Virendra Pandit

Ahmedabad, Oct. 15 Looks like a rosy picture right now: After the end-2008 crash in Surat’s diamond cutting-and-polishing industry, many units reopened recently, expecting a revival of this business; highly skilled workers are being paid up to Rs 1 lakh a month; bonuses, incentives and freebies have returned to retain whatever talent is available; the long holidays of workers post-Diwali in 2008 have been cut to a maximum of 10 days this year, starting this week; demand has increased from both domestic and global circuits….

But all this ‘good’ news has not exactly brought the smiles back on those in this business of the glitter. In fact, if anything, not only does the diamond trade continue to be on life-support system, another trade that sustained the former diamond workers when they found themselves out of jobs last year, is also gasping for breath now — embroidery.

After the high of 2005-06, when the mainly export-oriented diamond trade had a turnover of nearly Rs 75,000 crore, the industry began to lose shine. The global recession of 2008 dimmed its lustre further. Many diamond units of Surat turned themselves into embroidery units; this industry received investments of Rs 5,000 crore in three-four years until 2008.

“This new business had protected textile and silk industry in Surat during the downturn in diamond trade. Now, we are facing the problems such as a glut of workers, and a decline in demand, wages and business,” Dinesh M. Mandalaywala, President of the South Gujarat Chamber of Commerce and Industry, told Business Line from Surat.

In the third and fourth quarters of 2008-09, out of an estimated six lakh diamond workers, many returned to their natives places within Gujarat, about 50,000 turned to agriculture or other professions to eke out a living and a lakh, mostly women, shifted to embroidery or textile units.

Such was the frenzy early this year that nearly 40 embroidery units were being opened every week.

Soon, the industry became overcrowded with workers and their wages in this seasonal, demand-based industry, predictably, nose-dived.

Today, the embroidery business is also struggling for survival. But this does not mean the workers who had shifted from diamond-to-embroidery/textile are ready to return to diamond. Far from it: once bitten, twice shy, they would somehow survive where they are now.

Hence, embroidery units continue to be overcrowded and underpaid and diamond units continue to be labour starved and overpaid.

Even the so-called “revival” in diamond industry recently is qualified.

“Although the overall picture is quite positive and there is liquidity, we are yet to see if the Christmas demand picks up after Diwali.

“Until 2008, we used to get orders from the US (60 per cent) and Europe (20 per cent) in July-August. But receipt of orders-on-credit having been stopped due to the recession and all diamond trade now being on cash, such orders, if any, may come in only after Diwali,” said Rohit Mehta, President, Surat Diamond Association.

In fact, there being no inventory due to the match in demand and supply, the diamond industry is producing only 55 per cent of what it used to before 2008. So, where does the current fizz come from in Surat’s diamond business?

For one, due to the rising prices of gold and silver, some people in India, particularly the youth, have found an alternative in buying diamond.

Second, the demand from China, Japan, the Far East, South-East Asia and West Asia, has increased.

But there is another catch: The demand from China may soon turn into supply from within!

If the global demand for diamond plummeted by 40 per cent last year, it has increased 20 per cent in the domestic market and 20 per cent in Asia this year, which somehow kept the market aloft.

The US demand has been also picking up by 10-15 per cent. But, simultaneously, prices of finished diamond products have fallen drastically.

The diamantaires have requested the Union Government to help them buy cheaper raw diamond from Russia to increase profit margins, while some diamond units have even tied up with miners abroad.

At the peak of the diamond loop in 2005-06, there were nearly 10,000 units in Surat. Of these, some 4,500 cutting-and-polishing units worked in 2008 as the remaining converted into embroidery units.

In 2009, 2,000 more diamond units closed shop while the remaining worked partially, post-downturn.

Of those that closed, some 500 revived in the last few months and the partially-working ones have started full-time work.

So, as of now, nearly 3,000 units are working, employing 2.5-3 lakh lakh people, Mehta said, adding there was an acute shortage of skilled workers who can be paid anywhere between Rs 5,000 and Rs 1 lakh a month as wages, depending on their skill and the demand.

But for how long will they continue to get these wages?

(This article was published in the Business Line print edition dated October 16, 2009)
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