Gems and jewellery is one of the important sectors of India’s foreign trade and has traditionally played a significant role in earning foreign exchange, generating employment and strengthening India’s position in international markets. However, the statement that “the gems and jewellery sector is not import oriented” needs to be examined carefully. In reality, the sector is highly dependent on imported raw materials, particularly rough diamonds, gold, silver, coloured gemstones and other precious materials. Therefore, while the sector is strongly export oriented in terms of its contribution to merchandise exports, its production and export activities are substantially supported by imports. India has developed a globally competitive gems and jewellery industry, especially in diamond cutting and polishing. Cities such as Surat and Mumbai are major centres of the diamond trade, while Jaipur is internationally known for coloured gemstones and jewellery processing. The sector includes mining-related activities, cutting and polishing, manufacturing, designing, wholesaling, retailing and exporting. Indian craftsmen and manufacturers have developed considerable expertise in processing imported raw materials and converting them into high-value finished products for international consumers. The export orientation of the sector is evident from the large volume and value of gems and jewellery exported from India. Cut and polished diamonds constitute a major component of these exports. India imports rough diamonds from major producing countries and adds value through cutting, polishing and grading before exporting the finished diamonds to markets such as the United States, the United Arab Emirates, Hong Kong, Belgium and other countries. This process demonstrates that imports are not necessarily a sign of weakness in the sector. Rather, imported raw materials constitute an essential input into India’s export-oriented manufacturing process. Gold is another major imported input for the gems and jewellery industry. India has relatively limited domestic production of gold compared with the requirements of its jewellery manufacturing and consumption markets. Consequently, a substantial quantity of gold has historically been imported. Imported gold is used by jewellery manufacturers to produce ornaments that are sold domestically as well as exported. Thus, the gold jewellery segment also has an important import component. The same applies to silver and several precious and semi-precious stones that are either unavailable or insufficiently available domestically. The concept of an import-oriented sector generally refers to an industry whose activities are primarily dependent upon imported goods for meeting domestic requirements. In this sense, the gems and jewellery sector cannot simply be described as non-import oriented. Its raw-material base has a considerable import dependence. However, if the term is being used to describe the sector’s overall orientation in foreign trade, it is more appropriate to call it an export-oriented sector with significant import dependence. The relationship between imports and exports in this sector can be understood through the value-addition process. Rough diamonds imported into India are processed by skilled workers and converted into cut and polished diamonds. Similarly, imported gold can be converted into intricately designed jewellery through manufacturing, craftsmanship and technological processes. These activities increase the value of