A Golden Opportunity for India's Jewelers
It's not just India's drugmakers that are taking export lessons from the country's software industry. In the Bombay suburb of Andheri, home to the city's diamond and jewelry free-trade zone, 80 manufacturers of earrings, wedding bands, necklaces, and bracelets are gearing up for a boom in sales abroad. The reason? After years of lobbying by New Delhi, the U.S. has lifted its 5.7% tariff on finished jewelry from India. While India has long been a major processor of cut diamonds -- the country exported nearly $8 billion worth in 2002 -- makers of finished jewelry are polishing up their operations to take advantage of the tariff reduction. The drop in duties could double India's jewelry exports to the U.S. by 2005, to $1.2 billion, says Sanjay Kothari, president of the Gem & Jewelry Export Promotion Council.
Things are changing fast in Andheri. As recently as a year ago, the 15,000 factory hands spent their days lined up at long tables working with tiny gems and small, inexpensive settings, which required little skill and didn't add much profit to the factory owners' bottom line. Now, they're working with larger stones, creating more complex settings, using newer equipment -- and pumping up the industry's profits. Intergold India Ltd., whose $100 million in sales make it India's largest exporter of diamonds and jewelry, has for years placed stones in settings at factories in Mexico and New York, where labor costs are higher but where there are no tariff barriers. Now, Bombay-based Intergold plans to move 40% of its production to India within two years, saving the company up to $1 million annually. "Finally, it has become economical to do it out of India," says Amar Kothari, Intergold's sales director in Bombay.
India's 2,500 diamond exporters are making big plans to expand into finished jewelry, too. On news of the tariff removal in August, diamond cutter Suraj Diamonds & Jewellery upped its sales projections for this year by 50%, to $40 million. And Shishir Nevatia of Bombay's Sunjewel Ltd., a pioneer of the jewelry exporting business in India, invested $3 million in a new, 1,000-square-meter factory in Andheri in anticipation of a 30% increase in sales this year thanks to the new tariff regime. "This is a great opportunity for India to grow its wallet," says Biju Patnaik, who handles loans to India's jewelry companies for Dutch bank ABN Amro.
The shift should help Indian jewelers fend off growing competition. Other big jewelry-exporting nations, including Thailand, already enjoy tariff-free exports to the U.S. And many Indian jewelers fear that China will become a factor. From 1997 to 2001, Chinese jewelry exports to the U.S. doubled to $712 million, according to the U.S. Commerce Dept. If the current U.S. tariff of up to 6.6% on Chinese jewelry drops because of the country's membership in the World Trade Organization, exports from China could soar. For now, though, the Indian industry's prospects are glittering like never before.
By Manjeet Kripalani in Bombay