G7 Sanctions Strike India's Already Struggling Diamond Industry

The G7 sanctions on Russian diamonds polished in third countries, which kicked in on 1 March, pose a significant risk to an already struggling Indian industry, which supports over 2 million jobs primarily in the diamond trading hub of Surat in Gujarat.

"The condition of diamond industry workers hasn't improved much in the last one year. The economic distress caused by the downturn in industry has led to 44 of our workers committing suicide over the last one year or so," Bhaveshbhai Tank, the vice-president of Diamond Worker Union Gujarat (DWUG), told Sputnik India.

Tank stated that the workers' union was trying to negotiate an economic assistance package for the laid-off workers as well as those affected by lowering of wages due to reduced working hours, a consequence of slowdown in business.

Surat's reputation as the leading exporter of polished diamonds was largely fuelled by import of rough Russian diamonds mined by Alrosa. The US and EU ranked as biggest markets for Indian polished diamonds in 2021, according to official statistics.

However, restrictions placed by the US on import of Russian-origin diamond after President Joe Biden signed an Executive Order (EO) to the effect had a bearing on Indian exports.

In December, the G7 announced a coordinated set of sanctions against Russian-origin diamonds, triggering concerns in India.

At the time, India's Ministry of External Affairs (MEA) spokesperson told Sputnik India at a regular press briefing that the G7 sanctions on Russian diamonds was an "issue of concern" for New Delhi.

"We have concerns on this matter. This has been a subject of discussions with the EU and the G7," then MEA spokesperson Arindam Bagchi said.

Why India's Polished Diamond Exports Hit Five-Year Low?

Industry data on how the G7 sanctions on Russian diamonds have affected the Indian exports is yet to be published. However, diamond industry insiders have warned that the Surat industry could face challenges due to the western sanctions.

Explaining the reasons behind India's polished diamond exports hitting a five-year low, diamond industry analyst Edahn Golan told Sputnik India that the declining exports hadn't been caused only by G7.

He said that the demand volatility in the US, India's biggest market, had contributed significantly to New Delhi's exports.

"In the US, prices rose with exceptional demand in 2021 to mid 2022, and have declined since then. The rise and fall in US demand led to rising and declining prices as well. Since that time we are seeing a certain level of consumer fatigue, a situation of reduced consumption falling sharply," Golan stated.

According to Indian industry association Gems and Jewellery Export Promotion Council (GJEPC), India's overall exports of cut and polished diamonds registered a year-on-year decline of 27.58 percent in April 2023-January 2024 period.

Meanwhile, the Indian Prime Minister Narendra Modi, cognisant of the challenges being faced by the Surat industry, has urged the diamond traders to explore other markets.

Speaking at the inauguration of the Surat Diamond Bourse in December, Modi assured the diamond industry of all possible support in expanding its global footprint.

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