The proposed imposition of higher import duties by Washington DC on certain products from India may lead to jewellers losing major business in the US, Colin Shah, chairman of the Gems & Jewellery Export Promotion Council, told Moneycontrol in an exclusive interview.
This will affect more than 500 offices maintained by Indian companies in the US, Shah said. GJEPC is the largest forum for the Indian gems industry, which has battled a demand drop since last year when major job losses took place.
Currently, the industry is banking on exports to the US as global demand has picked up and the US has dropped a preferential treaty with Hong Kong, Shah said. Edited excerpts:
The Office of the United States Trade Representative has proposed retaliatory tariffs on Indian jewellery products. While it is currently under a six-month postponement, what will be the impact if it goes through?
The imposition of the proposed 25 percent import duty on 17 Indian jewellery items for the time being consists of exports to the US to the tune of $57 million. Though this amount looks less, there is every chance that this can get extended to other products from the sector too. American jewellery companies also bank on Indian companies to fund their business by giving long credit and memo facilities, which will have major repercussions.
Indian companies have established an estimated 500 offices around the US that provide thousands of high-paying white-collar jobs to locals. The imposition of duty could affect all these jobs as the Indo-US jewellery business would become unviable. Duties would also immensely impact the labour-intensive sector with loss of jobs and livelihoods and a shift of business to countries such as China and Mexico. However, there is a respite as the same has been extended for six months post several representations made by GJEPC along with trade bodies and the government of India.
After rising significantly in March and April, gold imports have tanked in May. Do you expect gold inflows to remain soft overall in FY22?
The vaccination drive is in full swing in India and we are hopeful that things will get back to normalcy very soon. There will be pent-up demand for gem and jewellery post-Covid due to festivities and marriages. We are expecting gold imports to pick up from the second half.
What is GJEPC’s opinion of the revamped gold monetisation scheme? How much imports is it set to reduce in the short and medium terms?
The government has accepted and incorporated all the recommendations of the GJEPC in the amended Gold Monetisation Scheme (GMS). The decision to include jewellers as Collection and Purity Testing Centres and the introduction of standard operation procedures for retailers under GMS is well appreciated. While there are no more amendments from our side, we are hopeful that the Indian Bank Association will ensure seamless operation of GMS with the help of jewellers.
India imports around 700 tonnes of gold every year and is the second-largest consumer of gold after China. With the revamped gold monetisation scheme, there will be local gold in the system and dependency on gold imports will come down significantly. We anticipate… gold imports in the next three years to gradually reduce by 30 percent, which will help the country with our current account deficit.
Given that specific sub-sectors like diamonds had been under stress even before the pandemic, what is the outlook on jobs which were lost last year?
Except for April 2020, when there was a complete lockdown, manufacturing activity continued, although in limited capacity, thanks to support from the government that we have received on relaxation in compliances. Migrant workers went to their hometowns in the initial stage of the pandemic but they have come back… the job loss was temporary as things are looking good now.
What about sectoral growth ?
India’s key export markets such as the US, Hong Kong and the United Arab Emirates have opened up for economic activities and are witnessing considerable demand for diamonds, gemstones and plain and studded jewellery. Demand for cut and polished diamonds along with diamond jewellery has witnessed significant growth of over 9 percent in April-May 2021, compared to the same period in 2019, the year before the pandemic.
Have export flows gone up as a result of America ending it’s preferential economic treaty with Hong Kong?
Recovering from the pandemic, India’s export flow had picked up in the second half of 2020. The surge in demand in the US market may be attributed to the festival and holiday season. This may not necessarily be the impact of the preferential economic treaty with Hong Kong. The shift in business to other countries as a result of the US ending the preferential economic treaty with HK can only be determined over a period of time and it is too early to gauge the impact on exports.
Based on current official estimates, it seems India is set to witness a third wave of infections in the short term. How is this expected to impact business and jobs?
Due to very honest efforts of the government at the state level, with active support from the ministry of commerce, manufacturing has been functional even during the second wave and export activities have been sustained. The industry is already on the path of recovery, with certain segments such as diamonds and diamond jewellery on a growth trajectory.
We are hopeful of government support in sustaining this as the export markets are already opened up and can witness pent-up demand across the US and the Middle East. With limited restrictions, trade and business are expected to be operational to fulfil the demands of the international markets and grow the economy.
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