"India's jewellery exports are stable and looking positive," said Mahesh Rao, convenor of GJEPC Gold Jewellery Panel. This statement appears to be at odds with the figures released for the first quarter of fiscal 2005-06. Exports for this period (April-June 2005) are US$ 383.55 mn which is almost 20 per cent lower than figures for the corresponding months of the previous year.

There are three reasons for this anomaly, says Rao. The overriding one is that the government has abolished the Target Plus scheme under which exporters of medallions and coins were registering their exports in the jewellery category. This was a huge amount which could have constituted almost one-third of the category's exports. The removal of this scheme has the support of GJEPC which recommended that jewellery exports should be kept separate.

Two further reasons that may have had an impact on the export figures are put forward by Rao. April, the first month in the fiscal year, saw consternation over the imposition of one per cent VAT on jewellery manufacturing units in SEEPZ, (specially demarcated tax-free zone in Mumbai for 100 per cent export oriented units which houses mainly jewellery manufacturing companies). Although the tax is refundable, exporters anticipate unnecessary waste of time and blockage of funds.

Moreover, there has been a change in value-added norms. Whereas, previously only the gold content was considered as the base, it is now calculated on the entire piece of jewellery - including diamond and precious stone content. This has given a jolt to exporters, who will find it tough to adhere to the 15 per cent norm, especially in the current scenario in which global markets are becoming increasingly price sensitive.

Overall, the Indian export industry's first quarter results at US$ 3,286.80 mn show a healthy 14.70 per cent growth. Counterbalancing the jewellery figures, exports of polished diamonds were up by 20 per cent.

July and August, however, may be slower than anticipated. Once the vacations are over in mid-June, it is generally a busy season as polishing machines start whirring again. But a shortage of rough and resistance to higher prices, has resulted in a slow start-up. In addition to this, the weather also played truant. Surat, where the bulk of polishing takes place, and Mumbai, were crippled due to heavy rains and flooding which affected office attendance, production and movement of goods. IIJS 2005, which concluded on July 18 in Mumbai, also kept exporters occupied.

However, there is a sense of optimism with the announcement of four new Indian DTC sightholders and many exporters are confident of growth after a good response at JCK and IIJS.

The Indian response to the anti-money laundering (AML) rules, to be implemented in the US next year, has been insouciant. Some agree that there will be an impact on their businesses. Dwarka Gems sees increased expenses in the form of employment and consultancy charges involved in the implementation of AML rules. Alok Sankia of Valentine agrees that there should be greater dialogue between US authorities and the exporting countries so that legitimate exporters do not face difficulties. Many others are not aware of the actual ramifications and so reactions may be more pronounced when the rules do come into effect.

	Indian Diamond Exports & Imports
	January-June 2005		January-June 2004
	US $ mn	Carats mn	US $ mn	Carats mn
Polished Exports	6294.27	25.69	4995.66	20.70
Rough Imports	4306.53	99.07	3930.46	102.35
* All figures are provisional