All that branded glitter is gold

The branded jewellery industry is a case of effective state intervention to correct market imperfection. India was last year the second largest importer of gold, the bulk of it for domestic jewellery consumption. Regulatory requirements of greater transparency by buyers through money laundering legislation and sellers through hallmarking have speeded up the formalisation of the jewellery industry. This has widened the capitalisation funnel for branded jewellery that includes the country's biggest business groups and listing by established regional players. What was essentially an opaque market a decade ago is now on course to becoming a modernised industry with standards set at all points of the value chain from import to re-export.

Undisclosed revenue has turned into a handicap for the unorganised jewellery segment. Access to capital, along with quality assurance and design capability, gives branded players their edge. And they are pushing their advantage deep into unpenetrated markets beyond India's cities, where demand for jewellery is stronger both for consumption and as a hedge against inflation. This competes with financial savings products that are also seeking growth beyond top-tier towns that are driving formal jobs growth. Branded jewellery chains are tracking the emerging urban middle class by geography, as well as catering noticeably to rural demand.

The process is likely to speed up with radial urbanisation as jobs move to where skills are available for the fastest growing industries. Technology is also pushing things along by bringing a larger labour pool into organised employment and improving consumer choice. Changed jewellery consumption patterns are irreversible, pushing up demand for design innovation. India has not succeeded in weaning its people off their fascination with gold, which essentially exports their savings. But it has made a big dent in raising value addition in the jewellery industry. It should aim at exporting this by creating global brands.