The shimmer of diamond, that light up the lives of many, is having an adverse effect on India. Over the past three months in Gujarat, close to twenty people involved in the diamond industry in the polishing units in Gujarat, have committed suicide because of unemployment. Nearly 25% of the 8,000 diamond polishing units did not open shop after the festival vacation of Diwali in November.
According to estimates by various industry experts, nearly 1,50,000 workers have been laid off in the year 2008 in the Indian diamond industry, and more are expected to follow in the coming months. The largely unorganized industry employs close to 5-6 lakh workers in Gujarat. Their average monthly salary hovers around Rs 5,000 - 10,000. Workers are also paid a premium based on their knowledge of polishing a delicate stone.
90 days into the closure of the units, it would perhaps not be an exaggeration to say that diamond industry is perhaps the most adversely affected by global recession. Executive director, De Beers Group Stephen Lussier was quoted in a leading financial newspaper of India that Christmas sales have dropped by 10-20% in the US, Lussier claimed, but real-time industry estimates peg this figure higher.
The US consumes about 50% of the world's total diamonds and close to 60% of India's output.
Chairman of Gems & Jewellery Export Promotion Council (GJEPC) Vasant Mehta said in a Reuters report that negative growth has been predicted in domestic and international diamond sales in the fiscal year ending March 31, 2009. For calendar year 2008, India's polished diamond exports grew 10 percent to $14.48 billion, though exports fell dramatically in the final quarter. December exports fell 26 percent, after declines of 46 percent in November and 20 percent in October compared with 2007.
However, the Indian domestic demand this marriage season did not register a drastic fall. The organized Indian market of diamonds is pegged at around US$ 2.5 to 3 billion, and the unorganized market is equal in value if not more. The Indian diamond jewellery industry is the third largest consumer of polished diamonds after the US and Japan.
Diamantaires in Antwerp, Belgium, the global trading hub of diamonds, have unequivocally said that they will refrain from buying more roughs till demand looks up. This has resulted in stock piling of polished diamonds of upto 12 months, as against the normal backlog of 3-4 months. As a result, diamond polishing units in Surat are not willing to open shop, rendering millions jobless.
However, a silver lining might be in the offing soon. The Union ministry of commerce and industry is expected to announce a bailout package for the industry. Moreover, a US consumer research conducted by De Beers also indicates that diamond continues to top people's list of gifts even in these trying times. Marketing budgets have been notched up to increase desire levels and reach out to new markets, hoping for a speedy recovery.
The Indian diamond industry is closely linked in the global diamond supply chain with diamond roughs being bought in Antwerp by diamond traders and sent to Surat and Mumbai for polishing. Mumbai is the hub for very high-end diamonds, while Surat produces the bulk. Eight out of every ten diamonds sold anywhere in the world are polished in Surat.