In a major blow to India’s diamond sector, members of leading trade organizations have jointly recommended freezing the import of rough diamonds for two months, from 15 October to 15 December.
The decision came after a severe dip in polished trading amid slow retail sales in the US, increased competition from lab-grown diamonds, and a fall in China’s economy.
In a joint statement, the Gem & Jewellery Export Promotion Council (GJEPC), along with Bharat Diamond Bourse (BDB), Surat Diamond Bourse (SDB), Mumbai Diamond Merchants’ Association (MDMA), and the Surat Diamond Association (SDA), said that it will be a “voluntary” ban and not an outright prohibition on the import of rough diamonds.
India’s Diamond Exports Decline by One Quarter
Citing the mismatch in the demand and supply of diamonds, the diamond merchants said in their statement that India’s exports have declined by 25% over the period of January to August, with a similar trend for the month of September also.
“Demand for loose polished diamonds and jewellery from large consuming economies such as the USA and China have been materially affected over the last many quarters, on the back of all-time highs of 2021 & 2022, with a visible slowdown in orders”, the statement reads.
In this handout photo released by the Russian diamond producer Alrosa, a view shows a rare 242-carat rough diamond, which will be offered at the 100th international auction of Alrosa in Dubai on March 22, 2021
© Sputnik / Alrosa
/ Nitin Kedia, general secretary, All India Jewellers & Goldsmith Federation (AIJGF), told Sputnik India that while India has an adequate stock of rough diamonds to supply, there has been a significant downfall in demand and the country's diamond export in calendar year (CY) 2023.
“This has resulted in a pile-up of inventories and a drop in prices due to the supply-demand ratio. Hence, the representative of the diamond industry had requested the government to put up a ban for two months on the import of rough diamonds”, Kedia said.
“In these two months domestic players may focus on under-utilized markets to deleverage on USA”, Kedia added.
Impact on Other Countries
India is the largest importer of rough diamonds, followed by Belgium and the United Arab Emirates.
Diamond merchant Rameshbhai Zilriya, president of the Diamond Workers Union Gujarat, told Sputnik India that gemstone imports from Russia make up 29% of India's total raw material diamond imports, while the US, China, and the UAE are the main markets for India's diamond jewellery.
Moreover, the US Treasury Department last month froze around $26 million in funds belonging to Dubai-based offshore firms owned by Indian businesses due to alleged links with Russian diamond companies.
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© Sputnik
Natalya Yeremina, professor at the Department of European Studies, Faculty of International Relations, St. Petersburg State University, told Sputnik India: “India’s decision to stop rough-diamond imports temporarily coincides with time. However, those seeking an embargo on Russian diamonds – the US and the EU – are well aware that in reality this doesn’t affect the possibilities of Russian diamond exports”.
Eremina, however, feels that India took such a decision as it fears a reaction from their Western partners and wants to see how they respond to it, but it still refers to the reduction in demand and, accordingly, to the fact that they have the problem of preserving jobs in the industry and maintaining a certain level of wages.
The professor stressed that since India is one of the main leaders in the diamond processing industry, the US does not want to lose this direction and it is an attempt to become a full-fledged leader in the Indian market and to influence the world market.
“There is a desire to snatch Russia’s presence from the world market. Therefore, the task of the US here is such that everything they do is not only related to economy, rather it should be sever Russia’s ties with other countries”, Eremina stated, adding that since Russia is now very actively developing BRICS and partnerships with China and India, the US will also hit precisely those areas in which very active interactions have developed.
The professor said that this would not yield the results the US wants, but it would somehow weaken the chain.
Will Diamond Prices Go Up?
The diamond merchants believe that amid the slowdown in demand, the industry has to present a request to the Indian government not to raise prices.
“Due to the pause on import of rough diamonds, the domestic prices can go up. We can only hope that during this period, the government can utilize existing inventory”, Kedia said.
Impact on Artisans’ Livelihood
When asked how the decision to pause the import of rough diamonds will impact India's diamond industry as a whole, Kedia said, “This may bring relief for domestic players as they are struggling with the price drop in recent months which is badly impacting their asset-liability ratio”.
However, members of the diamond associations have urged for measures to be taken to support the artisans and ensure that there is no adverse impact on their livelihoods during this period.
The committee also decided to review the situation in the first week of December, and then decide the future course of action.
Measures Taken to Increase Demand and Export of Diamonds
The Gem & Jewellery Export Promotion Council (GJEPC) has taken several measures to increase demand in significant markets with the help of all other trade bodies, the government of India, the Natural Diamond Council, rough diamond mining companies, and likeminded bodies in the US.
From organizing a grand gala function in Hong Kong to generate positive awareness around natural diamonds to tapping alternative markets such as the GCC, Vietnam, Cambodia, Myanmar, Thailand, and others, the GJEPC is leaving no stone unturned in raising the demand of diamonds.
The council has also established a dedicated diamond section within the India International Jewellery Show (IIJS), which has resulted in a boost in demand for diamonds in the Middle East and the Indian subcontinent, the statement reads.