials
   can actually be magnetic.




4. Darya-I-Nur

   This stone was created from the larger of the two pieces when the Great Table
   diamond was broken. As Meen explains, there is one large extra facet on the pavilion
   that doesn‘t belong there. Upon further analysis, he concluded that this facet was
   necessary to grind away a crack caused by the stones breakage. This allowed the
   Darya-I-Nur      to    remain    as     flawless     as    its     parent     stone.

   This is also one of the few diamonds containing an inscription. It was obviously placed
   on the largest of the side pavilion facets, one that extends from the bottom of the stone
   to the girdle. It can be partially seen as a reflection in one of the facets on the opposite
   side of the stone, one located at the six o-clock position in most reproduced photos of
   the stone.




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                                                                GEMS AND JEWELLERY

5. Dresden Green

   Weight of the original diamond is 41.00 cts. It is certainly the largest existing apple-
   green pear shaped diamond. It is mounted on a beautiful brooch with two others
   diamonds of 31.00 cts with many other small diamonds




6. Florentine

   Weight of the original diamond is 137.27 cts. An exceptionally golden yellow gem
   noted also for its unique nut shape. A nine side polygon, double rose cut with 126
   facets, it is the most famous Italian gem. It belonged to the treasure of the Grand Duke
   of Tuscany in 1657. With the marriage of the Empress Mary Theresa and Francis
   Stephan of Lorena, it passed into Hapsburg‘s treasure. The diamond disappeared with
   the fall of the Austrian empire.




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                                                                  GEMS AND JEWELLERY

7. Hope Diamond


   The Hope diamond is the world‘s second largest blue diamond, yet its provenance is
   shrouded in mystery and myth. Some have theorized that it is the re-cut form of a
   much larger stone, the French Blue, stolen during the French Revolution and re-cut to
   hide its identity. This study used computer modeling to show that it was possible that
   the Hope was cut from this stone. The controversy surrounding the Hope‘s origin has
   been on-going ever since it appeared, and this project has added to the factual
   knowledge concerning this very important diamond




8. Idol‟s Eye


   This stone was offered at a Christie‘s auction in 1865, its first authenticated
   appearance. It was probably mined in Golconda, India in the early 1600‘s. Rumor
   says it was in the eye of an idol and stolen (how unusual is this story?), finding its way
   to Europe in the 1700‘s. Harry Levinson, a Chicago jeweler, was the last confirmed
   public owner. It is now privately owned, probably in the Middle or Far East.

   GIA has graded this as a blue diamond. Although many think the Hope is the world‘s
   largest blue diamond, this is clearly erroneous, as the Idol‘s Eye is approximately 25
   carats larger.




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                                                                  GEMS AND JEWELLERY

9. Koh-I-Noor

   Weight of the original diamond 105.60 cts. This diamond also has a fabulous legend
   that goes back to 1300. The legend being that the owner of the Koh-I-Noor could rule
   the world. It belonged to Shah Jahan and its original cutting weight was 186.00 cts.
   The East Indian Company got possession of the diamond in 1849 and it was given as a
   present, the year after to Queen Victoria. The Queen had it cut in Amsterdam in a
   beautiful shape of 105.06 cts. And today, it still adorns the crown of the Queen Mother
   and is among the British Crown Jewels I the Tower of London.




10. Nassak

   The Nassak is one of those unfortunate Mogul-cut stones that have been re-cut to more
   modern tastes. First recorded history shows it as a triangular shaped stone of
   approximately 90 carats. It was then re-cut to an 80 carat version in the early 1800's,
   still triangular but with more rounded corners. It still didn‘t meet the changing tastes of
   history, and was re-cut in the 20th century into a 43 carat rectangle.




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                                                                GEMS AND JEWELLERY


11. Nur-Al-Ain

   This stone was created from the small piece of the broken Great Table diamond. Its
   weight and dimensions can only be estimated as direct measurements cannot be taken.
   Harry Winston Jewelers set it in a tiara for the Empress Farah Pahlavi back in 1958. It
   would be assumed that it was weighed and measured, but they have declined to release
   any information concerning this data. The Empress was kind enough to express her
   regrets that she did not have any of this information either, and suggested
   communication with the Bank Markazi in Teheran where the stone resides.




12. Pasha

   The earliest reference to the appearance of the Pasha is from Dieulafait (1874). It
   shows a drawing of an octagonal stone weighing 40 carats. Although once owned by
   Barbara Hutton, the Woolworth heiress, and King Farouk of Egypt, there is no other
   reference to it in the octagonal form. Unfortunately, Hutton did not like the shape, and
   had the only octagonal historic diamond re-cut to a 36 carat round stone.




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                                                               GEMS AND JEWELLERY


13. Portuguese:

   Weight of the original diamond is 127.02 cts. It is another gem exhibited at the
   Smithsonian Institute in Washington D.C. it is emerald- cut and flawless with a strong
   fluorescence that gives it a unique ―Velvet Look‖




14. Regent

   140.50 Carats, although it is now surpassed in weight by other famous diamonds, the
   exceptional limpidity and perfect cut of the Regent give it an uncontestable reputation
   as the most beautiful diamond in the world. Discovered in India in 1698, it was
   acquired by Thomas Pitt, Governor of Madras, who sent it to England where it was
   cut. In 1717 the Regent purchased it from Pitt for the French Crown. It first adorned
   the band of Louis XV's silver gilt crown (in the Louvre) at his coronation in 1722,
   going then to Louis XVI's crown in 1775. Later in 1801 it figured on the hilt of the
   First Consul's sword (Fontainebleau, Musée Napoleon 1st), and then on the Emperor's
   two-edged sword in 1812. In 1825 it was worn on the crown at the coronation of
   Charles x, and during the Second Empire it embellished the "Grecian diadem" of the
   Empress Eugenie. It can be seen today at the Louvre in Paris.




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                                                                  GEMS AND JEWELLERY

15. Sancy

   55 Carats, it was cut in a pear shape and was first owned by Charles the Bold, Duke of
   Burgundy, who lost it in battle in 1477. The stone is in fact named after a later owner,
   Seigneur de Sancy, a French Ambassador to Turkey in the late 16th century. He
   loaned it to the French king, Henry III who wore it in the cap with which he concealed
   his baldness. Henry IV of France also borrowed the stone from Sancy, but it was sold
   in 1664 to James I of England. In 1688, James II, last of the Stuart kings of England,
   fled with it to Paris. It disappeared during the French revolution.




16. Tavernier Blue

   Much of the technical information concerning the Tavernier Blue was developed while
   researching the Hope diamond. Jean Baptiste Tavernier first saw the stone around
   1668, and described it at the time as 112 3/16 carats (Tavernier, 1676). He fortunately
   provided the only known drawing of this stone so that it can be recreated. This process
   is covered in detail in the research page for the Hope Diamond.

   One of the historical technical fictions about this stone relates that it is the size of a
   man‘s fist. This is clearly not the case, as the replica is 32.89 x 27.65 x 12.92 mm as
   derived by Gem Cad modeling. For those unfamiliar with metric measurements, it is a
   little over an inch in length and width and half an inch deep if it were the size of a
   man‘s fist, he would have had to reside in Oz




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                                                                 GEMS AND JEWELLERY




17. Tiffany

   The Tiffany has an uneventful history, belonging to Tiffany‘s since it was
   unearthed.OK, what you see above is the current model of the Tiffany, not the
   brownish replica I had before. It‘s amazing what can be done to update a model after
   25 years of technological developments. No more tracing paper, this was done using
   my latest techniques on the computer.

   One of the things I recently discovered is that the pavilion main angles can be
   accurately determined (within about ±0.5°) by looking at the reflection of the culet
   facet, and its position relative to the facet itself and the girdle.




18. Wittelsbach

   Weight of the original diamond is 35.50 cts. Interesting for the blue color that makes it
   a particularly rare stone, it was mounted on a marvelous brooch surrounded by a crown
   of many other diamonds for Mary Amelia of Austria in 1722, during the reign of
   Macmillan II. Later, the famous brooch changed owners, was exhibited in Europe and
   in the U.S.A and bought in 1964 by a German collector.




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                                                                GEMS AND JEWELLERY

19. Cullinan I

   530.20 Carats - the Cullinan I or Star Africa diamond is the largest cut diamond in the
   world. Pear shaped, with 74 facets, it is set in the Royal Scepter (kept with the other
   Crown Jewels in the Tower of London). It was cut from the 3,106-carat Cullian, the
   largest diamond crystal ever found. The Cullian was discovered in Transvaal, South
   Africa in l095 on an inspection tour of the Premier Mine. The Cullian was cut by
   Joseph Asscher and Company of Amsterdam, who examined the enormous crystal for
   around six months before determining how to divide it. It eventually yielded nine
   major, and 96 smaller brilliant cut stones. When the Cullian was first discovered,
   certain signs suggested that it may have been part of a much larger crystal. But no
   discovery of the "missing half" has ever been authenticated




20. The Centenary Diamond


   273.85 Carats, discovered at the Premier Mine, in July 1986. The 'Centenary' diamond
   weighed 599.10 carats in the rough. Together with a small select team, master-cutter
   Gabi Tolko sky took almost three years to complete its transformation into the world's
   largest,       most        modern-cut,        top-color,        flawless        diamond.
   Possessing 247 facets - 164 on the stone and 83 on its girdle - the aptly-named
   'Centenary' diamond weighs 273.85 carats, and is only surpassed in size by the 530.20
   carat 'Great Star of Africa' and the 317.40 carat 'Lesser Star of Africa', both of which
   are set into the British Crown Jewels. The 'Centenary' diamond was unveiled,
   appropriately at the Tower of London in May, 1991.




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                                                               GEMS AND JEWELLERY


21. The Taylor-Burton


  69.42 Carats, color: F-G, clarity: IF, cut: Pear-shape, source: Premier Mine, Transvaal,
  South-Africa.
  It was founded in 1966 in the Premier Mine in South Africa. The rough, which
  weighted 240.80 carats, was cut into a 69.42 pear shape diamond.
  As you might guess from the name, Richard Burton bought and named this stone as a
  gift for Elizabeth Taylor. Yes, Richard Burton bought it $1,100,000. He also named
  this stone as an engagement. After Burton's death in 1979, Liz Taylor sold the stone for
  charity and reportedly received $2.8 million. She donated in his memory to a hospital
  in Biafra. It was last seen in Saudi Arabia.




22.The American Star
  The American Star Diamond began life as an unnamed 14.89-carat D-color, Flawless-
  clarity modern round brilliant. It was bought in late 1999 by the Eight Star Company
  of California, with the intent of a re-cutting. The plan was to prove, on a large scale,
  that the Eight Star approach brings otherwise unattainable sculptural and optical
  perfection to the round brilliant, even ones the rest of the world already thinks are as
  good as it gets.
  As with every Eight Star diamond, the American Star was cut using an exclusive light-
  tracking instrument called a 'Fire Scope' which allows cutters to align facets so
  precisely they can completely control the flow of light into and out of a diamond.
  "Without a Fire scope, diamond cutting is guesswork," says Richard von Sternberg,
  Eight Star's founder and president. "With it, our cutters look inside a diamond and fix
  fatal problems other cutters never even see".




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                                                              GEMS AND JEWELLERY
23.The Moussaieff Red Diamond

  The Moussaieff Red is displayed as part of the Smithsonian‘s ―The Splendor of
  Diamonds‖ exhibition, in addition to the De Beers Millennium Star and The Heart of
  Eternity.

  Moussaieff Red is reported to have been discovered by a Brazilian farmer in
  Abaetezinho River in 1990, in an area known as Alto Paranaiba who had a reputation
  as a great source of beautiful and colorful diamond. Roughly, it was believed to be 13.
  9 carats (2. 78 g).

  Diamond was purchased and cut by the William Goldberg Diamond Corp. and named
  the Red Shield. It is currently owned by Moussaieff Jewelers Ltd. Rated in color as
  Fancy Red by the Gemological Institute of America (GIA). Moussaieff Red Diamond
  is a diamond the size of 5. 11 carat (1. 022 g) by cutting a triangular brilliant
  (sometimes called trilliant, trillion or cut), given a color as Fancy Red by the
  Gemological Institute of America.




24.The Steinmetz Pink

  The Steinmetz Pink is the diamond weighing 59.60 carat (11.92 grams), the color
  defined as Fancy Vivid Pink by the Gemological Institute of America. The Steinmetz
  Pink is the largest known diamond has been given Vivid Pink. As a result of the
  scarcity of this extraordinary diamonds, the Steinmetz Group took careful 20 months to
  cut the Pink. It was introduced in Monaco on May 29, 2003, in a public ceremony.




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                                                               GEMS AND JEWELLERY
                              Lab Created Diamonds

In the last decade, technology has improved to the point that diamonds can be
produced in the lab that is equal in quality to any mined diamond.

Lab created diamonds are quite simply, real diamonds that have been produced in a lab
rather than those that occur naturally and are mined out of the ground – there is no
other difference in the chemical makeup.

Both natural and manmade diamonds are made of the same material – nearly pure
carbon, and the crystalline structure is very similar with differences only detectable
using specialized instruments. In nature, diamonds are formed up to 200 kilometers
below the earth‘s surface. They are created in conditions of intense heat and pressure
and slowly, over millions or billions of years, they are carried to the surface by
volcanic activity.

In contrast, modern labs created diamonds are made in a laboratory by one of two
methods – either by HPHT (High Pressure High Temperature) or CVD (Chemical
Vapour Deposition).

Synthetic diamonds created by either method, if well made, can be impossible to
identify as lab created using the naked eye alone. They offer the beauty of a natural
diamond, without the price tag and without the possibility that you have contributed to
the social conflict associated with ‗blood diamonds‘.

Of course, jewelry is not the only application for created diamonds. Diamonds actually
have a huge range of industrial, scientific and military applications and if it wasn‘t for
this need it is unlikely that created stones of such high quality would be on the market
today!

Good quality lab created diamonds can be hard to identify using normal jeweler‘s
equipment, although they can readily be identified in a lab using standard tests. With
ever improving technology, created diamonds are improving in quality as well as cost
and are a very affordable alternative to the real thing – although a top quality created
diamond is still not cheap! This article cites a range of prices, but the consensus is that
you can save well over 30% depending on the size and color of the stone. However, for
many consumers the idea of a lab created diamond is becoming more palatable,
particularly in the current economic climate.

It‘s easy to become confused by the terminology used by some unscrupulous retailers,
particularly online. Watch out for people advertising ‗simulated diamonds‘ as created
diamonds – a stimulant is more likely to be a different type of created gem rather than
a true created diamond.




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                                                            GEMS AND JEWELLERY
History:
The first attempts to create diamonds in the lab began in 1797, but the earliest
successes came in 1879 and 1893. The first commercial success was achieved in 1954,
using a belt press to produce the necessary high pressure and temperature.

Types:
Lab-created diamonds used as gemstones are manufactured using the HPHT or the
CVP methods. HPHT uses various presses to supply requisite pressure and
temperature; CVP uses a hydrocarbon chemical gas mixture.

Properties:
Real diamonds are assessed according to cut, color, clarity and carat weight. Lab-
created diamonds can be chemically, physically and optically identical, but might be
identified using spectroscopy with different wavelengths.

Colors:
Lab-created diamonds are available in yellow and blue. Unlike real diamonds, they are
rarely colorless. Other colors such as pink or green are achieved through irradiation.

Cost:
Lab-created diamonds are significantly cheaper than real ones. A 3-carat diamond will
retail for approximately $40,000 as of August 2009, while a lab-created stone of the
same weight will cost only $600.




             Lab created Diamonds


                                                                                       56
                                                                GEMS AND JEWELLERY
SWOT Analysis of Indian Gems & Jewellery Industry:



Strengths:
· About one million craftsmen are associated with this industry. Their skills can be
  utilized for designing and making modern Jewellery

· Availability of abundance of cheap and skilled labor in India.

· Presence of excellent marketing network spread across the world.

· Supportive government industrial/ EXIM policy.

Weaknesses:

· Small firms lacking technological/ export information expertise.

· Low productivity compared to labor in china, Thailand and Sri Lanka.

· As the major raw material requirements need to be imported, companies normally
  stock huge quantities of inventory resulting high inventory carrying costs.

Opportunities:
· New markets in Europe & Latin America

· Growing demand in South Asian & Far East countries.

· Rupee value depreciating resulting in a windfall increase in the profitability.

· Industry moving from a phase of consolidation


 Threats:

· China, Sri Lanka and Thailand's entry in small diamond segment

· Infrastructure bottlenecks, absence of latest technology

· Unusual increase in the prices of gold and rough diamonds




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                                                              GEMS AND JEWELLERY
THE GEMS AND                   JEWELLERY              EXPORT         PROMOTION
COUNCIL (GJEPC)

Set-up in 1966, the GJEPC has over the years effectively molded the scattered efforts
of individual exporters to make the gem and jewellery sector a powerful engine driving
India's export-led growth. This apex body of the gem & jewellery industry has played a
significant role in the evolution of the Indian gem and jewellery industry to its present
stature. GJEPC is continuously working towards creating a pool of artisans and
designers trained to international standards so as to consolidate the Indian jewellery
industry and establish it as a prominent global player in the jewellery segment.

With strength of 6,500 members' spread all over the country, the Council is primarily
involved in introducing the Indian gem & jewellery products to the international
market and promotes their exports. To achieve this, the Council provides market
information to its members regarding foreign trade inquiries, trade and tariff
regulations, rates of import duties, and information about jewellery fairs and
exhibitions.
The role of GJEPC can be broadly classified under the following categories:

Trade Facilitator
The Council undertakes direct promotional activities like organizing joint participation
in international jewellery shows, sending and hosting trade delegations, and sustained
image building exercises through advertisements abroad, publications and audio-
visuals. GJEPC also invites countries to explore areas of co-operation in supply of
rough diamonds and rough colored stones as well as offers co-operation in jewellery
manufacturing. The Council regularly communicates with Indian Embassies, trade
bodies and associations in various countries. And finally, GJEPC also organizes
seminars, buyer-seller meets, symposiums.

Advisory Role
A crucial area of activity of the Council has also been aiding better interaction and
understanding between the trade and the government. The Council takes up relevant
issues with government and agencies connected with exports and submit documents
for consideration and inclusion in the Exim Policy. The Council also grants
membership, registration certificates and performs other roles as per the Exim Policy.


Nodal Agency for Kimberly Process Certification Scheme
GJEPC works closely with the Government of India and the trade to implement and
oversee the Kimberly Process Certification Scheme. To that effect, the Council has
been appointed as the Nodal Agency in India under the Kimberly Process Certification
Scheme.

 Training and Research
The Gems & Jewellery Export Promotion Council runs a number of institutes that
provide training in all aspects of manufacture and design in Mumbai, Delhi, Surat and
Jaipur. These training programs are being conducted to ensure that the Indian industry
achieves the highest levels of technical excellence.




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                                                                     GEMS AND JEWELLERY
Exports of Gems and Jewellery

Items                       April-July- 10            April-July- 09           % Growth / decline
                            (Provisional)             (Same ports as current   over previous Year
                                                      year)
                            Rs.          USD          Rs.            USD       Rs.         USD
                            Crores      Million       Crores       Million     Crores     Million

Cut and pol Diamonds        35122.70     7649.06      21572.95     4436.60     62.81         72.41
(quantity in lakh carats)     188.58                    173.02


Gold Jewellery D-T-A         4264.69      927.68       3022.69      619.32     41.09         49.79
SEZ/EPZ                      9056.28     1984.16       7813.76     1600.96     15.90         23.94

Total                       13320.97     2911.84      10836.45     2220.28     22.93         31.15
Colored Gemstones             371.22          80.54     371.76        76.53     -0.15      5.24
                             2360.91         513.70     403.80        83.08    484.67    518.32
Others

Net Exports                 51175.80 11155.14         33184.96     6816.49     54.21         63.65
Exports of Rough             1429.19         311.35     959.11       196.97    49.01         58.07
Diamonds                      104.60                     53.42                 95.81

(Quantity in Lakhs)
Total                       52604.99 11466.49         34144.07     7013.46     54.07 63.49


Gold Jewellery Exports: The export of gold jewellery during April- July 10 was
registered at Rs 4264.69 crores as against Rs 3022.69 during April- July 09.
• Cut and Polished Diamonds: The share of this segment in the exports stood at Rs
35122.80 crores for the period April- July10 as the exports of the same was registered
at Rs 21572.95 crores during April- July 09.
• Coloured Gemstones: This segment accounted for exports worth Rs 371.22 crores for
the period of April- July 10 as against Rs 371.76 crores for the same period last year.

They, along with chemicals and allied products, engineering goods, ready-made
garments, textile yarn, fabrics, made-ups have been the main drivers within the
manufactured product exports during the last decade. Top export destination includes
United States, Hong Kong, UAE, Singapore and Belgium. With the increase in exports
in recent years, the gems and jewellery industry has also accounted for an increased
share of gross bank credit (GBC) of scheduled commercial banks (SCBs).

The bulk of the gems and jewellery industry in India is concentrated in the
unorganized sector and employs an estimated 2 million workers serving over 0.45
million goldsmiths, and around 0.1 million diamond processing units. The number of
gold jewellery manufacturing units is put at 0.1 million. Also, a large number of skilled
goldsmiths/ gold merchants from India are engaged in gold trade and industry in
almost all the oil-rich Middle Eastern countries.




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                                                             GEMS AND JEWELLERY

GOVERNMENT REGULATIONS AND SUPPORT

The Government of India (GoI) has been working to develop the gems and jewellery
industry in India through several initiatives.

                                   export industry had its modern beginning in the
1960s, when the Government of India introduced the Replenishment (REP) license,
allowing an importer to import rough diamonds worth 80 per cent of the value of his
exports. The REP license thus provides the foreign currency needed to purchase rough
to manufacture the relevant type of polished diamonds. At the outset, a 45 per cent
customs duty was levied on rough diamond imports, but this duty was reduced to NIL
in the Union Budget of 2003-04.

                   cy for 2002-07 contains a special focus on exports of gems and
jewellery through market access initiative schemes, duty free imports and appropriate
adjustments in value addition norms.

   the government has set up various special economic zones (SEZ) for gems and
jewellery industry with specific incentives provided to units in SEZs. Gems &
jewellery units in SEZs and Export Oriented Units (EOUs) can receive precious metal,
viz, gold/silver/platinum prior to exports or post exports equivalent to value of
jewellery exported. This means that they can bring export proceeds in kind against the
present provision of bringing in cash only. In order to give a boost to exports of gems
and jewellery, Government took major policy
Initiatives during 2004-05.

             import duty on platinum from US$ 12.2 per 10 Gms to US$ 4.64.


itself instead of claiming reimbursements later.

                                                                   further increase the
exports of studded jewellery and platinum jewellery.

The policies for this sector announced in the Foreign Trade Policy include:

             -import entitlement for rejected jewellery up to 2 per cent of Freight on
Board (FOB) value of exports.




focus is clearly on export promotion, the liberalized policy regime will help players
perform better in the domestic market as well by improving their overall
competitiveness.




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                                                           GEMS AND JEWELLERY



HIGHLIGHTS OF NEW FOREIGN TRADE POLICY FOR THE
YEAR 2009 – 14

Shri Anand Sharma, Hon‘ble Union Minister of Commerce and Industry have
announced the
Following measures for gems and jewellery sector in the new Foreign Trade Policy
(2009 – 14)
On 27th August, 2009:

a) To neutralize duty incidence on gold jewellery exports, it has now been decided to
   allow Duty Drawback on such exports.

b) Import of Diamonds on consignment basis for Certification / Grading and re –
   export by the authorized offices / agencies of Gemological Institute of America
   (GIA) in India or other approved agencies will be permitted.


c) To promote export of Gems and Jewellery products, the value limit of personal
   carriage have been increased from US$ 2 million to US$ 5 million in case of
   participation in overseas exhibitions. The limit in case of personal carriage, as
   samples, for export promotion tours, has also been increased from US$ 0.1 million
   to US$ 1 million.

d) The number of days for re – import of unsold items in case of participation in an
   exhibition in USA has been increased to 90 days.


e) In an endeavor to make India a Diamond International Diamond Trading Hub, it is
   planned to establish ―Diamond Bourses‖

f) With an objective to meet the Dollar Credit needs of exporters, a Committee has
  been constituted with Finance Secretary, Commerce Secretary and Chairman IBA.




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                                                                GEMS AND JEWELLERY

   Effect of Recession on the Gems and Jewellery Industry

   The economic slowdown in the U.S in 2007 following the U.S subprime crisis in
   August 2007 which resulted in the fall in GDP growth in the U.S from 2.8 in 2006 to
   2.0 in 2007 and consequent fall in the U.S import growth which indirectly started
   affecting the Indian exports to U.S in 2007. However, this simmering crisis accelerated
   and turned into a full blown global recession with the dramatic escalation of the global
   financial crisis in September 2008 which resulted in an unprecedented contraction of
   world growth to 3.2% and trade to 3.3% with the growth of advanced economies to
   0.9%and 0.4% respectively.
   The situation worsened in 2009 with the world output project at -1.3% and world trade
   volume at -11%. The fall in growth and imports of advanced economies was worse
   with projection at -3.8% and -12.1% respectively. This has affected the trade of all the
   countries. India was no exception though it has weathered the crisis more confidently
   than many other countries including the advanced countries.
   All sectors were affected due to the global slowdown. The Gems and Jewellery
   industry was also badly affected.

1. Increase in Unemployment at the factory level:



2. Reduction of Exports:




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                                                              GEMS AND JEWELLERY

Future Prospect
Future growth in gold jewellery business is likely to be driven by increased exports to
U.S and other markets and domestic consumption. Although domestic consumption
has increased in 2005-08, consumption per capita is still very low, reflection the high
proportion of the rural population and the social infrastructure of the country. The
export business has been constrained by an inability to compete in global market on
the base of price and superior design capabilities.

The Indian cut and polished industry has thrived because of increased exports. At
present, Indian in the world‘s leading diamond cutting and polished centres. The sharp
increase in exports of Gems and Jewellery during recent years in primary attributable
to pick-up in demand in major market like U.S, Belgium, Israel and Hong Kong. Gems
and Jewellery exports have also benefited from the supportive policy measures of the
Government of India. Reflecting a pick up a demand in global market since 2002,
Indian exports of cut and polished diamonds has increased at a 3 years CAGR of 16%
during FY 2004-08.

The U.S still accounts for around 40% of consumer demand for diamond jewellery, but
our estimates for 2016 indicates that India is poised to grow significantly over the next
six years, from 8% global of global consumer demand in 2009 to 11%. In 2000, China
and India accounted for an estimated 5% of global consumer polished demand in 2009,
this proportion was estimated at around 14%. As these markets continue to grow above
global average rates, they will take share from more established market, and by 2016,
Chinese and Indian consumers are expected to account for a combined 20% of the
world‘s polished consumption. While not back to pre- crisis levels, we are seeking
encouraging signs in the market that the recovery has gained am important foothold
and is continuing to gain traction. As report at half- year results, there has been good
restocking by retailers in the first half of 2010. U.S consumer‘s confidence is
improving, while China and India continue to show strong growth. It is clear that in the
‗new normal‘, consumer still desire diamond as the ultimate gift of love




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                                                                 GEMS AND JEWELLERY
   Annexure




   Questions for Personal Interview

1) What is the company doing in gems & jewellery sector?
2) According to you has there been a significant growth in the GJ Sector in the last 5
    years? How?
3) Where according to you does India stand in the GJ Sector?
4) What is the trend in this sector at the moment?
5) What was the impact of the global financial crisis on gems & jewellery sector?
6) How was your company affected?
7) What was the strategy to overcome this situation?
8) What initiatives has your company taken so far to achieve competitive advantage?
9) What benefits are you expecting from the government?
10) What is the overall profitability in this sector?
11) Tell me more about Synthetic Diamonds? What kind of threat do they pose?
12) What according to you should be the Future Outlook of this sector?




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