3.

    PESTEL Analysis
 
a. Technological

A brand like Tanishq is

known for its heavy pockets and
capitalising on technology has
been second nature to them.
With the advancement of
jewellery making technology,
the workers (Karigars) gain
training and access to these
machines to help in the creation
process of their ornaments.
Tanishq's success is due to
its use of technology since the
early '90s. It's cutting edge and
highly mechanised
manufacturing unit in Hosur,
Tamil Nadu, is equipped with
the latest machinery from
Switzerland, Germany, UK and Japan. Tanishq's product development cycle is highly
efficient because of the use of CAD/CAM technology. Today, Tanishq also uses the
power of casting methods which enables one to feed the designs in a CAD file, which is
converted into 3D Printable forms. The demand for lightweight, wearable jewellery has
escalated, hence paving the way to innovation and techniques such as CAD and 3D
Printing, CNC milling machines, laser engraving machines, finishing and polishing
machines and more. CAD, along with 3D Printing, has revolutionised the jewellery
industry in many ways.

b. Political

India's gold market is unorganised, fragmented and suffers from inefficiencies. Policy
formulation has not addressed these issues, and there is a lack of a comprehensive
vision. The Government's Gold Monetisation Scheme (GMS) was launched in 2015
with the aim of turning the unused gold lying idle in the households into a productive
asset. The NITI Aayog has formulated a vision structure in 2018, which is as follows:

1. Make in India in Gold: The gold industry can augment the domestic supplies
through mining, recycling and refining with appropriate incentives. It would be
advisable to include gold as one of the industries under Tier 1 of the Make in India
initiative. The 'Make in India in Gold' also aims at fueling exports. There is a huge
scope in promoting exports, including both B2B and B2C businesses. The B2B
business is high sales and low value adds, while the B2C business requires a higher
value add.

2. Financialisation of gold: It means three things. One, to integrate existing above-

ground stocks of gold into the financial system. Two, to ensure that all future
investment demand for gold is made in financial products that are backed by gold and
 not as physical gold. Three, to ensure that the economic value of an individual's gold
reserves is realised.

3. Tax Reforms: Tax policies should be designed in a way that it enables changes the
largely MSME sector to an organised sector. These can be achieved by rationalising
the import duty on gold and gold doré, which would remove the arbitrage between
Indian and international gold prices, thus dis-incentivising illegal smuggling. It will
get a level of pricing of Indian and global jewellery by making the exports
competitive on prices. There is a need to incentivise digital payments and reduce
compliance requirements under the PMLA. The GST applicable also needs to be
rationalised.

4. Regulatory body: To help the integration of the informal sector into one market,
the vision plans to create an advisory body to the Government in the form of the Gold
Board of India. It will be a multi-stakeholder body with representation from relevant
Ministries, regulators and industry. To take the vision forward, there is a need to have
a Gold Domestic Council, which could be the representative body of the industry. It
also aims at setting up Bullion Exchanges. It will result in the development of an
integrated market that provides for price discovery.

5. Skill Development and Employment Generation: Skill development shall cater

to new technologies and modern methods while preserving traditional skills that
would uplift the capability of domestic manufacturing to create competitive exports.
The vision focuses on a need to develop specific skill sets over the industry value
chain covering four major sub-divisions, (1) Mining and Refining, (2) Manufacturing,
(3) Standardisation and (4) Sales.

c. Economic

Demand for gold in India arises from culture, tradition, the desire for beauty
and the desire for financial protection. The Indian gold industry employs 5 million
people and contributes more than $30 billion to the domestic economy. It
approximately contributes 7 per cent of GDP.

During inflation, the value of the currency goes down, and people tend to hold
money in the form of gold. Therefore, in times when inflation remains high for a more
extended period, gold becomes a tool to hedge. This pushes gold prices higher.

Usually, there is an inverse relationship between gold and interest rates. Rising
productivity indicates an expectation of strong economy, which gives rise to inflation
and gold is used as a hedge against inflation. Also, when interest rates rise, investors
gather fixed-income investments that provide a fixed return, unlike gold. So, demand
takes a setback with prices remaining flat.

Even if gold does not command the role of a monetary note, it continues to
attract its consumers, producers and investors. In India, gold has immense value in
terms of jewellery consumption for adornment as well as a significant form of wealth
accumulation (asset demand) by low - and middle-income households in urban and
 rural areas alike. India is the largest consumer of gold, which accounts for a fifth of
annual global gold consumption. The gold industry in India employs about half a
million people with a turnover of more than US $ 20 billion. Imports meet almost all
of India's gold demand. Thus, for India's gold market, gold demand is the mainstay.
Gold Demand Drivers in India
 Combining Security and Beauty
 Protection Against Volatility
 Part of the Family Budget
 A Trusted Asset
 Easy to Understand

Indian gems and jewellery industry are predominantly wedding driven. But
due to COVID-19, such events have been cancelled, and wedding shopping has come
to a standstill. India's average long-term gold demand is likely around 850 tonnes
because of its affinity to gold due to economic and social requirements. Despite the
forecasted gold demand to be in the range
of 700-800 tonnes in 2020, the volatility
along with high prices impacted the demand
severely before and during the COVID-19
outbreak.

d. Social 

Gold plays various roles in cultures and

societies. Gold jewellery has existed throughout
history with pieces dating back 90,000 years
and more. Ancient jewellery often consisted of
materials, such as shells, wood, feathers and other natural items, but many of those pieces
had a significant symbol behind them. Despite the difference in materials and crafting
methods, jewellery shares similar roles as that ancient jewellery. Some common rationale
of gold jewellery include:
Currency: Throughout history, gold jewellery served as a currency or as a tool used in
barter. Even today, some cultures use jewellery as a form of currency based on the value
of the materials they are made of.

Wealth Security: Valuable jewellery provides a good source of wealth security. A

valuable piece of gold jewellery can be an investment for the owner.

Status Symbol: Gold jewellery often symbolises a person's social status, both in today's
society and in history. People of higher social status often own and wear gold jewellery
that is valuable. Usually, they even own more jewellery than others.

Religion: Many pieces of gold jewellery serve as a religious purpose. They may represent
an achievement or position within the religion. Gold jewellery sometimes memorialises a
religious event, such as a communion or a baptism. Other symbols, such as a cross, carry
a general religious meaning.

Fashion Accent: Many people use gold jewellery solely as a fashion statement. They
select their pieces based on how well they match particular clothes or outfits.

Self-Expression: Some use gold jewellery as a form of self-expression as a piece of

jewellery might show their personality or style, for example. You might choose pieces to
make a unique statement.

Relationships: A popular purpose for gold jewellery is to represent relationships.

Wedding bands and engagement rings are examples of this type. It represents your love
and commitment to the relationship for both yourself and others.

Heirlooms: Many families pass gold jewellery down through the generations. This
practice connects families to the past while remembering their heritage.

e. Legal 

Gold hallmarking certifies the purity of gold, has so far been operating on a voluntary
basis in recent years. It has been encouraged by the Government in response to
widespread complaints about the
impurity of gold sold in the
market. However, the Central
Government has made
hallmarking of gold jewellery
and artefacts mandatory from Jan
2020 by issuing a notification,
but it will give one year's time to
jewellers and retailers to clear
 their old stock. Hallmarking has been made mandated to protect the consumer against
lower cartage and ensure that they are not cheated while buying gold jewellery. This will
benefit people in villages and small towns which are not able to make out the purity of
gold they have been buying.

Since the hallmarking scheme had been voluntary so far, many jewellers have been
found to be misleading buyers. For instance, '916' on the gold item denotes 22-carat
purity. However, if there is no accompanying BIS logo, the gold may not really be 22
carats pure. Other jewellers are said to conveniently and illegally get only a part of the
stock hallmarked and claim that all their gold is hallmarked.

Right now, big retailers like Tanishq showcase 100% hallmarking as a USP.
However, in rural areas, neither retailers nor buyers are much aware of hallmarking.
Rather than just making it a regulation, the Government should create awareness through
big retailers so that the demand comes from consumers.

The Gold (Control) Act, 1968 is a repealed Act of the Parliament of India which was
enacted to control sale and holding of gold in personal possession. However, excessive
demand for gold in India with negligible indigenous production is met with gold imports
leading to drastic devaluation of Indian rupee and depletion of foreign exchange reserves
to alarming levels.

f. Environmental:

Dirty gold mining has ravaged landscapes, contaminated water supplies, and
contributed to the destruction of vital eco-systems. Cyanide, mercury, and other toxic
substances like cyanide are regularly released into the environment due to dirty gold
mining.

 Acid Mine Drainage: The problem results when underground rock disturbed by
mining is exposed to air and water. Iron sulfides in the rock react with oxygen to
form sulfuric acid. Acidic water draining from mine sites can be 20 to 300 times
more concentrated than acid rain, and it is toxic for the eco-system.

 Mercury Pollution: The use of mercury in gold mining is causing a health and
environmental crisis. Mercury is used in small-scale gold mining to extract gold
from rock and sediment. It is a toxic substance that wreaks havoc on miners'
health.

To limit the environmental damage, mines often construct dams and place the toxic
waste inside. But these dams do not necessarily prevent contamination of the surrounding
environment. Toxic waste can easily seep into soil and groundwater, or be released in
catastrophic spills. At the world's estimated 3,500 dams built to hold mine waste, one or
two major spills occur every year.

https://indianjeweller.in/Indian-Jewellery-News/11503/Is-the-Indian-Jewellery-Industry-
HighTech-Enough
https://economictimes.indiatimes.com/markets/commodities/news/gold-demand-to-plunge-
by-30-in-2020-indian-chamber-of-commerce/articleshow/75062292.cms
http://www.statista.com/statistics/1010495/india-titan-jewelry-quarterly-income/
https://economictimes.indiatimes.com/wealth/invest/factors-that-affect-gold-
price/articleshow/64464960.cms

Industry attractiveness based on a micro view

 The high capital requirement and strict guidelines make the industry less attractive for
new entrants. However,
 The social importance that gold enjoys is neverending and will sustain the demand in
the future as well. The jewelry industry seems poised for a glittering future. Consumer
appetite for jewelry, which was dampened by the global recession, now appears more
voracious than ever.
Industry attractiveness based on a macro view
 The technological advancements has promoted new manufacturing methods.
Implementation of these technologies is now extremely necessary for stores to remain
competitive and relevant in the rapidly changing market dynamics.
 The government has been promoting growth the the industry via various schemes and
will continue to do so because it is a major contributor to the country’s GDP.
Based on these factors, the industry is attractive provided there is enough capital investment.
the gems and jewellery sector is also expected to grow in the domestic market, going
forward. As the per capita consumption of jewellery is low in India, there exists an attractive
opportunity to tap the domestic market. India’s nominal year-over-year expenditure growth of
12% is more than double the global rate of 5%, making it the thirdlargest consumer market
by 2025.

As the per capita consumption of jewellery is low in India, there exists an attractive
opportunity to tap the domestic market. India is forecasted to be the world’s fastest growing
large economy and a favourable demography through 2050. India’s diverse and large
consumer segments are driving purchases across categories. Rising affluence is the biggest
driver of increasing consumption. India’s economic growth is driven by domestic demand.
The introduction of GST created more flexibility, making it easier to trade between and
within states. India’s nominal year-over-year expenditure growth of 12% is more than double
the global rate of 5%, making it the thirdlargest consumer market by 2025. India adds 7,300
millionnaires in a year, with the dollar millionnaire club having gone up to 3,43,000. The
number of dollar-millionnaire Indians is expected to go past 5.26 lakh by 2023. India’s
consumer market is predicted to triple to 335 lakh crore by 2028, accounting for 62% of
GDP, and driven by GDP growth, rising affluence and urbanisation.