Can the Indian diamond industry survive the current crisis?

Aruna Gaitonde

The Indian diamond industry is facing an uncertain future with multiple challenges to tackle simultaneously. When diamond mining major De Beers reported the sale of $545 mln worth of rough diamonds in the first sales cycle of this year after a difficult 2019, it was an indication that the industry is on a recovery path.

But, just when the industry showed signs of improving at the beginning of the New Year 2020, after facing demand downturn from Hong Kong and China due to the US-China trade war and the Hong Kong riots, suddenly chaos prevailed with the outbreak of the deadly coronavirus in China.

Though India’s total global exports of cut and polished diamonds during December 2019 recorded a minor increase to $ 1.25 bln against the previous month, imports of rough lab-grown diamonds stood at $ 45.69 mln during December 2019, up from $ 14.75 mln in December a year ago. This indicated that the industry was on the verge of improvement and growth. But now, the first quarter is looking increasingly bleakas the Coronavirus outbreak hurts demand in Hong Kong, India’s biggest export market. December was better so industry members felt that it would recover, but from January onward the Coronavirus issue has surfaced. So January exports have been hit and it may take at least a month or two to recover.

India’s cut and polished diamond exports to Hong Kong have slumped 23% in the nine months to December from a year earlier to $5.4 bn. The country’s total exports of gems and jewellery to Hong Kong are down 9% to $7.4 bn in the period. With Hong Kong Trade Development Council (HKTDC) advancing the twin Shows— the Hong Kong International Diamond, Gem & Pearl Show and the Hong Kong International Jewellery Show—to May 18-21 due to the coronavirus outbreak, the Indian Gem & Jewellery industry is in a state of distress. Also, no Chinese or Hong Kong visitors are expected to visit the IIJS Signature -2020 as India has barred visas for travelers from both the countries.

In De Beers’ first sale of the year, prices of rough diamonds have risen by 3-4 per cent, but the Indian diamond exporters are not sure if the price increase will be reflected in polished diamonds, as demand from China, Hong Kong and the Far East is likely to take a hit due to the outbreak of Coronavirus. Besides, the Indian G&J Trade is disappointed by the Union Government-2020 Budget, which retained import duty on gold at 12.5% and polished diamonds at 7.5%; and no other sops offered to the diamond industry. Of late, Gold jewellery demand in India declined to 544.6 tonnes in 2019, a fall of 9% as compared to the earlier year. The decline was largely on account of a surge in the price of the yellow metal to a new six-year high in dollar terms during the second half of the year, with the domestic economic slowdown and muted rural demand also having an impact.

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Source Rough & Polished