Impact Of Covid-19 On G & J Industry A Banking Perspective

Banks and business owners have always shared a dynamic relationship, one which is tested in difficult times. The current pandemic and resulting economic slowdown is one such situation, where understanding the banking perspective is important for every business owner

- P N Prasad

The gems and jewellery sector contributes largely to the export and GDP of India. It contributes to nearly 29 per cent of exports of the country and about seven per cent to the GDP.

In fact, for the last couple of years the gems and jewellery sector has been facing difficulties in terms of demand and supply parity. The global socio-political situation has been largely responsible for the fall in demand in this sector. The worsening trade relations between USA – China also contributed to the glut. Exports to the USA have been less. The sector was showing negative growth in terms of imports, as well, in every quarter. Owing to rising gold prices, retail demand also came down.

Coming to the banking perspective; many commercial banks have a negative outlook due to certain incidents which created a major distrust between the banks and the borrowers. Exposure to the sector hasn’t grown and has been stagnating. On the other hand, the dollar has been appreciating consistently. In terms of dollar parity, the exposure has been on a steady decline. Adding to these existing woes, the unexpected nationwide lockdown announced since the March 25th has dealt a serious blow to gems and jewellery sector.

At present, the lockdown has been partially lifted in certain parts of the country and government has announced some relief measures. The relief measures aren’t much as compared to the actual problems the exporters in this sector are facing. Factories are closed resulting in lower production and migration of labourers have not helped the cause of this sector.