The gem and jewellery industry plans to tap alternative markets in West Asia, the UK and Europe more aggressively with the US giving effect to the unsustainable 50 per cent import duty on imports from India.
The industry, which has already been reeling under global economic slowdown and geopolitical tensions, has also sought government support to intensify promotions in select countries to display their products and attract fresh orders, said industry sources.
A few exporters are planning to tap the US market through their subsidiaries in other countries such as the UAE though it will not be cost-effective as the margins in this industry is very thin, they said. However, these measures will have little impact given the fact that the US is the second-largest market for Indian gem and jewellery exporters.
Last fiscal, the industry exported $10 billion worth of goods to the US and accounted for nearly one-third of India’s total gems and jewellery exports of $30 billion.
Namita Kothari, Founder at Akoirah by Augmont said relocating manufacturing to the UAE or Mexico to bypass the higher US duties presents both opportunities and challenges.
The UAE, with its 10 per cent duty, offers a potential escape route, allowing manufacturers to continue serving the US market via re-exports. However, such a shift would come with substantial operational and compliance challenges—including higher production and logistics costs, regulatory hurdles, and strain on supply chains, he said.
Additionally, it could require significant upfront investment in new facilities and compliance systems. While it offers a viable alternative, such a transition is far from straightforward and requires careful consideration of the long-term costs and benefits, he added.
The sector is also hoping that the festival season ahead will spur domestic demand and mitigate some of the hit in demand due to the stiff US tariffs.
In a bid to ease the burden, the Central government has revised the duty drawback rates on gold, silver and platinum jewellery. As per a Department of Revenue notification, the duty drawback on silver jewellery has been increased from ₹335.50 to ₹466.76 per 10 grams, while the rate for gold and platinum jewellery has been raised from ₹4,468.10 to ₹5,234 per 10 grams.
More support sought
However, the industry feels the need for more support from the government to sustain exports and retain jobs. The duty drawback will be of no use if the exports are going to plunge, said an exporter.
Duty drawback rebates the incidence of Customs and Central Excise duties, chargeable on imported and excisable material respectively when used as inputs for goods to be exported.
The industry’s dependency on the US market is very high as about 80-85 per cent of exports from Mumbai SEEPZ SEZ, and half of cut and polished diamond exports are directed to that country, he said.
The setback for India can become an advantage for competing manufacturing hubs such as Turkey, Vietnam and Thailand that enjoy significantly lower tariffs of 15 per cent, 20 per cent and 19 per cent.
The Gem and Jewellery Export Promotion Council (GJEPC) has appealed for policy reforms and extensive support to aid the industry in these extraordinarily challenging times.
The industry body has sought deferment of interest on Working Capital Facilities for six months till January. Allow job work at SEZ units to utilise their machinery and engage their labour for manufacture and supply of jewellery in the domestic tariff area (DTA) which can be a saviour during this crisis.