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"In 5-10 years, India will be a dominant player in the market for diamonds and jewellery," Mr Paul C. Goris, Chairman of the Executive Committee, Antwerp Diamond Bank (ADB), said.

MUMBAI, Dec. 12

INDIA'S role in the global diamond industry is becoming more prominent, with the country successfully eating into manufacturing capacities elsewhere.

Starting out by "cutting the uncuttable" and developing thereby a reputation in finishing small diamonds, India now has also a share of the market for moderately big diamonds once dominated by Israel and even forayed into the domain of big diamonds, the Belgians' forte.

Competition is forecast from China. But they have a lot of catching up to do, with India already well entrenched in the business. "In 5-10 years, India will be a dominant player in the market for diamonds and jewellery," Mr Paul C. Goris, Chairman of the Executive Committee, Antwerp Diamond Bank (ADB), said on Thursday. And that this was the secret behind opening a branch in Mumbai.

Further reason for ADB's new branch is the growing domestic market for diamonds and jewellery in India.

While the country's low labour cost continues to give it a competitive edge in small diamonds, its business pattern provides strength in covering markets worldwide. According to Mr Goris, Indian outfits are efficient, professional and have vision. More important, their family-driven structure is a safe route to building distribution networks globally.

ADB, founded in 1934 to finance the Antwerp diamond trade, is today one of an estimated 15 focused diamond banks worldwide. It was the first to float a commercial paper programme for the diamond industry, incidentally for an Indian-owned company in Antwerp. With a full-fledged banking licence from the RBI covering the diamond industry, ADB can offer similar facilities here too, officials said.

The apparent risk in a single sector-focus is reduced at the apex level, as ADB is being owned 99.98 per cent by KBC Bank. This also allows innovations to be moved across KBC's businesses, Mr Jan Vanhevel, Chairman of the board of directors, ADB, said.

According to Mr Goris, focused financing of the diamond trade makes ADB different on the inside from a conventional bank. First, the business is capital-intensive featuring a lot of money assigned to a single borrower. Second, the asset side of company books look peculiar, composed of diamonds and receivables from other diamond companies, with diamonds changing value and moving around as they travel up the finishing process. "You have to build systems to watch that flow," he said.

Notwithstanding optimism on India, caution is currently advised at a global level for the business. Over the last year or so in tune with the economic gloom, diamond sales in key markets like US and Japan were hit. The average price per diamond fell.

However, the supply overhang in polished diamonds was corrected at the start of 2002, giving the year's first quarter "good balance". The second quarter was even better, profitability returning to the rough diamonds side of the business as well, courtesy adjustments by the Diamond Trading Corporation.

Right now, as US sales move through their busiest months, Mr Goris advises "caution". Though Thanksgiving sales were buoyant, economic indicators are not yet strong in the US and clarity eludes Japan; on the brighter side, Asian markets like Taiwan and Korea seem upbeat.

Also to track is the industry's bank debt position, used sometimes to finance inventory of polished diamonds. Should it linger at high level, pipelines will be seen as clogged with possible lag effect on rough supplies.

Industry bank debt of $6 billion or under is reckoned as a comfortable level. Estimates at present show bank debt of $2.1 billion in Antwerp, $2.2 billion in India, $1.7 billion in Israel and $1.2 billion in New York. This is largely attributed to the busy season, correction forecast after the season ends by February 2003.

"So, worry is not the right word for this, but the situation still has to be monitored," Mr Goris said.

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