Demand for silver jewellery exports picks up sharply

MUMBAI (Reuters) - Steep growth in India's silver exports is outpacing its other trade in precious metals as world demand picks up, albeit for cheaper jewellery options.

Shipments are likely ro rise by up to 30 percent this year, trade body officials said on Tuesday

"At such high prices, gold is going out of budget for many youngsters ... a wrist bracelet of white gold is now replaced with sterling silver as it is cheaper," said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council (GJEPC).

Shipments of gems and jewellery constituted 14 percent of India's total exports, and employ 3.4 million workers, with the Middle East taking most of the market.

Silver exports are likely to to go up by 25-30 percent this year against $797 million a year ago while gems and jewellery exports are expected to rise 15 percent against $38.28 billion worth of overseas shipments in the previous year.

The GJEPC expects robust sales from the United States, which contributed to 11 percent of exports.

"From the U.S., demand and consumer confidence are very encouraging... this market will play a major role in gems and jewellery exports," said Vipul Shah, chairman of the GJEPC, adding they have been focussing in other growth areas like the United States, China, Russia and Australia.

The body, which represents more than 5,000 members, also hoped the government will reduce import duty on refined gold bars in the budget on February 28.

Exporters generally take duty free gold from lending banks, but they need to give margin money, which includes import duty and value added tax to take a gold loan from banks. The margin money, which is blocked for a maximum of 90 days until payment from importers is proved, has increased more than threefold after the duty hike was implemented.

"Increase in import has an impact on export transaction cost," said Parekh, adding "hand to mouth exporters will have to restrict their business due to additional requirement of margin money to take care of additional import duty."

The trade body wants the federal government to allow a duty free import quota of 15 percent of the previous year's exports. In January 2012, the government levied a 2 percent import duty on cut and polished diamonds.

(Editing by William Hardy)