Jewellery as a potential source of export earning in India

Scientific Essay , 2019 , 15 Pages

Economics - Foreign Trade Theory, Trade Policy

In this work the author focuses on the prospects of gems and jewellery as a potential source of export earnings in India and the problems and constraints it may encounter.

The assimilation of the Indian economy through the twin channels of trade and capital flows has been accelerated in the wake of globalization. Unrestricted international trade maximises the flow of goods and services, accumulates income, builds capital and supplies required inputs for industrialization among the participating countries. Moreover, such trade results in facilitating more diffusion of knowledge, enhances efficiency of inputs which transforms into manufactured outputs and consequently paves the way for economic development.

Trade and development: a study on export performance of gems and jewellery in India

Dr. S. N. Tripathy¹

Abstract

The assimilation of the Indian economy through the twin channels of trade and capital flows has been accelerated in the wake of globalization. Unrestricted international trade maximises the flow of goods and services, accumulates income, builds capital, and supplies required inputs for industrialization among the participating countries. Moreover, such trade results in facilitating more diffusion of knowledge, enhances efficiency of inputs which transforms into manufactured outputs consequently paving the way to economic development.

In the light of the above, among the basket of export items the case gems & jewellery is purposively selected for the present write up. Hence, an attempt has been made in this paper with the help of secondary sources of data to focus on the prospects of gems & jewellery as a potential source of export earning in India and the problems and constraints it encountered.

Key words: Trade and development, Gems & jewellery, Global market, Export destinations

Backdrop:

The integration of the Indian economy through the twin channels of trade and capital flows has been accelerated in the wake of globalization resulting in increased economic and market integration at the international level. Globalization facilitated uninterrupted global movement of capital, goods and services by removing national barriers, with the IMF, World Bank and WTO as its key players. Globalization empowered the countries to be knowledge-driven and market-driven so as to become globally competitive.

International trade and its role as a promoter of economic development; have gained momentum especially at the advent of globalization. The subsequent adherence of trade liberalization policies in India impacted considerably on economic development. There are divergent views pertaining to international trade and economic development among the participating countries.

Some economists are of the opinion that international trade has brought about unfavourable changes in the economic sphere of the developing countries through the siphoning off advantages accruing from trade to developed countries.

The onslaught of globalization through liberalization of trade policies and reduction of tariffs adversely affects the industrialization process and endangers the infant industries of the less developed countries. Other allied industries because of globalization and liberalization, which used to operate under government protection, experience it challenging to compete with their global counterparts.

On the contrary, the protagonist of international trade, both classical and neo-classical economists argue in favour of free trade policy. To them, developing countries, adhering to trade liberalization policies, have experienced all the favourable effects of globalization in the international trade regime. Among the developing countries some of the objectives of liberalizing, globalizing through opening up the economy to free trade has been to modify productive specialization, establishing harmonious foreign trade relations in order to increase the relative share in production and trade of tradable goods-particularly those produced with labour-intensive technologies-, and thus finally improve the efficiency of the economy (World Bank, 1987).

There is no denying that international trade coupled with flexible trade policies, favourable macroeconomic scenario and political stability; is beneficial for the countries involved in trade, through the efficient utilization of available resources, and opening up the opportunities of global market through the availability of latest technology to the entrepreneurs of the developing countries.

Unrestricted international trade maximises the flow of goods and services, accumulates income, builds capital, and supplies required inputs for industrialization among the participating countries. Increased exports improve balance of payments position and generate foreign exchange to the participating countries there by improving their economic condition.

Moreover, such trade results in facilitating more diffusion of knowledge, enhances efficiency of inputs which transforms into manufactured outputs consequently paving the way to economic development. In any of these cases, international trade can be designated as an engine of growth (Hogendorn 1996, Kindleberger 1962, cyper and Dietz, 1997).

India’s foreign Trade:

Before we delve deep into the growth of gems and jewellery sector in India; its performance over the years with regard to foreign exchange earnings, employment generation; and the constraints which the gems and jewellery sector encountered; let us briefly highlight on India’s export in the recent years.

Table-1: India’s foreign Trade for April –March 2017-18

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As per latest available data from the ministry of commerce, Government of India, Exports from India increased 3.93 percent compared to 2018-19 increased to USD 29.99 billion in May 2019, due to increases in sales of electronic goods (50.97 percent); organic & inorganic chemicals (20.64 percent); Readymade garments (RMG) of all textiles (14.15 percent); drugs & pharmaceuticals (10.98 percent); and engineering goods (4.40 percent). Exports in India averaged 5580.54 USD Million from 1957 until 2019, reaching an all-time high of 32550 USD Million in March of 2019 .

India’s Principal Exports:

Table-2: Percentage share in Total Exports in 2014-15 and 2017-18

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Source: Centre for Monitoring Indian Economy, Economic Outlook

Table-1 depicts the position of India’s foreign trade with regard to its exports, imports and trade balance 2017-18. It is revealed that India’s imports have exceeded its export position and therefore, there is deficit or trade imbalance.

Table-2 depicts the position of India’s principal items of exports which comprises of engineering goods, Petroleum & crude products, gems & jewellery, agricultural & allied products, chemicals & related products, textiles including readymade garments. A comparative picture of percentage share of principal items of exports to total exports in 2014-15 and 2017-18 in India is presented in table-2. The table reveals that there has been deterioration of exports in India in financial year 2017-18 as compared to the year 2014-15 except the export of engineering goods.

As per the latest data available from the ministry of commerce in January 2019, among the basket of items exported from India the principal items of exports demonstrate the items like engineering goods (1.07%), gems & jewellery (6.67%), organic & inorganic chemicals (15.56%), drugs and pharmaceuticals (15.2%) and Readymade garments (RMG) of all textiles (9.33%).

It is relevant to present the latest data available from the ministry of commerce, which reveals that India exported mostly: pearls, precious and semi-precious stones and jewellery (16 percent of total shipments); mineral fuels, oils and waxes and bituminous substances (12 percent); vehicles, parts and accessories (5 percent); nuclear reactors, boilers, machinery and mechanical appliances (5 percent); pharmaceutical products (5 percent); and organic chemicals (4 percent).

India’s main export partners are: United States (15 percent of the total exports), United Arab Emirates (11 percent), Hong Kong (5 percent), China (4 percent), Singapore (4 percent) and United Kingdom (3 percent).

In the above perspectives, let us examine the role of India’s gems and jewellery sector.

Gems & jewellery export in India:

Since the dawn of civilization gems and jewellery ornaments have occupied a central place and an integral part of the Indian culture. Gems and jewellery with its artistic designs, glamour and attractions have been considered as a significant component either far adorning or beautification of body and investment purposes. In India gems and jewellery have great fascination among the people and as such gems and jewellery has a unique place in all rituals, marriage ceremonies and festivals in India.

The modus operandi of gems and jewellery sector manufacturing, necessities the processes of sourcing, processing, manufacturing and selling of precious metals and gemstones such as gold, silver, diamond, diamond, ruby, sapphire, among others As a leading foreign exchange earner gems and jewellery sector in India has attained global popularity due to their artistic design, craftsmanship prepared by talented artisans.

Countries like India, Italy, China, Thailand and USA dominates the jewellery manufacturing in the global market which is over $100 billion (Sharma and Sharma, 2013). Moreover, Hong Kong is renowned for jewellery set with precious stones, in particular jewellery mounted with diamond in 14K and 18K gold designed and prepared with high quality craftsmanship and skill labour of artisans.

Review of literature:

Review of literature provides an insight to the studies made on the present research so as to find out the gap that exists in the realm of research and finally unfolds the rationale for the present research.

Das Keshab, (2007) in his research write up has unfolded that participation in the global production network (GPNs) as an efficient strategy has lead the Indian gems and jewellery industry linked to the global market dominating the diamond processing trade. Lamentably, the informal nature of the production and labour process has cared the least for the labour, environmental and even the social standards.

Export Facilitation Measures by the Ministry of Commerce and Industry (2009), reveals that the gems and jewellery sector got a special boost from the Ministry of Commerce.

Gems and jewellery, diamonds and precious metals were given a special boost by the Ministry of Commerce and Industry, the Export Promotion Council for Gems and Jewellery and Star Trading Houses (in the gems and jewellery sector). Foreign Trade Policy 2009-2014: Foreign Trade Policy has identified that the gems and jewellery sector in India has immense potentiality for its expansion and employment generation (http://www.dnb.co.in/IndianGemsandJewellerySector/default.asp)

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¹ Former Professor of Economics, Gokhale Institute of Politics and Economics, Pune, currently at 4th Bijoy Bihar, Berhampur, Ganjam, Odisha-760004

• Author: Professor S. N. Tripathy (Author)
• Publication Year: 2019
• Pages: 15
• Catalog Number: V496186
• ISBN (eBook): 9783346016676
• ISBN (Book): 9783346016683
• Language: English
• Tags: jewellery, india