Vipul P Shah as Chairman of the Gem & Jewellery Export Promotion Council of India (GJEPC) has been at the forefront to drive export demand and was successful in strengthening ties with mining companies and diamond trade bodies.
Among the many important milestones, he was instrumental in organizing GJEPC’s first World Diamond Conference which was attended by Hon. Prime Minister Narendra Modi and Finance Minister Smt. Nirmala Sitharaman.
As CEO & Managing Director of Asian Star Co. Ltd., Vipul Shah has built an empire with his astuteness, focus and determination, and is a force to reckon with. He has been instrumental in establishing the company’s jewellery business and global distribution network, currently one of the best in the industry.
Here, in an exclusive interview with Rough&Polished, Vipul Shah opines on the various challenges being faced by the Indian gem and jewellery industry.
Some excerpts:
What is the current situation in the Indian diamond industry with the manufacturing sector affected drastically with shortage of rough diamonds? Recently, India's rough imports as well as polished exports have decreased considerably. Your views?
There is no upstream shortage of rough diamonds, but there is a demand challenge globally that the industry is addressing through generic promotions of diamonds. Indian manufacturers are making cautious decisions to align inventory with demand, particularly in key export markets such as the USA and China, which were affected by inflation and economic slowdowns in 2023. However, we observed a decent demand for diamond jewellery in the USA during the holiday season, indicating a positive trend for the industry. Moreover, we remain hopeful that China, another vital market for diamonds, will experience an uptick in demand during its two-week-long festive New Year celebration.
Despite these optimistic signs, it's important to note that overall exports of cut and polished diamonds from April 2023 to December 2023 have declined by 28.27% compared to the same period last year. Additionally, imports of rough diamonds have decreased by 23.51% compared to the previous year's figures.
On the one hand, the Lab-grown diamond (LGD) sector's production and manufacturing is doing pretty well in India, but prices seem to drop? What changes do you foresee in this sector, going forward?
Regarding the Lab-Grown Diamond (LGD) sector in India, while production and manufacturing are thriving, there has been a noticeable drop in prices. This was expected, given the abundant nature of LGDs produced in factories. However, the prices have now reached a point where further reductions may not be sustainable, considering manufacturing costs. For customers in tier 2 and tier 3 segments, LGDs offer an attractive option for realising their aspiration of owning a diamond. It's evident that LGDs will attract a specific set of customers, and as a distinct category.
Some overseas markets, especially the USA market, showed good demand for LGDs in the past. But, with prices dipping for LGDs, demand is fluctuating a great deal with market watchers claiming it to be a temporary situation. Your opinion?
As previously mentioned, the prices of LGDs have now reached a threshold where further reductions are unsustainable given the manufacturing costs. Despite these fluctuations, LGDs are expected to persist and flourish as a distinct product category. There will likely be a specific consumer base that continues to embrace and purchase LGDs.
G7 countries' approach to the war in Ukraine and the resultant sanctions on ALROSA has not only impacted the global diamond and jewelry markets, but the Indian manufacturing sector, which is facing acute shortage of roughs. Can the Indian Government help in 'direct sourcing' of rough from other mining countries by altering its tax structure, maybe?
There is no shortage of rough diamonds but there are logistical challenges in bringing rough diamonds directly to India. India has set up Special Notified Zones (SNZs) in Mumbai and Surat with the prime objective that there would be easy availability of rough diamonds by creating efficiencies in procurement of rough diamonds by allowing overseas diamond mining companies to sell their produce directly to Indian manufacturers through such SNZs. But as of now sale of rough diamond at SNZ is not allowed. This has been GJEPC's long-standing demand from the Government to introduce the safe harbour rule permitting sale of rough diamonds in SNZs.
With the slowdown in diamond manufacturing, how is India's domestic jewellery sector faring now? Reports claim that domestic demand is set to increase for gold jewellery, with more gemstone/LGD studded than natural diamond studded, during the upcoming wedding and festival seasons? Your opinion?
For centuries, gold has remained a timeless choice for brides for several well-known reasons. Despite changing trends, we maintain the belief that discerning buyers, conscious of value, will persist in choosing gold and natural diamonds, acknowledging their lasting intrinsic worth over the years.
The recent IIJS Show is reported to have fared very well, but with the US as well as China too in a major slowdown, how do you see demand for natural diamonds / LGDs hitting exports from India in the coming months?
In the USA, robust demand was observed during the Holiday season, contributing to an uptick in the demand for diamonds and diamond jewellery. Similarly, in China, another crucial market for diamond exports, we anticipate an increase in demand during their New Year period, celebrated from the 11th to the rest of February 2024.
Nonetheless, the overall demand for 2024 is contingent on various factors, such as geopolitical events like wars, which could significantly shape the global business landscape.
What are the challenges and opportunities facing the domestic diamond and jewellery sector during the FY 2024-25? Please give us a complete picture of India's diamond industry as of now, and also where it's heading...to the future.
India's diamond and jewellery exports contribute around 9% to the country's merchandise exports and employs nearly 5 million people. Some of the challenges it faces are the economic downturn in key export markets, geopolitical concerns, demand challenges globally and availability of duty-free gold. The industry also needs to cope with the impact of the G7 sanctions on Russian-origin diamonds.
Among the opportunities, the industry has a huge potential to grow in the domestic and international markets, as India is expected to lead the global natural diamond demand in 2024 due to its strong financial position and changing demographics. The industry can also benefit from the Government's policy interventions, such as investments in modern infrastructure like the Mega CFC in SEEPZ, providing incentives for exports and manufacturing, and funding a research grant of Rs. 242 crore for Lab-Grown Diamonds through IIT Madras. The industry can also leverage its strengths in design, craftsmanship, and innovation to create value-added products and services for the consumers.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
