The recent rise in Sri Lanka’s gems and jewellery export revenue despite domestic and global economic challenges has led to a renewed discourse on the need to boost up the sector and address existing challenges faced by the industry. In a meeting held in August 2023, President Ranil Wickremesinghe showed keenness to devise plans for further enhancing annual exports, addressing the challenges faced by the industry, reforming the tax policies, and attaining the US $2 billion annual export target. The industry has suffered severe setbacks during the repeated waves of COVID-19 and has become one of the worst-affected industries, with exports declining by more than 50 percent. Thus, the revival of the industry’s revenue in recent times, amidst the economic turmoil is commendable.
However, from time to time, representatives from the Sri Lanka Gem and Jewellery Association (SLGJA) , as well as other industry experts, have expressed their concerns about some sticky problems faced by the industry, limiting its export potential.
Illegal mining and resulting over-extraction have been recognized as the key challenge in the mining industry resulting in sub-optimal revenue collection. The second challenge is related to insufficient development of technology and R&D in the mining space. The industry still relies on traditional methods of gemstone processing, which limits its ability to gain quality and productivity-wise competitive advantage in the international markets. The third problem is the rising paucity of skilled craftsmen, inhibiting quality control and innovation potential. Though the first challenge is more of a law-and-order issue, the second and third challenges reflect infrastructural and capacity-building related shortcomings. Because of the underutilization of resources and resulting undersupplying, it is not able to meet its export opportunities. The resulting demand-supply gap can hurt Colombo’s export growth and market expansion in the long term.
This is where bilateral alliance and cooperation can help Sri Lanka achieve desired goals, and India can be a major ally. The collaboration between the two neighbours in the gems and jewellery industry is an opportunity worth exploring for two main reasons. First, India is a major centre for the export of gems and jewellery and has consistently increased its global market share over time. In 2022-23, India’s gems and jewellery exports reached US$ 37.73 billion, which is almost 20 times greater than Sri Lanka’s target. The Government of India has undertaken various measures to promote investment and upgrade technology and skills to promote gems and jewellery trade. Thus, India has developed the required technical know-how in the extraction and processing of precious metals and stones, and is evident from the boosting export numbers, and it has also gained commendable quality and innovation through skilled labour.
Second, India stands to hold huge relevance for Sri Lanka as a huge potential market with its sheer size of the population, the cultural relevance of gems and jewellery, and rising purchasing power. India’s gold demand is expected to increase to 800 tonnes in 2023. The competitive advantage that Sri Lanka possesses in its “niche gems products” has the potential to attract a vast market of Indian consumers if marketed well.
India’s bilateral engagements in the gems and jewellery industry are not new. In May 2021, India’s Gem & Jewellery Export Promotion Council (GJEPC) and the Embassy of India got involved with the government of Morocco to develop an understanding of the current business climate and trade prospects for manufacturers, exporters, and importers from both countries. The two nations co-hosted an ‘India-Morocco Global Connect’ for the same. India has also signed an FTA with the UAE to boost exports and reach the target of US$ 52 billion. Signalling itself as a lucrative market and meeting its domestic demands, the government of India has reduced import duty for gold and silver (from 12.5% to 7.5%) and platinum and palladium (from 12.5% to 10%). The Government has also reduced customs duty on cut and polished diamond and coloured gemstones from 7.5% to 5% and nil. India imported almost $32 billion worth of gems and jewellery in the fiscal year 2023.
India is Sri Lanka’s largest trade partner, and they have amicable relations as close neighbours. Thus, the potential of expanding their friendship to the gems and jewellery industry would lead to positive outcomes for both parties. Agreements between the two can lead to multifold benefits for Sri Lanka’s export growth
Both Colombo’s ambitious revenue collection plans and the challenges faced by the industry can be effectively solved if experts explore the possibility of a Sri Lanka-India connection. The supply-side bottlenecks related to a lack of infrastructure, innovation, R&D, skilled labour, and market expertise faced by Sri Lanka can be rectified with enhanced engagements with India. A possible agreement between the two envisaged by technology transfer and capacity building can ameliorate the island’s long-pending challenges. Moreover, given that India is investing in developing the skilled labour base, a collaboration for skill and innovation training and knowledge transfer from India to Sri Lanka can be worked around. The two neighbours can also collaborate to expand their niche market or introduce innovation in jewellery processing or design.
Sri Lanka is well-known for its excellent craftsmanship and good crystal quality gemstones like sapphires. However, though gemstones are available in high quantities and quality on the island, but the lack of mining and research hinders its expansion. This is another front where Indian expertise in mining-related R&D and technology collaboration can yield fruitful outcomes for Sri Lanka. India can provide its expertise in mining and enhance the production and processing efficiency of Sri Lankan gemstones.
Given that both nations have a rich legacy of jewellery craft and ancient artisanal traditions, the exchange of craft and skills between various artisans’ guilds and traditions can be another frontier for a possible collaboration. There are a plethora of possibilities and facets in which the two nations can connect for this industry. Interest, commitment and initiation of dialogue by the two governments and stakeholders, namely SLGJA from Sri Lanka and GJEPC from India, can lead to lucrative and mutually beneficial opportunities for the neighbours.