Across the globe, imitation jewellery made in India has found popular acceptance as a fashion accessory. And with the government’s latest move to increase basic customs duty on imported imitation jewellery by 5% assuredly complementing benefits to exporters like 5% MEIS and up to 7% Drawback, export-manufacturing of this category is bound to grow in months to come.
Vanita Peter D'Souza | April 2016 Issue | The Dollar Business
Tired of repeating your regular pair of gold earrings to every wedding function? Looking for some fresh piece of jewellery [and within your budget!] every time you step out of your house? The answer might be hidden in a fashion store next door. With gold and diamond prices shooting through the roof, imitation or fashion jewellery is the choice of the hour. It’s fun to wear, comes with a wide range, within your budget, and of course, adds glitter to your fashion statement.
Even when it comes to business, imitation jewellery has surely got some dazzling future. The reason is simple. Imitation jewellery is gaining popularity across the globe and if you can measure the market pulse well, its exports can fetch you big moolah. According to RNCOS, a business consulting firm, the imitation jewellery market in India is expected to grow at a CAGR of about 20% during 2013-17. What’s more? India is also one of the fastest growing exporters of imitation jewellery in the world.
India is the world’s second-largest manufacturer of imitation jewellery after China and its eighth-largest exporter. If the government data is anything to go by, India’s exports of imitation jewellery bloated by almost 72% in FY2012 to $313.72 million from $181.64 million in FY2011, with majority of shipments going to US, UK, UAE and Iran. After touching a high of $337 million in FY2013, exports slipped to $283 million in FY2015. However, exports are once again picking up and India in the first nine months of the current fiscal has shipped imitation jewellery worth $205.90 million across the globe. While the drop in exports is being attributed to the global slowdown, Imitation Jewellery Manufacturing Association (IJMA), is hopeful that the exports will eventually pick up. “We are slowly recouping from this meltdown and we are pretty much sure that we would be able to recover quickly,” says Nagendra Mehta, Secretary, IJMA.
Those in the trade indicate that profit margins of 10% and above are still quite achievable. And then there are dedicated B2C e-commerce platforms that are creating a direct connect between Indian sellers and foreign buyers, making it possible for even micro-manufacturers to access export markets.
While the shine of India’s non-precious jewellery continues to attract customers from US, France, Germany, UK and the Middle East, demand for the same from our neighbour – Pakistan – has grown manifold over the last few years. However, many in the trade like Bhupesh Mahajan, a Delhi-based jewellery trader, are a little apprehensive while exporting to Pakistan. “There’s a constant fear trading with the neighbour without any trade pact. If any such agreement is signed in future, Pakistan can emerge as a top export market for Indian jewellery,” he tells The Dollar Business.
If Pakistan holds the potential to be the largest market for India, China is already a supply threat to the Indian imitation jewellery industry. Being the world’s top exporter in this category, China is a fierce competitor in the global market. In fact, China exported imitation jewellery worth $2.65 billion in CY2015, almost 10 times more than what India exported during the same year.
And not just our exports, China is also eating up India’s domestic fashion jewellery market with low-priced Chinese imports. In fact, 65% of the imitation jewellery imported into India is from China. It was only recently that the sector got an impetus as the Finance Minister Arun Jaitley, during the Union Budget 2016, hiked the Customs duty from 10% to 15% on imports of imitation jewellery. However, the domestic players feel that such measures would have a very limited impact on the sector as the importers often under-invoice their bills or resort to smuggling jewellery from China. The Imitation Jewellery Manufacturers Association (IJMA), welcomes the rate hike but expects more action from the government. “We have sent proposals to the government about the malpractices prevailing in the industry. We hope that the government will take necessary steps to restrict these malpractices,” says Mehta.
Even as the sector is truly living up to the spirits of ‘Make in India’, those in the trade have their own set of challenges and issues. Bhupesh Mahajan, Managing Director of Vogue Crafts, who procures brass (a base metal used for making imitation jewellery) from Moradabad a.k.a the ‘Brass City of India’ or from the lanes of Old Delhi, says it is not an easy job to purchase brass.
“The problem is, if we go to factories to procure brass we have to order in bulk. Storing brass in huge quantities might not be a good idea as it can depreciate. Stocking up is not viable. Ultimately we have to find small wholesalers or vendors in Old Delhi or Moradabad. But the catch here is that the quality of brass procured from these people cannot be guaranteed. We have go with hit and trial approach to test it and a lot of time gets wasted in the process,” he expresses his concern.
Finding skilled labour is yet another challenge that manufacturers of imitation jewellery face. One prime reason behind scarce labour is that artisans work in clusters and are not paid well. The skilled craftsmen move out of the industry in search of lucrative options.
However, both trade figures and industry sources indicate that there is a demand for Indian imitation jewellery in US and Europe as well in Pakistan and the Middle East. “In terms of the size of the market, if you consider US, imitation jewellery constitutes 93% of the US jewellery market,” Archana Garodia Gupta, Owner Touchstone Gems & Jewellery India (P) Ltd., tells The Dollar Business. This in itself speaks volume about the exports opportunities that Indian imitation jewellery can tap.
Given the current market trend, the Indian imitation jewellery industry has enough potential to grow. All it needs is the government support to lure back its skilled artisans into the trade and, of course, some right marketing moves. While the global slowdown may affect the speed of recovery, it cannot affect the industry’s trade potential.
In fact, just a few creative ideas can churn an export-manufacturer double-digit (easily!) high profits. Now that’s some dazzle!
TDB: Give us a gist of the various types of imitation jewellery available in the market? What kind of raw materials go into the making of these products?
Bhupesh Mahajan (BM): The horizon of the imitation jewellery is vast and consists of a huge range. You can fit in a lot of raw materials – beads, metal, imitation stones, CZ crystals, etc. We are mostly into 14 and 18k gold jewellery, sterling silver jewellery, semi-precious jewellery, beads and metal jewellery. We majorly use brass as other metal alloys might be unsafe for certain skin types. Since we are primarily into exports, we have to follow safe practices as per the norms accepted internationally. There are strict norms in the international market with regards to nickel content in jewellery pieces, hence we always abide by those norms.
TDB: Imitation jewellery export is trending downwards. What do you think is the reason behind this?
BM: There are two reasons. Firstly, markets, especially in the fashion segments, change according to the trends. Something which is in fashion today may not be in fashion tomorrow and then it may come back to fashion after sometime. Most of our manufacturers do not study the trends and change accordingly. Secondly, the slowdown in global economy is also a reason why the exports are not doing well.
TDB: In recent Union Budget, FM Arun Jaitley increased the Customs duty on imitation jewellery imports. Do you think domestic players can benefit from it?
BM: Eventually, they would. China has had a monopoly in the imitational jewellery market. Duties were not only low, but a lot of traders also used to smuggle the goods too from China and neighbouring countries. People selling this substandard Chinese jewellery make 5-6 times more margins than us.
TDB: Tells us about your export markets.
BM: We export to US, UK, Europe and Australia. We see the Middle East as an upcoming market. This zone has always been into precious gems and jewellery, but now there is a growing craze of imitation jewellery. Pakistan is also a potential market. But the only problem between India and Pakistan is there are hardly any trade agreements and, hence, there is always a level of apprehension.
TDB: Have your buyers ever complained about the quality of Indian imitation jewellery?
BM: Some exporters make false commitments to clients just to beat the competition. When the order is due for dispatch, manufacturers start giving excuses and seek extensions or eventually deliver defective goods to meet the timelines. At times, if the order is ready there is no quality check on it and, eventually, these buyers stop giving business. This is why we have a strict in house quality check process to make sure only the promised quality is delivered.
TDB: There has been a slowdown in the global economy. Have imitation jewellery exports been affected?
Nagendra Mehta (NM): As far as the global meltdown is concerned, it has affected all business areas and imitation jewellery is not an exception. Exports from the sector has fallen, and there is a lower demand in the local market too. However, we are very optimistic about Indian traditional jewellery as it is very popular and not produced by any other country in the world. Talking about potential, it’s not just Asia that is a potential market, imitation jewellery has a very promising market in emerging countries like Brazil and Argentina. However, the biggest buyers are Saudi Arabia, Dubai [UAE], African countries and Malaysia. People of Asian origin living in UK and US also demand this kind of jewellery. The global scenario has been in a very bad shape, but the imitation jewellery sector is doing better than other industries. Indian traditional jewellery is unique as it cannot be produced by any other country.
If we take China, for example, there are buyers who buy certain imitation jewellery from them, but then again they cannot provide the traditional Indian jewellery which is very famous for its skilled artisans and delicate craftsmanship. We are slowly recouping from this meltdown and we are pretty much sure that we would be able to recover quickly.
TDB: The Finance Minister in the Union Budget has proposed to increase the Customs duty on imported imitation jewellery. Do you think it would benefit the sector?
NM: We had proposed it to the government saying that high Customs duty should be levied and Excise duty should be exempted. The government has agreed to our demand to increase the Customs duty on this product imported from any country. However the 5% increase is not going to have much impact on the industry as such. The reason being that there are a lot of malpractices happening in the industry. For example, when the importers import from China they only prepare a 10% invoice for the same. So the invoice is highly undervalued and the 5% custom duty will not have much impact.
TDB: India’s traditional jewellery has always been highly valued in several markets across the globe. How did China emerge as a market leader?
NM: There have been very rapid changes. People used to wear intricate jewellery a while back. But now the trend has changed. Nowadays, the jewellery normally worn by youngsters are simple chains or small studs or thin bangles. The demand for this is more and China is very strong in this particular field. Women in the age group of 25-35 years are the largest consumers of this kind of jewellery. China has captured this particular market, where jewellery can be mass produced. The machinery used are properly automated which can cater to the demand of a large number of consumers. They have huge plants for production. In India we still do not have proper machinery. Our artisans are still not exposed to the technology.
Chinese jewellery is cheaper for two reasons, one being automation and the other being the support from their government. They are given land at very cheap rates and their duty structure is favourable to the industry. In fact, China has captured almost 30% of the market in India itself. We are worried about this.
TDB: What are the steps taken by the association to boost exports of imitation jewellery?
NM: We have demanded that incentives on exports should be increased but there is no subsidy or support from the government side yet. We have asked the government to allot us land in Mumbai for a jewellery park. All our manufacturers can set up their business and buyers from around the world would have a reliable source for getting the product from here rather than being tricked by agents. In China there is a huge market with around 8,000 shops where you can just walk in, finalise the design, give the order and come back. We are hoping for the same to happen in Mumbai. Also we are educating manufacturers about exports.
TDB: How is the association addressing the issue of acquiring skilled workers?
NM: There is an acute crunch of labour in the market. The government schemes have actually made people lazy. They get all the amenities at a much cheaper price and the various scheme have all made it difficult to get labour. So we have selected a tribal area and we have signed a memorandum of understanding (MoU) with the National Skill Development Council to train these people. We will give the materials and ask them to produce jewellery. This way we can get more skilled workers and they can work from their place, eliminating the issue of leaving their native place. If the scheme works properly, then we will be able to get around 4,000 skilled workers.
TDB: Tell us about the latest trends in the imitation jewellery sector.
NM: Our social fabric is very diverse and we need to manufacture jewellery as per the requirements of various cultures. Talking about the latest trends, CZ Jewellery is very much in trend. It is also called American diamond where the pieces are intricately crafted.
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