India’s diamond and jewelry are up in arms , following an announcement by the country’s finance minister, Arun Jaitley, that it was raising import duties on polished diamonds, semi-processed diamonds, polished colored gemstones and laboratory-grown stones from 5 percent to 7 percent, and on jewelry and jewelry components from 15 percent to 20 percent.
The jewelry and gemstone trade were not the only business sectors to be affected, with the government raising import tariffs on 18 different products, among them air-conditioners, refrigerators, washing machines, footwear, furniture fittings, tableware and aviation turbine fuel. The imports concerned in the previous financial year that ended on March 31 equaled about $11.8 billion.
The move comes as part of an effort to rein in the country’s current account deficit and to shore up the Indian rupee, which has fallen in value precipitously against the U.S. dollar. The import duties are expected to add an additional $551 million in government revenues.
The latest measures are scheduled to come into effect on Thursday, October 4, the finance ministry said in its announcement. “The central government has taken tariff measures, by way of increase in the basic customs duty, to curb import of certain imported items,” it stated, noting that prices of all affected goods are expected to rise, dampening demand, lowering imports and helping local manufacturers.
CONCERN IN THE DIAMOND SECTOR
But the diamond and jewelry sector were concerned that the government decision is likely to lead to business shifting to other diamond centers. In statement released after the government announcement, Pramod Agarwal, Chairman of the Gem & Jewelry Export Promotion Council (GJEPC) said that the raise in import duties would impact all aspects of the diamond and jewelry trade in India and impact “a large part of employment in the sector.”
“Other global trading centres such as New York, Dubai and Israel would be at an advantage and the import duty hike could encourage malpractices in India. We at the GJEPC are constantly working with the government to initiate measures favorable for the growth of exports, and we are hopeful that rupee stability in future would bring relief to the trade,” Mr. Agarwal stated.
The stakes are very high. After crude oil and petroleum products, the export and import of gold, precious metals, precious stones, gems and jewelry accounts for the largest portion of India’s global trade. The industry currently contributes about 7 percent of the country’s GDP.