How Union Budget can be a catalyst for growth in the diamond sector

The gems and jewellery industry needs a boost from the government. AP

The gem and jewellery industry, a key contributor to India’s exports and employment, is eagerly awaiting the Union Budget 2024-25, which will be presented by Finance Minister Nirmala Sitharaman on 1 February, 2024. The industry anticipates the announcement of several initiatives likely to boost the growth and competitiveness of the diamond sector, both in the domestic and global markets.

Some eagerly anticipated initiatives in the upcoming budget that hold immense potential to benefit the diamond industry and catalyse positive transformations within the sector, if implemented, are as follows:

Reduced import duty: A reduction in import duty on cut and polished diamonds and coloured gemstones from the current 7.5 per cent to 2.5 per cent would substantially lower the cost of raw materials, leading to increased competitiveness for businesses engaged in the processing and manufacturing of gemstones.

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Extended Interest Equalization Scheme: The extension of the interest equalization scheme which is specifically designed to provide relief to MSME exporters within the diamond industry, is anticipated. This extension is eagerly sought as it holds the promise of alleviating liquidity challenges faced by these enterprises, ensuring their sustained contribution to the sector’s growth.

Funding for Common Facility Centre: The proposed allocation of funds towards the establishment of a common facility centre in Surat for diamond polishing and certification would be a significant step towards enhancing the quality and credibility of Indian diamonds in the global market, and would fortify the industry’s commitment to maintaining high standards in diamond processing and certification.

Digital Transactions and E-commerce Promotion: Initiatives to promote digital transactions and e-commerce within the diamond trade is expected to bring about increased transparency in the supply chain and reduce dependence on cash transactions. This is seen as a forward-looking move that aligns with global trends, bringing about efficiency and security in trade practices.

Recent recommendations from The Gem and Jewellery Export Promotion Council (GJEPC) to the Government for the upcoming budget 2024 with respect to the diamond industry also evoke excitement. These recommendations, aiming to boost the growth of the sector in India are:

Sale of rough diamonds in Special Notified Zones (SNZs): GJEPC has urged the Government to allow the sale of rough diamonds in SNZs, as this would enable direct sales from foreign mining companies to Indian manufacturers, avoiding tax uncertainties and the 2% Equalisation Levy on online auction sales of rough diamonds.

Facilitate rough diamond broking and trading companies at SNZs: The GJEPC has requested the Government to permit globally recognized diamond broking/trading houses to operate from SNZs to ensure India’s access to diamonds from smaller miners, which account for 35% of global mining production.

Introduction of Diamond Imprest License and reduction in import duty on cut and polished diamonds to 2.5 per cent: GJEPC proposes the reintroduction of the Diamond Imprest Licence or a reduction in import duty on cut and polished diamonds from 5 per cent to 2.5 per cent.

Going forward, the market will continue to value natural diamonds as global giant DeBeers looks to cut prices to revive sales. The demand for Lab-grown diamonds is expected to grow manifold during 2024, with tougher competition from India to other major Lab-grown diamond-producing countries. This growing demand for Lab-grown diamonds in both domestic and international markets will not only cushion the blow of export decline but also offer an opportunity for the industry to grow and improve.

As the industry awaits the unveiling of the Union Budget 2024-2025, it remains optimistic about the potential positive impact. The diamond sector is seeking initiatives that boost consumer confidence and drive demand for both natural and lab-grown diamonds, positioning India as a key player in the global market.

Ankit Singh Kimtee is Founder & CEO, DiamondXE and Deepali Vijay Jain is Founder & Chairperson, DiamondXE. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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