Recession Erodes Surat Diamond Market's Sheen

The diamond industry of Surat, one of the major sources of foreign revenue and livelihood for millions, has hit a rough patch. A number of polishing units are in the grip of recession, with the fear of closure looming large for some.

A slowdown in overseas demand and stagnant rates of polished diamonds as against the growing cost of rough stones are to blame.

"The overseas demand is very low and there is no increase in the prices of polished diamonds, if you compare them with (the increased rates of) rough diamonds since 2014," Surat Diamond Association president Dinesh Navadia told PTI.

Navadia termed the downturn as "unprecedented".

"This happens quite a time, but after three or four months, the situation usually improves. This time, the crisis has lasted for a long time," he said, adding that rumours are only worsening the situation.

While Godhani Gems, a diamond unit with 1,500 workers, has shut shop, some 25 units have gone bankrupt, he said.

On the plight of diamond workers, Navadia said it's difficult for unskilled or semi-skilled workers to find jobs in a slowdown.

Aniruddh Lidbide, diamond trade analyst, couldn't agree more. "There is very less demand (of polished diamonds) from China, South-East Asia, the Gulf, Europe and the US. Because of that, a lot of inventories are still lying with diamond industries," said Lidbide.

"Prices of roughs (rough stones), which is the raw material for the cut and polished diamonds, have gone up to 65-70% in three years. Corresponding to that, polished diamonds prices have not gone up. It's stagnant, so the profit margin has become very thin," said Lidbide.

Besides, some of the diamond industry owners have diverted money to other businesses, which has also hurt (the industry), he said.

"In the last few years, most of the diamond industries have diverted their finances to different business. They have invested mainly in property business, and also in the stock market or in crude oil and forex trading," Lidbide said.

Synthetic diamonds which look very similar to original ones, mainly produced by Russia and China, have also impacted the business, Lidbide added.

Pravin Nanavati, owner of the Surat-based She Jewellers, also blames reduced exports for the current state of affairs.

"About 90% of the diamond business is based on exports. But as the demand from foreign countries came down in the past couple of months, our industry has been facing the slowdown," Nanavati told PTI.

He was also of the opinion that synthetic diamonds make people doubt adulteration when they buy precious gems.

"The government should establish a unique university for the diamond industry, offering courses of skill development and management," he suggested.

Since lakhs of people are dependent on the industry, Nanavati said "this is high time the government took steps in the interest of one of the highest revenue-generating industries".