Indian jewellers, long spoiled by access to the world's largest group of gold consumers, must seek expansion overseas after the authorities tied gold imports to exports. But the path will not be easy.
India has hiked import duty for gold, its biggest non-essential import, this year from 4 percent to 10 percent -- 15 percent in the case of jewellery -- in a bid to cut imports and close its record current account deficit.
It has also linked imports to export volumes -- at least 20 percent of bullion imported must now be exported. Pressure on the industry to increase gold exports is helping to push Indian jewellers towards overseas markets.
"Just to secure domestic supplies, (jewellers) have to export," Mayank Khemka, managing director of jewellery wholesaler Khemka Group, said on the sidelines of the London Bullion Market Association conference in Rome. For his company, Dubai, Hong Kong and Singapore will be the primary markets to target, he said.
C.K. Venkataraman, chief executive of the jewellery division of Titan Company Ltd, told Reuters at the conference that his company was looking at building up its exports as a part of its long-term growth strategy, targeting in particular Indian consumers living overseas.
"I don't think India has ever looked globally for gold jewellery sales," he said. "Over the next decade, we should expect that to change."
But for all jewellers may want to sell overseas, the path to boosting exports is unlikely to be smooth. Exports have dropped 60 percent between April and August this year as confusion over the new regulations, tough competition from other manufacturers like Thailand, and slack demand from major consumer the United States led to a virtual suspension of imports into India.
The country is historically the world's biggest consumer of gold, with imports hitting 850 tonnes last year. Only 8 percent of that was exported.
Indian jewellers face tough competition from lower-cost producers, and will have to sharpen their design and manufacturing skills to move away from the heavy, yellow-gold pieces popular in India but less marketable overseas.
"Our machine-made products have been facing huge competition from Thailand, Malaysia and Indonesia, and since we