The Hindu Business Line : Diamond biz hopes to regain sparkle this Xmas

Rough times
Livelihood of about 7.5 lakh workers in jeopardy.
Polishing, cutting industry suffered a loss of about 30%
Trade has continuously declined over the last three years.

Virendra Pandit

Ahmedabad, Dec. 11 Severely affected by the global economic meltdown, continuously declining demand and increase in workers’ wages, the local diamond units, some of which have opened this week after a nearly 45-day-long ‘Diwali holiday’, are keeping their fingers crossed, hoping that this Christmas would bring their smile back.

Manufacturing — diamond cutting and polishing — has remained suspended for the last two months, import of rough diamond was stopped from November 25 for one month due to increasing inventory and decreasing demand.

Workers leaving for their homes in the last week of October for Diwali for two weeks as in the past were virtually forced to spend a 45-day-long holiday at home. Clearly, livelihood of about five lakh diamond Gujarati workers and another 2.50 lakh elsewhere, is seen in jeopardy if fresh demands do not come from abroad.

Demand outlook

However, given the expanding recessionary shadows in the West, from where a large chunk of Christmas-eve demands used to materialise from July itself until three years ago, the last two years have seen a continuous decline in demand, a reason why import of rough diamond was stopped last month and is likely to resume only next month.

But diamond merchants are still hoping that the demand would pick up.

“It is still difficult to say whether demand for diamond, which is seen as a luxury good but an investor-friendly investment, would pick up due to Christmas. The picture would emerge only in January when we would be able to have future projections,” Mr Vasant Mehta, Chairman, Gems and Jewellery Export Promotion Council, Mumbai, told Business Line. But, due to the recession, demand is expected to suffer, he added.

Acknowledging the challenges ahead, Mr Mehta said despite recession, prices of diamonds have remained stable and the business may still pick up with reduced interest rates.

Braving odds

Braving these odds, according to Mr C.P. Vanani, President, Surat Diamond Association, about 30 to 40 per cent of the 4,000-odd units have reopened from December 8. “Those workers whose children study in Surat educational institutions have begun to return to work. By December-end, we hope to see all units reopened.”

About half of these diamond workers are from Gujarat and the remaining come from Hindi-speaking States. These non-Gujarati workers mostly keep their families back in their native States and have yet to return, finding it easier to work farm in the Rabi season rather than wait for uncertain wages in Surat.

Gone are the days when diamond export, with an annual growth of 5 to 10 per cent in the decade ended 2007, had seen exports zooming from Rs 75,754 crore in January-December 2006 to Rs 82,025 crore in January-December 2007.

Despite import duty on polished diamond reduced to zero in a bid to develop India as a major diamond trading centre rather than just a manufacturing hub, the trade has continuously declined over the last three years.

Loss estimate

Since last year, when the sub-prime crisis began to unfold in the US, the order book has continuously dwindled. Although no official figures are available, the diamond polishing and cutting industry sources maintain that it has suffered a loss of at least about 30 per cent, affecting wages of workers and profit of unit owners.

In July, diamond units were hit by workers’ agitation, forcing some of the owners to announce a 20 per cent hike in wages. But a few also reneged on this promise due to business losses and falling demands. Export earnings from diamonds are yet to be estimated as many units have switched over from low quality to superior quality diamonds whose values are high.

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