Though last year has been successful for Indian jewelry industry whose exports are expected to cross USD 40 billion, a four year high, it is largely credited to gold. Diamond market globally and in India is facing a downward spiral with Indian Diamond processing industry bearing the brunt.
Gold import in India increased by 19.5% in 2014-15 due to Reserve Bank of India’s (RBI) move to reduce gold import restrictions. Credit rating agency – ICRA in its recent report has estimated India’s gold jewelry industry to achieve an impressive growth of 8-10% in medium to long term.
Indian diamond industry, on the other hand, has been facing a very gloomy period. Recent annual performance report released by Gem & Jewellery Export Promotion Council (GJEPC) showed a decline of 9.06% in import of rough diamonds and decline of 5.46% in export of Cut & Polished diamonds compared to previous year. Indian Rupee (INR) has been weakening considerably since April and stood at 63.43 to USD on 5th May resulting in rough diamonds getting costlier by 2-3%. This has caused a major setback to the Indian diamond cutting and polishing industry, which processes more than 80% of world’s rough diamonds.
“The last quarter has been very bad for the diamond industry. Most of them will clock losses in last quarter as the demand for solitaires that earn major revenues for the trade has almost disappeared”, Vipul Shah, chairman of GJEPC recently mentioned.
To avoid losses, Indian diamond manufacturers are planning to cut production up to 30%. Most of the major diamond processing units in Surat – backbone of Indian diamond manufacturing – had declared a three-week vacation to lessen inventory accumulation. However, as the conditions have not yet improved much, diamond processing industry in India has decided to extend the vacation period to around 6 weeks and not to resume work till June first week.
Though the drop in diamond exports has been worrying, increase of local demand for polished diamonds in India is providing some relief to the Indian diamond industry. Demand for diamond in India recorded a 7-8% growth in 2014-15. GJEPC is optimistic that even global demand will pick up from June.