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Exports of both cut and polished diamonds from India are expected to shrink by a fifth to $19 billion by March 2021, against $24 billion logged in fiscal 2019, on sluggish demand across the globe, due to the coronavirus outbreak.
In the first nine months of this fiscal, India’s total diamond exports by value were down 18 per cent; of this, about 40 per cent were to Hong Kong, which has seen dysfunctional local markets over the past year or so. Moreover, there have been no diamond exports to the island since January 15 this year.
Hong Kong revival to take time
Subodh Rai, Senior Director, Crisil Ratings, said exports would continue to fall in the closing quarter of this fiscal, which typically accounts for roughly a third of India’s exports to the South-East Asian region.
Given extended holidays in the region and shutdown of markets in the aftermath of the coronovirus outbreak, exports worth over $1 billion may be lost in this quarter alone, he added.
The virus impact comes even as the industry is already experiencing tepid demand and declining realisations amid the ongoing political conflict in Hong Kong. Even if the n-CoV outbreak is contained in the next two months, trade normalcy and demand uptick from Hong Kong are unlikely before the middle of next fiscal.
Consequently, exports next fiscal would remain down or be at best flat because any traction in the second half would be offset by the weak first half.
Payments falling due
Rahul Guha, Director, Crisil Ratings, said bill payments from Hong Kong have been on time so far as the bulk of the payments has just started falling due. A large part of the sales happened after last October and bills are generally discounted for 90-120 days. Any further delay in the revival of business in Hong Kong would weigh on the liquidity profiles of Indian exporters, he said.
The other significant export markets for Indian diamonds include the US, with 35 per cent share, followed by the EU, West Asia and Japan along with the rest of South-East Asia, with market share of about 10 per cent each. The average receivable cycle for sales to the US and the European Union is 45-60 days, which helps ease cash-flow pressures.
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