India is the world’s largest manufacturer of polished diamonds. About 90% of global diamond-cutting capacities and 80% of workers with different degrees of qualification (up to 1 million people) are based in India. The state of Indian diamond market is an important indicator of the global diamond economy, severely staggered by the world economic crisis.
In recent years India imports approximately 100 million carats of diamonds worth $10 billion annually. According to the statistics of the Gem and Jewellery Export Promotion Council in 1995-2005, Belgium and Great Britain (Antwerp World Diamond Centre and De Beers) remain major suppliers of rough diamonds; they account for up to 75% of the rough diamonds flow. About 20% of rough stock are supplies from Israel, Hong-Kong and the United Arab Emirates. That is to say, the managers of the Indian cutting industry still prefer to purchase rough diamonds via intermediary countries. Direct deliveries of rough stock from Russia were insignificant. Negotiations of direct rough supply from African countries (Botswana, Namibia, etc.) are going in a slow mode.
However, the interest of Indian diamantaires with regard to direct deliveries of rough stock has grown significantly during the last year. It is seen by higher purchases in Moscow and Yakutsk.
The amount of polished exports is volatile. The volatility has intensified in the period of acute crisis phase (autumn 2008 – summer 2009). So, the worst drop equal to 40% as compared with the previous year was registered in January 2009. A relative decline in export was registered before August 2009 compared with 2008. From September to December 2009 Indian diamond exports increased by 12-129% per month. As a whole, the diamond exports amounted to $12 billion which is 4.6% more as compared with 2008. In terms of carats the export growth rate reached 18%. Hong-Kong became the main attraction for export in 2009, exerting pressure on the USA.
Thus, given diamond exports to the USA at Rs 2,500 crore in 1997, the above figure has reached Rs 18,000 crore at present; it means that exports to Hong-Kong jumped 7 times. It is evident that Hong-Kong is not the final buyer but rather suitable terminal point. India also undertakes active efforts to intrude into the new markets of Russia and the Middle East. However, the access to the Russian market is blocked by 20-percent import duties.
India has about 1 million workers engaged at thousands of cutting factories. The cutting business is concentrated in two Indian states. The main gem-cutting clusters are located in Gujarat (Surat, Ahmadabad, Bhavnagar cities). Trade offices are located in Mumbai (state Maharashtra).
It was previously reported, that over 2,000 companies were closed during the period of the end of 2008 to Summer of 2009 due to the crisis, and thousands of specialists consequently lost their jobs after diamond exports dropped abruptly due to sharp decline in the global demand. According to the data provided by the chairman of GJEPC Vasant Mehta production load dropped to 20% in January-March of 2009. However production was completely resumed by the end 2009 and production load reached 65%.
More and more polished diamonds produced in India remain in the country for distribution, at that part of diamonds is directed to the domestic jewellery factories for production of jewelry destined strictly for exports. In circumstances where polished diamonds lost over 15% of their value during the period of economic recession these precious stones are purchased increasingly for investment purposes. Domestic consumption of diamonds doubled during the previous three months from 2% to 4% of the whole production. Despite the fact that this amount is miserable as compared to the global demand and taking into account that the gold in losing the favour of investors, diamonds have become an alternative for latter. “People tend to shift from gold to diamonds.
While the price of rough diamonds has increased considerably, the cost of polished diamonds is slowly increasing after reaching a new minimum in the process of recession. This created a good opportunity of investment to these precious stones” – says Mehul Choksi, the chairman of the committee on precious stones and jewelry of Federation of Indian Chambers of Commerce and Industry.
Minister of Trade of India Anand Sharma recently declared the Foreign Trade Policy for the period of 2009-2014. Considerable preferences were provided to the sector of precious stones and jewellery. The authorities are committed to turn India into large center of international diamond trade. Particularly, establishment of additional diamond exchanges is scheduled in Ahmedabad, Surat, Kolkata and Hyderabad. It is also planned to construct the new cutting factories for production of diamonds on the give-and-take basis. With the view of raising confidence of internation consumers to Indian production a decision was passed providing for development of diamond grading/certification services. For promotion of export of diamonds and diamond jewellery the government increased the limit for personal transit of jewelry and stones up to $5 million for participation in international exhibitions. The costs for special advertising campaigns will be increased up to $1 million. Apart from this, export procedures will be simplified.
The period of 2010 will be difficult for the Indian cutting industry: the balance will depend on the growth of investment consumption of diamonds, the recent applications for jewelry deliveries and secondary turnover of polished diamonds.
Vladimir Teslenko for Rough&Polished
