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Chapter 2
REVIEW OF LITERATURE
2.1 INTRODUCTION
Literature Review is considered an important component of
research. Review of literature involves summarising the
current status of research works already done. Its helps to
identify the gaps in terms of the area appearing relevant and
those which have been already studied and those which are
subject for further studies. A review of the pertinent past work
and contradictions, pitfalls and other failings of the earlier
work is necessary mainly to substantiate the need for another
research study. Previous research studies are abstracted and
significant writings of authorities in the area under study are
reviewed.
The review of relevant Literature on the study area is
necessary before going deep into the research work. Reviews
of related studies enable the researcher to get an in-depth
knowledge of the topic and to conduct the study in a different
approach from that of the existing studies in the relevant field.
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This enables to carry out the study in the untouched field. In
this chapter, the researcher has attempted to take up the review
of the available literature on various aspects of Gems and
Jewellery industry in India vis-a-vis challenges and
opportunities before the industry. In doing so, the researcher
surveyed a number of journals, magazines, research papers,
project reports, published and unpublished reports and thesis,
dissertations, conference and seminar proceedings, books and
websites. Such a review has provided a proper background to
the researcher for the development of the present study. It will
be worth mentioning to state that very few studies have been
carried out on the topic Gems and Jewellery Industry in India:
Challenges and Opportunities. Hence, this study has
significance. The reviews made in this aspect are summarized
below:
Vinod Kuriyan,1 in his article reports that with the
volatile price of gold casting a shadow of uncertainty over both
Jewellery production and retail, the Indian Gems and Jewellery
Industry responded with some surprising bold experimentation
with looks and alternative materials. The domestic turnover
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was down mainly because of the uncertainty over the price of
gold. However, the outlook for diamond jewellery looks good
due to two factors i.e. price competitiveness and increasing
preference of the consumers. Despite the price rise of the
precious metal there was a marked improvement in the quality
of displays and positioning of the products. The domestic
Indian Jewellery is coming into its own and will take its place
along side the already globally successful export production
industry.1
Mallika Hegde (2006) in her Ph.D. unpublished thesis,
Performance Evaluation of Minerals and Metals Trading
Corporation (MMTC) of India with special reference to
Precious Metals Division, opined that jewellery trends are
changing the world over. The customer has become more
demanding, looking for better quality in the product. New
tastes and preferences in line with the best changing fashion
trends need new skills in manufacturing, new materials and
new standards of perfection. Towards this end, MMTC is
totally committed to meet every need and choice from any part
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of the world, as a challenge to its learning, acquiring and
developing new skills.2
Dasiy Tanwani (2007) in her article, Indian Jewellery,
Retail, an impressive phenomenon , published in the Journal
of Gem and Jewellery Industry, states that the Retailing in
Indian jewellery sector is emerging stronger with various big
companies opening multiple stores across the country.
Jewellery brands have made diamond jewellery more popular
than ever before. Just like foreign lands jewellery in malls is
now a common feature in India too. The traditional jeweller
has recognized the need of branding and superior services. The
customer is accorded utmost respect and is pampered with
comfortable shopping and better services. However, there are
certain aspects of jewellery retailing that have not been
incorporated completely by all.3
Denise Meyer,2 in his article opines that the consumer
has to see the advertisement three times before she or he
remembers the product. Whether it is the print media or
television or radio advertisement, the average consumer must
be exposed to the same message at least three times before it
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sticks. He also opines that the consistency of the message and
the medium will enable the consumer to remember the product
and what it stands for.4
Pallavi (2007) in her article, High-End Couture
Jewellery Pieces: What Sets them Apart and Why they Lead the
Design Trends for the Industry, published in the magazine
The Art of Jewellery, states that the business of jewellery is
set to get more and more evolved yet difficult each year as the
people across the world get more into the fold of fashion
products and evaluate the level at which the fashion interpreted
in the jewels they buy and wear. It has become an obvious fact
that the jewellery world has to come face to face with the
challenges of the fashion industry and make products that
address the emotional, psychological, philosophical and
fashion needs of the people today. She also opines that the
jewellery buying today needs to be a holistic experience and a
jewellery store needs to move beyond, and become a world
that invites you, charms you and surprises you all the time.5
Nilesh Shah, in his article states that the Indian Gems
and Jewellery and diamond industry is going through taxing
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times with the proposals in the finance bill and the new taxes
slab onto this industry not only bite the size of the profits but
also increase the burden of procedures and paper work and
making it all cumbersome and difficult to follow, the
provisions of the bill are vague and incomplete leaving the
industry unclear on procedures to recover their money. He is of
the opinion that the industry is not averse to paying tax and the
procedure is very tedious. The hassles and the corruption at
every point have made this sector to deal with many agencies
which is a headache for this sector. With the introduction of
Value Added Tax (VAT) the picture has become more chaotic
as VAT requires good implementation too, though the sector
has welcomed VAT in the sector as long as it was beneficial
for the Gems and Jewellery sector.6
Shanoo Bijlani and Regan Luis (2009) in their article,
Foreign Brand Recognition Poor in India and Price StillDominates, published in Solitaire International, The Indian
Gem and Jewellery magazine, reports that an increasing
number of global brands are setting up base in India,
commensurate with the rapid growth in the number of high net
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worth individuals in the country. But, they have to face the
Indian consumer who is not brand conscious, but definitely
price conscious. Further the global players coming in India
have to bear in mind that, a brand has to be aspirational. Indian
consumers buy these products not because they need them, but
because it elevates their social position. What this means for
the domestic and international players is that, they will have to
necessarily invest in building retail management strengths,
understanding the consumers better, branding and distribution
capabilities. The opportunities for growth are huge, provided
they are tailored made for the Indian consumers.7
Fflur Roberts, states that the global luxury goods market
of Gems and Jewellery indicates another solid years of
performance in stores for 2012 despite, persistent economic
turbulence, mounting troubles in the Euro zone and ongoing
political instability in several emerging markets. This is
expected to grow by 4 percent in comparison to the previous
year. This is because developed countries remain by far the
largest spenders on personal luxury specially markets in USA,
Japan, Italy and France together account for half the value of
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sales in 2012. The consumers of middle class of China, Russia,
Brazil and India are showing a growing demand and luxury
consumers around the world showed almost 22 percent growth
in comparison to 2007, which is an indication that the there is
a luxury resilience in the Gems and Jewellery sector even
though there was economic turbulence globally .
Pranay Narvekar, in his article states that the industry's
legacy is on the crises and the industry has already seen a
pivotal shift in how rough diamonds are priced and sold and
there is a paradigm shift from the producers to the managers.
The business is no longer run by persons who are producers
and now they are managed by professional senior managers
who may or may not have experience in the diamond business.
The sole focus is on the profitability of the company over the
duration of their tenure in office which is generally around
three to five years. The benevolent producers no longer exist
with all the large producers focusing on maximizing the prices
rather than ensuring the basic health of the industry. The senior
management has to justify that he is securing best possible
prices during the course of his tenure and is not really
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concerned about whether his customers are profitable or what
they require from the market.
Focusing solely on ones profitability is acceptable for
industries where there are multiple uses of same raw material
and product is easier to value. Diamonds on the other hand,
belongs to one supply chain with all the finished diamonds
ending up in jewellery, hence all supply chain should focus on
their end customer. The research shows that global retail
diamond consumption growth has not even kept pace with
inflation growth, let alone Gross Domestic Product (GDP). The
price rise in diamonds, of late is already making its impact felt
on consumers, with reports of customer tastes moving towards
lower qualities of diamond and with new luxury designs
having lower diamond content.9
Sumit Lal (2005) in his article, Indian Branded
Jewellery Industry, published in The Gem News, Indian
Diamond Institutes Quarterly Bulletin, states that the Indian
diamond merchants are involved in the business of cutting and
polishing diamonds for decades, have finally woken up to the
potential for the manufacturing and trying to enter the
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Diamond Branded Jewellery. He opines that the consumers
attitude and approach is rapidly changing and the largely
unorganized sector is gearing up to service the consumers
present attitude and approach. The young generation is clearly
looking for contemporary, bearable style that is aesthetically
appealing with a clear accent on the design and quality. The
consumers are moving away from the option to wear
traditional jewellery of relatively cheap and poorly made to
fashionable jewellery. Todays buyer also seeks the wider
selection at a single convenient location and also excepts an
international shopping experience that have witnessed in other
sectors of the economy. He is also of the opinion that lack of
distribution, advertising, branding and the lack of skilled
manpower and technology to create and produce the design for
the international market are the key challenges that have been
identified for the related underperformance in the jewellery
segment.10
Arjun Batra and N. K. Gupta, in their research paper
reveals that the global economic turmoil erupted from US sub
prime mortgage market in August 2007 and engulfed almost
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the entire world economy with its negative repercussions. India
also felt tremors of the same due to reversal of capital flows,
slow down in demand-external as well as internal, narrowing
profit margins and shrinking growth in all sectors of our
economy. Overall annual economic growth rate receded along
with fallen merchandise exports but the Indian Gems and
Jewellery industry kept scintillating even in this global melt
down.
In studying the Gems and Jewellery industry during pre
recession and post recession periods, they studied performance
of five organizations with respect to the assessment of the
impact of recession on the sales, expenses and profitability of
these companies. On the basis of the study, they suggested
certain effective measures to enhance their potential and
competiveness in the Gems and Jewellery sector.
Chanchala Jain, in her research paper states that Gems
and Jewellery industry is an important emerging sector in the
Indian Economy and as ranked among the fastest growing
sectors, it contributes greatly to foreign exchange generation.
According to the study, Gold jewellers form around 80% of the
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Indian Jewellery market, with the balance comprising
fabricated studded Jewellery that includes diamond studded as
well as gemstone studded Jewellery. She analyzed the
performance of Gems and Jewellery industry in India for the
period 2006-2011. Based on the study, she opines that there is
a continuous increase in the export of Gems and Jewellery
industry in India and plays a vital role in the economic
development of the country. There is a vital scope for
expansion in the markets in the global economy and can be
recognized as a major foreign exchange earner. Due to the
importance of this sector the government has taken many
initiatives to boost the exports and declared a thrust for
exports.
Anli Suresh, in her research paper states that the ever-
growing demand for gold in India irrespective of the
continuous escalation in its price and Indian demand for
savings and real income levels will drive gold, not by price.
The study observed that the emerging socio-economic trends
may provide some challenges to the gold market; however,
purchasing will remain underpinned by Indias long-standing
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and deep cultural affinity for gold. The study envisage that the
Gem and Jewellery sector has a huge market in India and
abroad and the limited size of total gold market provides
tremendous leverage. Due to the rising geo-political tensions
across the globe, the public distrust the paper assets and the
investors turn to gold for a safe heaven. When the economy
crisis occurs, the government rescues themselves with the
printing press making their currency worthless and gold worth
more. The study also analyzed the Gems and Jewllery in India
both in gold and diamond, export of Gems and Jewellery and
government initiativeness. The study concludes that Indians
are buying gold for its virtues as an investment rather than for
adornment.
Indu Rao, in her working paper states that the Indian
diamond industry thrives in the atmosphere of secrecy and
informality that envelops the diamond trade and has for long
been labelled as an unorganized sector of the economy.
However, it resembles a close-knit community composed of
thousands of small, medium and large sized Cut and Polished
Diamonds (CPD) units and has grown to become one of the
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highest foreign exchange earners for the country. The industry
exports CPD worth US $ 14 billion annually and enjoys a 95%
market share of the global exports of CPD pieces. An in-depth
study of the industry reveals that the so called unorganized
sector is in fact highly organized and has great potential to
offer useful insights to the field of management in terms of
new forms of organizing, networking, business processing and
for doing international business. This paper presents summary
of findings from research conducted in the Indian diamond
industry over a period of last four years. The first part of the
study includes insights about the remarkable rise, growth and
the unique working of the industry. The second part makes use
of a case study of a 40 years old large-sized CPD units to help
gain further understanding of the Indian diamond industry and
part three is about the impact of the 2008 global turmoil and of
the industrys revival after a severe recession. The study of the
Indian diamond industry reveals that, the production and the
exports are on its rise, recession and recovery provide useful
insights to the field of management.
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Amitava Hazra and Madhumita Malakar, in their pilot
study opines that the Gems and Jewellery industry, is
predominantly an unorganised sector and almost 96% of the
business is with the family jewellers and the remaining 4% is
with the organised sector. This being one of the major foreign
exchange earner for Indian economy, its growth and
competitiveness in the global market is to be sustained through
the process of innovation. It also states that among many
factors that contributed to the upsurge of the industry, the most
intangible one is the various technological and non-
technological innovations that have been brought in by the
industry to capitalise on the opportunities created by the series
of policy changes.
The mainstay of the study examined both the
technological and non-technological dynamism of the firms.
The technological part is grouped under the heading Product
innovation to capture the initiatives towards changes in
product, process, raw material use, and R&D initiatives. Non-
technological initiatives of the firms are grouped here under
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market innovation. Major findings of the study are certain
initiatives in this sector towards developing technological and
market advantage at a global scale and to upgrade the existing
skill of the manpower appears as one of the major factors,
which needs to be addressed.
This has been seen as the precursor of innovation. The
Initiatives in achieving globally acceptable quality and
standard are apparent in the organised sector. The complex
process of innovation in market place has been broadly
categorised in the study are targeting and creating new
markets, new designs, going for brands to promote products.
The study had taken a close look at various government
policies that had influenced the technological and market
related initiatives of the firms. Supportive policies to boost
export have actually brought confidence and dynamism in the
industry. It is observed in the study, that in an industry that
largely, caters to the traditional demand and also modern snob
market, innovation is essentially in industry organisation with
limited technological changes.
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The indicators suggested above are derived from the
observations on the behaviour of the existing firms and in the
industry. Although these indicators refer specifically to the
features of the Gems and Jewellery industry of India, they also
bring out the fact that organisational innovation is actually a
derivative of market types and skill requirements in the
production process of the industry. In this sense the indicators
would have general appeal and should reveal features of the
similar relations in other industries.
Export-Import Bank of India, in its study titled reveals
that, Indias Gems and Jewellery industry is highly
unorganized and fragmented with more than 90% of the
players having family owned businesses and there had been a
loss of market for Gems and Jewellery exports due to recession
and global economic slowdown.
Following the economic slowdown, asset price
evaluations, job losses and decrease in disposable income have
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happened, along with escalation in gold prices, which have
changed the consumption pattern of gems and jewellery.
Further, the economic slowdown has also affected the
consumer buying pattern, with growing demand for single-line
jewellery, low-carat jewellery, and gems-studded jewellery.
The study also states that the financial performance of players
in this sector has also been affected by the recessionary trends
in demand. Out of the fourteen jewellery companies analyzed,
6 companies witnessed a decline in income, and eight
companies witnessed decline in profit during the first half of
2009-10.
The steep rise in raw material prices has squeezed the
cost efficiency of the Indian Gems and Jewellery sector. It also
shows that although India currently enjoys dominance in the
worlds cut and polished diamond market, China may emerge
as a rival in the long term, mainly because of the availability of
cheap labour, growing domestic demand, and also the
improvement in the quality of workmanship in the country.
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Utilization of hi-tech, speedy and efficient machinery
and software has led to the gradual replacement of traditional /
manual methods of polishing, manufacturing and designing of
gems and jewellery. Proactive players in the Indian Gems and
Jewellery industry are always on the lookout for better
technology for their units. However, such technology
absorption is relatively low in Indian Gems and Jewellery
industry, due to the small size and unorganized nature of
majority of the players. Also, mere absorption of technology
may not be helpful, without a proper blend between manual
labour and machinery to provide ethnicity to the end-products.
Usage of semiskilled and unskilled workforce in operation of
such high-end machines may result in significant under-
utilization of the machinery / technology, and may at times
cause losses in operations. Skill development is therefore very
essential for proper reclassification of the workmen in this
industry.
The study conducted by Investment Information and
Credit Rating Agency of India Limited (ICRA), analyzes the
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structure of Gems and Jewellery industry of India and its
importance to economy. The demand, for Indian gold and
diamond jewellery both domestically and internationally are
increasing. The key issues facing the sector are large presence
of unorganized sector are discussed in detail. The study also
describes the recent trends in jewellery consumption and the
possible long term threat from different markets. The study
states that the Gems and Jewellery industry is highly sensitive
to the government policies and hence continued support from
government is crucial for the growth of this sector.
The outlook of the study reveals that the diamond
industry is optimistic that the recent healthy growth in world
GDP, and increased marketing expenditure could result in
increased demand growth. Both China and India represent
potential new sources of demand for diamonds. China has the
potential to become a leading consumer of diamond jewellery.
China's retail sales in recent years have shown strong growth
relative to other centers. In India, diamonds are an established
consumer product, but the potential size of the market is only
just being recognised, especially in comparison with annual
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gold demand. The long-term outlook for the Indian diamond
and jewellery industry continues to be positive. Indias
competitive advantage is likely to centre on its skilled labour
combined with a ready adoption of leading-edge technology
and an increasing degree of vertical integration.
An EXIM Bank study, reveals that theIndia's exports of
Gems and Jewellery showed a year-on-year (y-o-y) growth of
40.7 percent in 2008-09 compared to 23 percent witnessed in
the previous year, despite a global economic slowdown. The
Indian Gems and Jewellery industry is one of the important
sectors of the Indian economy. The Gems and Jewellery
industry in India comprises sourcing, processing,
manufacturing and selling of precious metals, diamonds,
pearls, precious and semi-precious gemstones and artificial
jewellery. India is one of the fastest growing jewellery markets
in the world and is the largest consumer of gold in the world.
India is also one of the largest diamond processors in the
world, with more than 90 percent in terms of pieces, around 80
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percent in terms of carats and around 55 percent in terms of
volume being processed in India.
India is also the largest consumer of gold in the world
(over 700 tonnes in 2008), accounting for around 24 percent of
world gold consumption, majority of them going into
production of jewellery. Over the years, India is also emerging
as largest trading centre for gold. However, during the second
quarter of 2009, the consumption of gold had shown a decline
mainly due to the rising prices and global slowdown. Despite
global economic slowdown, in the year 2008-09, the exports of
Gems and Jewellery from India showed a y-o-y growth of 40.7
percent as compared to a y-o-y growth of 23 percent
witnessed during 2007-08. Demand for Gems and Jewellery
are income elastic and is likely to remain moderate in the near
future. The continuation of demand slowdown in the US and
Europe might slow down the exports of Gems and Jewellery as
also the domestic retail market. One of the major trends
witnessed in the Gems and Jewellery industry due to the
economic slowdown has been the recycling of gold or in other
terms, gold scrap.
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Key focus has been the surge in the levels of gold scrap
coming back to the market. With mine production on a
declining trend and the outlook relatively benign, scrap levels
are likely to remain as the primary supply of gold due to
uncertainty over the short to medium term. Selling old gold
jewellery has provided consumers with access to the much-
needed funds during these very difficult economic times. In the
price sensitive markets, the profit-taking motive behind
recycling activity has been very strong, highlighting the
intrinsic value of jewellery and the strength of the savings /
investment aspect of gold jewellery purchases. Increase in
recycling activity has been both a western and non-western
phenomenon, although volumes in the non-western markets
have continued to dominate. In western markets, the primary
motivation behind recycling of gold has been distress selling,
while in the more traditional non-western market, the primary
motive has been profit- taking. The prospects in growing
economies in India, Middle East, Hong Kong and China are
expected to help the sector to regain its glitter. Changing
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References
1. Vinod Kuriyan, New Looks and Innovations marknew Indian Jewellery, Solitaire International, The
Indian Gem and Jewellery Magazine, Mumbai, June-
July 2006, pp. 44-48.
2. Mallika Hegde, Performance Evaluation of Mineralsand Metals Trading Corporation (MMTC) of India
with special reference to Precious Metals Division ,
S.N.D.T Womens University, Mumbai Ph.D.
Unpublished Thesis 2006, p. 436 , p.437.
3. Dasiy Tanwani, Indian Jewellery, Retail, animpressive phenomenon, Journal of Gem and
Jewellery Industry, Jaipur, Vol. 45, No. 2, February
2007, pp. 21-27.
4. Denise Meyer, The Power of Three, ProfessionalJeweller, Philadelphia, January 2004, pp. 76-77.
5. Pallavi, High-End Couture Jewellery Pieces: WhatSets them Apart and Why they Lead the Design
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Trends for the Industry, The Art of Jewellery,
Bangalore, Vol.6, No.5, May 2007, p.136.
6. Nilesh Shah, Taxation Woes, Diamond World,Mumbai, May-June 2005, pp. 156-158.
7. Shanoo Bijlani and Regan Luis, Foreign BrandRecognition Poor in India & Price Still Dominates,
Solitaire International, The Indian Gem and Jewellery
Magazine, Mumbai, February 2009, pp. 49-51.
8. Fflur Roberts, Luxury Resilient in the face ofEconomic Turbulence, Solitaire International, The
Indian Gem and Jewellery Magazine, Mumbai,
November 2012, p. 66, p.67.
9. Pranay Narvekar, Rough Diamonds a ParadigmShifts, Solitaire International, The Indian Gem and
Jewellery Magazine, Mumbai, June 2012, pp.50-
54.
10. Sumit Lal, Indian Branded Jewellery IndustryThe Gem News, Indian Diamond Institutes Quarterly
Bulletin, Vol. X, January- March 2005, p. 13.
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11. Arjun Batra and Dr. N. K. Gupta, ScintillatingGems and Jewellery under Global Meltdown- A
Study on Indian Gems and Jewellery Industry, The
International Journal of Research in IT and
Management, Jagadhri, Vol. 1, Issue 1, May 2011,
pp.105-115.
12. Chanchala Jain, A Trend Analysis of ExportPerformance of Gems & Jewellery Industry In India,
International Journal of Engineering Sciences &
Management (IJESM), Greater Noida, Vol. 2, Issue 2,
April- June 2011, pp.170-174.
13. Anli Sureshin, A Review on Gold Quest in theInvestment Portfolio by Indian Investors,
International Journal of Research in Management &
Technology (IJRMT), Vol.1, No.2, December 2011,
pp.128-134.
14.Indu Rao, Organizing the un-Organized? The Rise,Recession and Revival of the Indian Diamond
Industry, Indian Institute of Management, Ahmedabad,
W.P. No. 2009-09-01, September 2009.
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15. Amitava Hazra and Madhumita Malakar, Statusof Innovation in Gems and Jewellery Industry of
India, Centre for Knowledge, Ideas and
Development Studies (KNIDS), Kolkata, July 2006.
16. Export-Import Bank of India, Indian Gems AndJewellery: A Sector Study, Occasional Paper No.
138, Quest Publications, February 2010, pp.
94-119.
17. Investment Information and Credit Rating Agencyof India Limited (ICRA), The Indian Gems and
Jewellery Sector, New Delhi, July 2006, pp. 35-
36.
18. EXIM Bank, Indian Gems and Jewellery ExportsRise 40pc despite Recession, 2009.