India's diamond polishing industry will see its revenue drop by 30-35 per cent to $14-15 bn in the current fiscal year on poor demand from the US, EU and China, which account for 75 per cent of India's polished diamond exports, according to rating agency CRISIL.
Also, Israel imports $1.25 bn of polished diamonds annually from India, but with the country now declaring a war on the Palestinian militant group Hamas, this might get affected. Though there is an increase in demand in the second half of every fiscal year from festivities such as Thanksgiving, Christmas and the Chinese New Year, it is unlikely to provide a significant offset this time. Consequently, the Indian diamond industry is likely to shrink by over a third on an annualised basis this fiscal.
According to CRISIL, with the inventory of higher-cost polished diamonds piling up to over four months of sales, profitability of polishers will be chiseled 50-100 basis points amid lower retail prices. The silver lining is that a shrinking business translates to reduced debt, which will offset the pressure on credit risk profiles of diamond polishers, says CRISIL.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
