Why Diamond Industry is Being Hammered
The diamond industry, which has been deemed the most affluent sector, has endured various blows in the past
The Indian diamond industry has a historical background. The industry upholds the Indian ecosystem and further, contributes to incrementing exports. Primarily, the Gem and Jewellery sector play an imperative role in the Indian economy, contributing around 7 per cent of the country's GDP and 15 per cent to India's total merchandise exports, reported by IBEF.
Renowned Indian diamonds—the Hope diamond, Regent diamond and Koh-i-Noor diamond are masterpieces of the Indian riches. Owing to the magnificent diamonds that are excavated and manufactured, India is presently known for its polished and hand-cut diamonds. A large proportion of foreign markets demand the Indian diamonds and thus, yearly export huge chunks of diamonds from the country.
Skilled Indian Diamantaires
To ascertain the best, skilful Diamantaires, Surat is the best place. For decades, the diamond city—Surat employs hundreds of diamantaires, comprising small as well as large firms. Multiple invasions by different dynasties have not affected the glimmer of the city. Historians reckon that diamond polishing and cutting work initiated in the city as early as the 1950s and received a huge surge in 1970s when the American market began demanding finely-cut diamond stones.
The foreign export incremented the diamond industry by manifold and continues to augment for years. Export and import are significant parameters to assess the growth of the diamond industry. In 2017, Indian mirrors reported that by weight, exports jumped 14 per cent to 37.3 million carats, while the average price slipped 11 per cent to $620 per carat. Net polished exports representing exports minus imports jumped 3.8 per cent to $20.71 billion, figures released by Gem & Jewellery Export Promotion Council. Net rough imports minus exports rose 11 per cent to $ 18.46 billion, while exports increased 7 per cent to $1.52 billion. In total, the nation’s diamond industry declined by 20 per cent to $3.76 billion.
The decrement in the diamond industry was not a minor fluctuation as the industry continued to slide down in the following year.
A Downturn in the Diamond Industry
The diamond industry, which has been deemed the most affluent sector, has endured various blows in the past. First was the demonetization, which halted the market overnight. A day ago, Indian currencies which had a market worth lost its significance under Modi’s regime. Similar to other industries, the Gem and jewellery industry leapt down drastically. In the same year, jewellers experienced less demand for gold ornaments across India, leading to a stagnant market.
Followed by demonetization, another amendment was passed which is termed as GST (Goods and Services Tax). The regime advocated the new reform stating that it would ease the tax liability for small as well as large entrepreneurs. However, GST impacts were completely opposite; many industries, including the textile industry, protested and remained shut for a long time whilst the diamond industry did not get much affected by GST implementation. Lately, the regime reduced the GST on polished diamonds from 3 per cent to 0.25 per cent. The move brought much cheer to processors and jewellery exporters, reported by Business Standard.
Indo China Trade War
The third headwind for the diamond industry was India-China trade war. The trade war abruptly rose in 2017 over Doklam plateau which, in turn, led to a standoff between Chinese and Indian armies. The trade war affected the trade between China and India. India's trade deficit with China rose to $46.56 billion last year. China's exports to India totalled $58.33 billion, registering a meagre increase of 0.2 per cent compared to $58.25 billion in 2015. India's exports to China dropped 12 per cent from 2015 to $11.76 billion as reported by The Economic Times.
Impact of Affairs in The US
Following this, US shutdown had continued for 35 days, ultimately lifted on January 25. The shutdown has wounded the industry as it has declined the diamond industry by 8.48 per cent. Colin Shah, vice chairman, Gem & Jewellery Export Promotion Council said that We are yet to assess the entire impact of the US shutdown on exports. But the impact will definitely be felt on consumption of smaller diamonds that are generally purchased by middle-class US citizens who have been affected by this shutdown, as reported by The Economic Times.
The Indian diamantaires are facing a tough time as exports have decremented whilst imports have become costlier. In order to bring some ease, the Indian diamantaires have approached the government to reform income tax regulations. In addition, the government should take actions to augment the diamond industry and expand the sector like before.
This article was originally published by Jaspreet Kaur.