GS 3 – Economy
Context:
The United States has imposed steep tariffs of up to 50% on plain gold jewellery and 57% on studded jewellery from India, severely impacting gem importers in Mumbai and diamond artisans in Gujarat, particularly those in Special Economic Zones (SEZs) like SEEPZ in Mumbai.
Key Developments:
Tariff Hike by the U.S.:
- Plain gold jewellery: Tariff raised to 50%.
- Studded gold jewellery: Tariff increased to 57%.
- Effective from August 27, 2025.
- Part of broader U.S. trade policy tightening, potentially post India-U.S. trade friction or retaliatory action.
Impact on India:
Economic Impact:
- Over 30% of India’s gem & jewellery exports go to the U.S.
- Export volumes to the U.S. may fall by 75%, says SEEPZ officials.
- Potential loss:
- FY24 exports to U.S.: ₹4,412 million
- Expected in FY25: ₹1,180–1,500 million
Employment Impact:
- Over 10,000 skilled artisans work in SEEPZ alone.
- Surat’s diamond industry employs ~1 lakh people; ~90,000 workers already sought relief package support.
- Risk of mass unemployment in diamond polishing, design, and jewellery crafting sectors.
Structural Issues Highlighted:
- Heavy reliance on the U.S. market for jewellery exports.
- Low margins in the industry (4–6%) make it vulnerable to tariff hikes.
- Small and medium enterprises (MSMEs) may struggle to survive:
- Small = turnover < ₹100 crore
- Medium = turnover < ₹500 crore
Government and Industry Response:
Industry Demands:
- Short-term relief: Regulatory relaxation, export duty rebates, quicker refunds.
- Long-term strategy: Diversify export destinations (e.g., Thailand, Dubai, Turkey).
- Appeal for policy clarity and support schemes (similar to post-COVID relief).
Trade Associations Speak:
- GJEPC (Gems and Jewellery Export Promotion Council) warns of drastic production drops.
- Leaders urge government to “absorb” short-term shocks and avoid regulatory burden during crises.