Rapaport Magazine

An Eye Toward India

Israel Market Report

By Leah Granof
RAPAPORT... The Israeli diamond industry hosted H.E. Kumar Ashwani, minister of state of the Indian Ministry of Commerce and Industry, at a luncheon in August to discuss future cooperation between the diamond industries in both countries. The event followed the recent repeal of import taxes on diamonds and gemstones by the Indian government. During his visit to Israel, Ashwani also met with Eli Yishai, Israeli minister of Industry, Trade and Labor, to negotiate a full free-trade zone between the two countries.

Moti Ganz, Israel Diamond Institute (IDI) chairman, served as the official host of the luncheon, which was also attended by such notables as Dr. Arun K. Singh, India’s ambassador to Israel; Avi Paz, Israel Diamond Exchange (IDE) president; Eli Avidar, IDI managing director and Shmuel Mordechai, Israel’s diamond controller.

During the luncheon, industry leaders discussed the need to equalize conditions between Israeli companies in India and their Indian counterparts in Israel. As part of that discussion, both parties agreed that Gopal Krishna, joint secretary of the Indian Ministry of Commerce and Industry, will lead a study on the issues, with the goal being to clarify regulations for Israeli companies and guide them in their business activities in India.

Tax Repeal

According to the IDI, reciprocal trade between Israel and India in the first half of 2007 totaled $1, 246 million, with diamonds and precious stones constituting 61 percent of the total export. Israel’s imports from India were $1,481 million, with diamonds and precious stones comprising 66 percent of the total.

Earlier this year, India lowered its import tax on diamonds and precious stones from 5 percent to 3 percent before finally abolishing it entirely in July. Israel’s industry leaders spent more than a year in negotiations with Indian counterparts in the hope that such a move would open up the Indian market for Israel’s polished stones.

The import tax had created barriers for the movement of goods, making it nearly impossible for Israeli diamantaires to send goods to India on memo. That, in turn, vastly decreased the amount of trade that could take place between the two countries, Paz said.

Paz predicted that diamond trade between the two countries would double in the second half of this year and increase even more in 2008. He noted that even though many Israeli diamantaires are looking to future markets in China, they face the same barriers to entry there that used to hinder entrance into the Indian market. “With the repeal of the tax, India can be a huge market for Israel now, even though China might be a market in the future,” he said.

The most noticeable and immediate result of the tax removal was the attendance of Israeli diamantaires at India’s International Jewellery Show in Mumbai at the end of August. This was the first time that Israel’s diamantaires could go to an Indian show without fear of tax penalties for bringing goods back into their country.

New Competition

Not all industry leaders are as optimistic about the impact of India’s move, noting that India abolished its import tax for all countries worldwide, not just Israel. “When you do it for everybody, what is the competitive advantage?” questioned Mordechai, who had hoped that Israel would receive favored status from the Indian government.

Steven Farber, a manager with Leo Schachter Diamonds, echoed Mordechai’s concerns, explaining that Indian diamantaires would now be able to compete more efficiently on a global scale, thus cutting into Israel’s current overseas market.

Still others welcomed any initiatives to open trade. “It’s always better for the whole industry when you open the market. It’s better for the Israeli industry to be able to do business with no limits,” said Michael Aghbashoff, president of Denir, manufacturers and exporters. Shlomo Eshed, president of the Israel Precious Stones and Diamond Exchange, agreed. “Usually, I sell to Indians in New York, who buy 30 to 40 percent of my goods. Maybe now, I will go to India,” he said.

Other Market News

The market is expected to pick up as summer vacation comes to a close, with diamantaires preparing to showcase their goods in the U.K. at the International Jewellery London show.

The Marketplace

• Overall trading activity was slow during the summer vacation.
• Demand is good for clean 0.5-carat+ princess in lower colors.
• The slowdown in the U.S. financial markets is hurting Israelis trying to move goods into U.S. markets.
• Demand is strong for 1.25 to 1.49 carats and 1.70 to 1.99 carats in VS+.
• 2- carat L+ goods with better clarity are starting to pick up.

Article from the Rapaport Magazine - September 2007. To subscribe click here.

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