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All that glitters is gold

Published by The Straits Times, Singapore on 2004-05-03

MUMBAI, India--A visit to Jhaveri Bazaar here offers an encapsulated glimpse into how indigenous entrepreneurship has tapped into the trends of globalization to generate more international business for India. This is a neighborhood of shops and creaky residential buildings that were raised nearly a century ago, a densely packed locality in an overcrowded city that's long been considered the commercial capital of this country of 1.1 billion people. No fancy apartments here as there are in other areas of Mumbai like Malabar Hill or Worli, no streets lined with plane trees or banyans.

But it is a neighborhood that glitters--literally. Shops displaying gold, silver and assorted jewelry stand side by side on street after street. Hawkers peddle snacks, toys and newspapers. The growling of traffic provides a continuous soundtrack. Shoppers are mostly Indians, who have traditionally viewed gold and jewelry as not only adornments but safe investments. There's little here to suggest that elsewhere in India a national political campaign in going on to elect 543 members of the national parliament; politicians, after all, come and go, but Jhaveri Bazaar is a constant in Mumbai's economic life.

And now Jhaveri Bazaar's merchants have pushed their trade into the world scene with a show of resourcefulness and aggressive marketing that's toppled China from its position as the leading supplier of jewelry to the United States. This year, according to government projections, the gems and jewelry sector will fetch more than US$13.5 billion, an increase of almost 15 percent from 2003. In three years, the figure is expected to rise beyond US$16 billion, according to Mr Sanjay Kothari, chairman of the Gold and Jewelry Export Promotion Council.

Such increases in export revenues are attributed to growing demand for Indian jewelry not only in the U.S. but also Europe and Southeast Asia, says another industry veteran, Mr Tushar Kothari--no relation to Mr Sanjay Kothari--who's based in Mumbai and New York. While the market for cut and polished diamonds from India was always strong overseas, finished gold jewelry and coloured gem stones are also now in great demand, he said.

Even government officials are a tad surprised by such demand. The central government's Ministry of Commerce had forecast that the 2004 figures for jewelry exports would be around US$10 billion. That the forecast will be exceeded by almost a third and go beyond US$13.5 billion is also attributed to the fact that the administration of U.S. President George W. Bush has eliminated the 5.7 percent tariff on finished jewelry from India.

Moreover, Indian merchants acknowledge, Indian exports have received a significant boost from the fact that the U.S. has continued to impose a 6.6 percent tax on Chinese jewelry imports.

Still, the marketing acumen of Indian traders is the driving force behind increased exports. They recognized that the international market--and especially in the U.S.--was ready for gems and colored stones set in pendants and sports jewelry. They broadened native production beyond the traditional cut and polished diamonds, initiated energetic sales campaigns aimed at wholesalers and department stores in the U.S. and elsewhere, and vigorously promoted the concept of affordable jewelry for the middle classes in Western countries.

At the same time, small companies such as Classic Diamonds benefited from the development of export promotion zones in Mumbai and other Indian cities. Classic Diamonds recently won a US$4 million order to provide jewelry by next month; its inventory and reputation for successfully handling short turnaround orders clearly influenced the American buyers.

Other diamond dealers in Mumbai are also prospering. In 2003, for example, they accounted for US$8.6 billion of the US$10 billion or so in total jewelry exports. Production costs are relatively low because the diamonds--bought at "sightings" in London--are cut and polished in small, intensive-labour workshops in Mumbai and small towns such as Surat. The low costs have given India an edge over manufacturers in other traditional jewelry-supplying places such as Israel and Belgium.

Indeed, Indian merchants have even set up shop in those countries in the belief that the contemporary global marketplace requires that competitors carry the fight to one another's home territory. However, because of India's tough laws governing the entry of foreign businesses, Mumbai's jewelers have been protected against marauders from abroad.

This, of course, dismays traders from those countries. Particularly concerned are conservative Jewish jewelry dealers in New York--drawn from the Hassidic community--whose pre-eminence in the cut and polished diamond industry has been eclipsed by Indians. The latter contend that in a global economy that is being increasingly liberalized, any manner of competition is fair.

But Jhaveri Bazaar's merchants will also tell anyone who listens that cutthroat though the competition may be, they adhere to a traditional code of ethics ingrained into them by generations of doing business in the jewelry industry. 'All's fair in love and war--and in dhanda, or business,' one businessman said. 'It's a big world out there, so what's the need for playing dirty? There's dhanda for everyone who wants to compete.'

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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