Serious 'Side-effects' Of Jewellers' Strike

It is now well over a month since jewellers across the country shut shops demanding that the Budget announcement of a 1% excise duty on jewellery be revoked. The withdrawal of the agitation following the setting up of the Ashok Lahiri committee was widely rejected by associations in various parts of the country, and after an initial stutter, the protests appear to have revived with additional vigour.

While most discussions related to the agitation have focused on the pros and cons of making excise applicable to the industry, there are many other areas where the strike has had a significant impact too.

Jewellers have stated that the overall loss to the industry from the protest that is now 35 days and counting, could amount to Rs one lakh crore. Given the vastly unorganised nature of the industry there is no way that this figure can be verified, but clearly the business losses are immense.

This has had a direct impact on related business sectors, as well as on others across the jewellery value chain. Imports have declined, hallmarking centres are running well below capacity and tens of thousands of piece rated workers are being forced to dip into their savings or seek other means of livelihood as a result.

The most immediate impact has been on gold imports. Recent reports suggest that gold imports for the month of March will be drastically reduced. Though no official figures have yet been released, it is widely believed that they will be at least 70% lower than the comparative figure of a year ago. Reports speak of a 97% fall in imports of gold in the state of Gujarat, one of the largest consuming centres in the country.

This comes on the back of an estimated 34% fall in gold imports during February due to higher prices and the then widely prevalent expectation that the Budget would announce a reduction in the 10% import duty on gold.

Hallmarking centres too are reportedly seeing massive dips in numbers. Most hallmarking centres have had to virtually shut down operations during this period, and business foregone will once again run into crores.

Corraborating this in a recently published research report, ICRA has estimated that the volume of jewellery manufactured across the country will drop by about 40-50 tonnes for the fourth fiscal quarter ending on March 31, 2016.

However, most jewellers believe that this will be a short term fallout, as pent up demand is likely to spark a rebound once the strike officially comes to an end. In fact some of them have suggested that with various festivals such as Gudi Padwa, Ugadi, Baisakhi etc round the corner, and Akshay Tritiya and the wedding season not too far away, sales may actually boom immediately after the strike.

The ICRA report too notes that the decline during Q4 will be temporary and overall volumes for the year (CY2016) are likely to be relatively stable.

Such statistics though do not really convey another more poignant fall out of the strike - the tragic situation which karigars or artisans employed for job work and paid on a piece-rate basis have been facing.

In Mumbai's Zaveri Bazaar, which supports thousands of small jewellery making units, the number of such affected karigars is said to be well over a lakh. Large numbers have left the city and returned to their villages.

Reports from across the country from cities like Nashik, Nagpur, Dehra Dun, Kolkata, Ludhiana, Delhi etc. suggest that the situation is similar in most jewellery manufacturing centres. The numbers may vary, but the story of skilled workers who have been in the jewellery business for many generations suddenly being out of work is being narrated all across the country.

Unfortunately, while the dip in gold imports and the drop in hallmarking activity is a temporary phenomenon and an immediate fallout of the agitation, the impact on the job-work / karigar based system that has served the industry for many decades could well be more permanent.

ICRA research believes that as a result of the excise duty, the organised retail industry will get strengthened over the medium to long term. The new system would work in favour of larger manufacturers who possess the strong information systems required to comply with the requirements. Small artisans and job workers, who have neither the expertise nor the infrastructure to maintain records, are likely to be hit.

The report notes that the excise levy is also likely to lead to a longer term change in the sourcing mix for organized retailers who will incline towards larger, organised sector manufacturers (as against the current practice of sourcing primarily from the unorganised sector).

It will indeed be tragic, if skills of thousands of karigar honed over many generations are lost as a result of this change. Whatever the outcome of the excise issue, the industry and government must formulate policies and plans to preserve these skills that have made Indian handcrafted jewellery a force to reckon with globally.