Why diamonds are not Indian girl’s best friend, yet!!

Unlike in most parts of the world, Gold is still the most preferred jewelry option in many emerging economies like India, where diamonds still lag far behind.

The World Gold Council survey for 2012 shows the emphasis Indians place on gold purchases.

FT-Attitudes-to-Gold-Jewelry-in-India-08252014-lg[Image Courtesy: Business Insider]


Dismally, demand for diamonds is still low compared to gold. Diamonds make up only 30% of India’s jewelry market. Apart from the traditional importance attached to Gold in the Indian sub-continent, there are several reasons why it still rules, some of which we’ll try to discuss:

>  Diamonds inherently are complex products. 4Cs of diamonds itself can create more than 16,000 combinations and unlike gold, a stone of a particular combination is not easily interchangeable with another one making diamonds almost non-fungible.

>  Pricing of diamonds is based on its grading (again derived from the 4Cs), which is much more complex than gold whose pricing is determined simply by weight and carat (In case of gold, carat stands for purity). Most Gold jewelry is made of 22ct or 24ct and benchmark retail prices per 10 grams of gold are disclosed daily in a transparent manner. Whereas, diamond pricing is not so transparent and remains a mystery to most.

>  Gold is regarded as safe investment avenue and some financial institutions accept gold as collateral against secured loans. Gold prices have appreciated 501 percent from 2001 to 2012 giving an annualized return of 18%, much better than government deposits. Due to complexities and transparency issues, no such single investment appreciation figure can be derived for diamonds. Besides, Gold ETFs exist globally.

>  Gold can be easily resold to the retailers themselves with no hassles. To re-sell a diamond ring is unfortunately an uphill task, at least till now. Though De Beers has planned a Diamond re-purchase program, it is yet to be implemented.

>  Advertisement and marketing spends of De Beers plummeted from a high of estimated $200+ million to $70 million in 2008. Other luxury items have an overall marketing budget (including PR & communications) of as high as 25% of revenue; In contrast, diamond industry reportedly spends only 1-2% of their revenue on marketing. Gold, on the other hand is aggressive promoted in India, which augurs well for the metal .


To change this scenario and to make diamonds the Indian girl’s best friend too, industry stakeholders have to significantly improve communication with consumers, educate and raise awareness among the people across value chain and strengthen the processes for diamond valuation and certification to boost demand in Indian market.

Some measures that industry players should take are:

>  Create a strong uniform disclosure and certification process where source and quality of all diamonds can be easily verified by all retailers and consumers alike.

>  Bring uniformity and transparency in diamond prices, where investment benchmarking is possible. Work on creating Diamond Spot prices.

>  Put more emphasis on advertising about rich heritage of diamonds and create place for them in the Indian culture

>  Give consumers re-selling options and improve diamond’s fungibility.



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