India is eyeing newer markets, like Japan, South Korea and key nations in Latin America such as Brazil, Argentina and Chile, to tackle the lukewarm demand from traditional buyers of India's gems and jewellery, a government official said.
The recent slowdown in India’s top export markets, including the US, European Union and Hong Kong has necessitated the need to diversify and scout for fresh markets as New Delhi looks to resuscitate demand for this crucial sector, the official said.
The choice of destinations depends on the appetite of these nations and the potential for more exports.
New Delhi is also banking on the India-Australia Economic Cooperation and Trade Agreement (ECTA) that came into force on December 29, 2022, to boost exports, on the back of the preferential zero duty market access to Australia for 100 percent of its tariff lines, benefiting the labour-intensive gems and jewellery sector.
What led to the fall?
Led by a decline in petroleum products, gems and jewellery and engineering goods, India's exports saw a nine-month low in July, registering a fall of 16 percent, following a lacklustre demand for Indian goods from major trading partners, including China and the US, government data released on August 14 showed.
Imports witnessed an equally steep fall last month, dropping 17 percent on year.
To arrest the impact of global headwinds, India is looking at a number of measures, including diversifying its export basket by scouting for newer markets as well as non-tariff barriers to push local manufacturing at the same time, Moneycontrol reported on August 14, citing a senior government official.
At present, countries like Japan, South Korea and Latin American nations cited above import either a minimal or no amount of gems and jewellery from India.
Also read: India devises strategy to boost exports in 2023
How bad does it mean for India?
The decline in outbound shipments of these products is worrying as a large part of India's micro, small and medium enterprises (MSMEs), which makes up almost 50 percent of the country’s overall exports, is involved in the making of gems and jewellery.
Though India's overall gems and jewellery exports for the first four months of 2023-24 fell 3.68 percent on year, a closer look at the data reveals a more dire picture.
In the first quarter of the current fiscal, outbound shipments to the US and Europe fell 28 percent and nearly 21 percent, respectively. Outbound shipments to Hong Kong, which clocks a massive 82.6 percent in terms of the share of gems and jewellery in overall exports from India to this region, contracted 35.11 percent in April-June, latest data show.
Overall gems and jewellery exports fell 25 percent during the first quarter of the current financial year, official data showed. The outlook is grim, with the Gems and Jewellery Export Promotion Council (GJEPC) predicting a decline of about 10-15 percent in overall exports for the current fiscal.
According to Dr A Sakthivel, President of the Federation of Indian Export Organisations (FIEO), though the decline in imports is a good sign for the country, it has also led to a fall in key export sectors like petroleum products, gems and jewellery, and organic and inorganic chemicals, among others.
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