Indian Diamond Exports Fall 17.3% As Measures to Curb ‘Round-Tripping’ BiteApril 19, 12
This in turn led to a 0.36 percent reduction in the country’s total gem and jewelry exports. The figures indicate that the Indian government’s measures to curb circular trading or so-called “round-tripping” have been successful.
When compared with the previous fiscal year, Indian polished diamond exports dropped by nearly $5 billion. Cut and polished diamond exports in fiscal 2011-12 stood at $23.33 billion as against 28.22 billion in 2010-11.
“We are happy that in keeping with the government objective of reducing the trade deficit, imports of cut and polished diamonds have dipped after the introduction of a 2 percent import duty in mid-January 2012," said Rajiv Jain, Chairman of the Gem & Jewellery Export Promotion Council (GJEPC).
"However, an increase in the import figures of rough diamonds indicates the stable growth of the trade at the manufacturing level and a growth in exports.”
Indian rough diamond imports have climbed to $15.13 billion compared to $11.98 billion in the previous fiscal year. Most of the increase reflects soaring rough diamond prices. Reinforcing this, in volume terms, rough diamond imports have dropped from 154.2 million carats in 2010-11 to 131.4 million carats in 2011-12.
Jain noted that in the month immediately after the imposition of the duty, imports of cut and polished diamonds dipped 70 percent. That sharp reduction and the subsequent low imports of polished in the succeeding 45 days to the end of the fiscal year also helped bring down polished imports for the whole year by 30 percent the GJEPC Chairman added.
Jain also observed that the 0.36 percent drop in overall exports had to be considered in the light of a rupee that dropped sharply in value against the US dollar over the period. “Total exports have increased 4.6 percent in rupee terms,” he said, adding, “Gems and jewelry accounted for 14 percent of
GJEPC’s outlook for the first quarter of the current fiscal year (April-June) is positive and that the export production industry would achieve higher value addition and would improve the country’s trade balance in the months to come.
“Round-tripping” involves the same parcel of diamonds making repeated export journeys to a company’s office at some tax-free overseas location, having being re-imported to India after each export. The “round trips” help a company show increased turnover and thus give it access to greater bank finance at special rates. In some cases, these round trips also help launder money.
Round tripping surged after 2008, when the then Finance Minister scrapped a 3 percent import duty on polished diamonds. That measure was intended to allow the free flow of diamonds in and out of the country towards achieving the objective of making it a gem and jewelry trading hub.
This phenomenon, which also takes place with gold – a simple medallion is exported as ‘jewelry’, only to be re-imported as primary gold – has impacted the country’s foreign trade figures significantly and has made a mockery of the country’s huge gross gem and jewelry export figures. In fiscal 2010-11,
Jain said that a series of measures initiated by the GJEPC would help boost trade. An ‘India Show’ was planned for the JCK Las Vegas show and the GJEPC would focus on
The GJEPC Chairman also announced that the 2012 IIJS trade show would run from August 23 to 27.