Marzin Shroff, chief executive officer of Ishi's, the jewellery arm of the Rs 1000 crore (Rs 10 billion) Suashish Diamonds [Get Quote], said, "This is a set back to quality standardisation in the jewellery industry."

The branded jewellery industry was only a couple of years old and every company would take at least 1000 days to break even. The duty, he said, was an incremental cost in an industry already under pressure.

Madhusudan Daga, a veteran bullion consultant, said "Slapping a two per cent duty on manufactured branded jewellery amounts to taxing the quality of the jewellery as consumers develop a trust towards brands."

Daga said the announcement was ambiguous on hallmarking, as it is mandatory to specify the brand name on the hallmarked jewellery.  This could create a problem at the time of computing the tax.

Mehul Choski, chief executive officer of the Gitanjali Group, said, "The step will hamper the industry that could have gone on to make India a brand leader. While the two per cent is unlikely to make a difference to consumer prices, excise duty will only increase the paper work."

Bakul Mehta, chairman of the Gem and Jewellery Export Promotion Council, said, "The sector is predominantly concentrating on making India an international hub for diamond jewellery but the budget did not tackle the issues in this regard."

He however, welcomed the opening up of the mining sector for foreign direct investment, as it would lead to exploitation of untapped resources.

The other announcement relating to reduction of duty on imitation jewellery from 16 per cent to 8 per cent is expected to encourage consumption among less affluent buyers.