India turns to Bollywood to help lift jewelry exports
International Herald Tribune
MUMBAI Indian jewelers have recruited the former Miss World Aishwarya Rai and the Bollywood film star Amitabh Bachchan in a battle to overtake Italy and Belgium as the world’s biggest jewelry exporters.
India plans to double jewelry exports in five years to $10 billion, using incentives such as low-tax export zones, said G. Pillai, special secretary at the Commerce Ministry, who heads a team trying to increase the nation’s share of the $90 billion export market
India, the largest market for jewelry, is stepping up overseas sales after demand for gold pushed prices to a 26- year high last month. Indian jewelers are counting on the cost advantage of its 1.3 million gem workers and the lure of Mumbai’s movie stars to outsell the diamond industry of Antwerp and the goldsmiths of Italy.
“Several companies have appointed Bollywood stars as their brand ambassadors, as these faces have glamour appeal,” said Si Kannan, an analyst at Sharekhan Commodities in Mumbai. “If taxes are lowered and rules are made simpler, then India can definitely become a jewelry hub.”
Global demand for jewelry is expected to rise 9.1 percent to 2,987 metric tons in 2006, Merrill Lynch said.
De Beers, which sells 60 percent of the world’s diamonds, employs Rai, the star of “The Mistress of Spices” and “Bride and Prejudice” to sell its Indian- made Nakshatra brand jewelry.
Vijaydimon Group of Belgium and India’s Asmi Jewelry use the Bollywood stars Bipasha Basu and Kajol to wear their jewelry in public.
Jewelry fabrication in India has grown 10 percent annually in the past decade, according to a study by the Indo-Italian Chambers of Commerce & Industry. Exports are worth about $16.6 billion and account for 20 percent of export revenue.
Still, the Gem & Jewelry Export Promotion Council, which represents more than 7,000 jewelers, said the government needs to adopt Italy’s simpler 1 percent turnover tax. Currently, jewelers in India pay a 1 percent value-added tax.
The council also wants Pillai’s committee to recommend lowering imposts on gold imports to 5 rupees per 10 grams from 10 rupees per 10 grams.
Shares in Rajesh Exports, India’s largest exporter of jewelry, have risen 43 percent this year to 226 rupees – seven times the gain in the benchmark Bombay Stock Exchange Sensitive Index, in anticipation of the tax changes.
“If jewelers get the right taxes, they will be able to sell at globally competitive prices,” said Ng Cheng Thye, head of the precious metals markets desk at Standard Bank Asia in Singapore.
Lower taxes may also attract Italian and Belgian jewelers to India. Italy’s industry only employs 2,500 people but generates $13 billion in sales. Belgium exports $8.9 billion in diamonds and employs 30,000 people to process them.
“With the right kind of tax incentives, several jewelry companies from Italy and diamond merchants from Antwerp may start operations in India,” Bakul Mehta, the chairman of the jewelry council said.
Still, some analysts, including Vineet Kumar Rai, say the tax changes may not be enough.
“The paperwork in India for exporters to get tax breaks on gold imported is just too cumbersome,” said Rai, assistant vice president at Man Financial Commodities India. “Import duties have to be abolished.”
Jewelers will also have to design for Western tastes in necklaces, earrings and bracelets, rather than the ornate designs favored at Indian weddings, said Sanjeev Agarwal, managing director of the India office of the World Gold Council.
Rajesh Nair, manager at Dubai Gold & Jewelry Group, said other countries compete with India by organizing shopping festivals and offering discounts to lure customers.
“We are the world’s best price market and there is no taxation,” said Nair of the group, which represents 90 percent of the jewelers in Dubai.
One area where India has been gaining influence is in the diamond trade. Diamonds account for more than 70 percent of India’s gem exports. Shipments of cut and polished diamonds grew to $11.8 billion in the year ended March, up 6 percent from a year ago, according to the gem and jewelry council.
Indian businesses and citizens account for 60 percent of Antwerp’s $36 billion rough and polished diamond business.
“Jewelry making is our strength and, finally, we as a country have woken to the fact,” Rajesh Mehta, the chairman of Rajesh Exports, said from Bangalore.
