Rupee Problem: Tough Going For Import-Dependent Jewellery Exports.

NEW DELHI: Weakening of rupee is a good news for most of the exporters, excepting those engaged in the exports of gems and jewellery which have very high import contents of gold and rough diamonds.

With consignments of USD 33.54 billion, gems and jewellery was India's third-largest export item in 2010-11.

During April-August period this fiscal, gems and jewellery exports grew by an annual 16 per cent to USD 18.12 billion.

"The net value addition (in gems and jewellery) is 25-30 per cent," Gems and jewellery giant Gitanjali Group Chairman and Managing Director Mehul Choksi said adding "rupee situation is very volatile and not really comfortable."

As rupee depreciation helps improve net realisation on export remittances, it works in the reverse direction for imports.

Since, the gems and jewellery exports are heavily dependent on import of precious metals like gold and rough diamonds, the advantage on export is offset by expensive imports.

The Indian currency has lost nine per cent of its value against the US dollar since the beginning of this month.

In the process, the trade margins have been hit. "There is high pressure on our margins. About two per cent of the total profits have already been impacted," P P Jewellers Director Rahul Gupta said.

The labour-intensive jewellery sector mainly imports gold and rough diamonds from countries like Russia, Brazil, Namibia and Zimbabwe.

"We extensively import raw materials. All benefits accruing from exports get offset with costly imports," Gems and Jewellery Export Promotion Council Regional Director-North Kewal K Duggal said.

Besides pressure, there is a need for continuous supply of raw material is required to take jewellery exports to USD 70 billion by 2013-14 from USD 33.54 billion in last fiscal.

Source : economictimes.indiatimes.com