Import, Export, Trade for MSMEs: India’s gems and jewellery sector is hit by a double whammy this year impacting its growth dramatically. The sector that grew 45-50 per cent in the financial year 2021-2022 (on a low base of FY 2020-2021) is likely to grow by only 1-3 per cent in the current fiscal in value terms, according to the CRISIL SME Tracker reported in Business Standard.
The rise in import duty to 12.5 per cent (an increase by 500 basis points) and the supply chain disruptions caused by the war in Russia and Ukraine are leading to a decrease in the quantum of exports.
According to the report, domestic demand, which makes up for 55-60 per cent of total sales by value in FY22, increased in Q1 of the current financial year, due to the low base. The growth narrative is likely to be subdued due to the hike in import duty. Domestic demand will also get impacted due to the rise in the gold price but it is likely to positively impact SMEs, especially in gems and jewellery clusters of Thrissur and Coimbatore that deal in plain gold and traditional jewellery.
The diamond cluster in Surat might also be impacted due to the supply chain disruptions and high base effect. Due to the invasion of Ukraine, the US and Europe have imposed sanctions on Russia which has impacted the import of diamonds in India and hence, is hitting the polishing industry. However, the recently signed India-UAE free trade agreement has led to the removal of the five per cent duty on gold jewellery boosting exports from India.