Status Of India’s Diamond Industry In 2020
In 2020, for the Indian diamond industry it’s been a very difficult year. And to say that the year 2020 was not the best for the Indian diamond business would be an understatement. But it is a well-known fact that over the years, the diamond industry has faced various challenges. The Industry, which is renowned for its resiliency, has bravely and tenaciously handled every crises throughout the years, emerging stronger each time. Simply put, the Indian diamond sector has survived!
Furthermore, one cannot claim that the COVID-19 pandemic's effects on the industry were what ultimately led to its current situation. It did, but it was a "double whammy," only partially. The diamond industry in India was already experiencing a difficult period due to a number of problems. Furthermore, the global proliferation of the coronavirus only made the issues worse.
The diamond, jewels, and jewelry industry has long been important to the Indian economy. Additionally, India exports more than 75% of the polished diamonds, jewels, and jewelry in the world, which helps the nation gain foreign currency (FEEs). It is one of the industries with the quickest rate of growth, is primarily focused on exports, requires a lot of labor, and accounts for around 7% of the GDP and 15% of all exports from India. It presently employs over 5 million people, and by 2022, that number is anticipated to increase to 8.23 million.
The greatest diamond cutting and polishing hub in the world is India, where favorable government regulations promote the sector. India is regarded as the center of the world's jewelry sector due to its low pricing and accessibility of highly skilled labor. It is not unexpected that the Indian government has implemented a number of initiatives to encourage investment and improve technology and skills in order to advertise "Brand India" internationally. Additionally, the government has designated the gem and jewelry industry as a target area for export promotion due to its potential for growth and value addition.
The automatic method is how the Indian government currently permits 100% Foreign Direct Investment (FDI) in the sector. The COVID-19, however, was an extraordinary circumstance that rocked the Indian diamond and jewelry industries as well as other businesses around the world, testing their resiliency. Along the pipeline, everyone involved, including miners, producers, wholesalers, and retailers, had to get ready to follow the new standards, including the Indian industry.
The industry participants thought a lot before starting the units after redefining new rules and different social norms—of course with courage in a threatening pandemic situation. Resuming manufacturing operations or even trading in the midst of the pandemic was daunting. However, the sector received the necessary support to expand further as a result of the global economy progressively coming around once more, several mining firms starting operations in Canada and Africa, and retailers in consumer countries gradually opening for business.
In addition, the Indian industry could not turn back with the opening of the Surat Hira Bourse and the Special Export Zones (SEZs) in Jaipur and Surat. However, India's diamond exports fell further in the months that followed, falling to $ 389.04 million from $1864.56 million in May 2019, a decline of 79.13%. This was because there were virtually no exports or imports during April due to the complete closure of all manufacturing facilities and the partial reopening of only a few facilities in May.
Exports to China, Europe, and Australia saw some rise in May, while COVID-19 continued to have an impact on the US and the Middle East. India exported cut and polished diamonds worth $898.32 million in June 2020, a 469.1 percent decrease from the same month in 2019.
When compared to the same period in 2019, the total exports of cut and polished diamonds fell by 49.68% to $ 1801.71 million, a decrease of $ 3580.22 million. India's cut and polished diamond exports decreased by 38.85% in July, totaling $ 918.44 mn in 2020 compared to $ 1501.9 mn in 2019. When compared to the same period in 2019, the total exports of cut and polished diamonds fell by 49.68% to $ 1801.71 million, a decrease of $ 3580.22 million. India's cut and polished diamond exports decreased by 38.85% in July, totaling $ 918.44 mn in 2020 compared to $ 1501.9 mn in 2019. In July, rough imports decreased 81.63% to $ 230.90 million from $ 1094.58 million in the same month last year.
The then-Chairman of the Gem & Jewellery Export Promotion Council (GJEPC), Pramod Agrawal, was more than optimistic and asserted that the Indian gem and jewellery industry had a backlog of over $1 billion worth of orders in an effort to boost confidence in the sector. Additionally, he stated that the orders needed to be fulfilled quickly in order to avoid losing business to nearby nations like China or Thailand, both of which were running at the time. This provided the necessary motivation for the industry, which continued the manufacturing process head-on while, of course, exercising all necessary caution.
The most well-known export zones in India—Santacruz Electronics Export Promotion Zone (SEEPZ), Bharat Diamond Bourse (BDB), etc.—were permitted to operate with a minimum of restrictions because to GJEPC's efforts during the country's rigorous lockdown. In order to start up minimal operations at BDB while adhering to COVID-19 restrictions to clear backlogs, GJEPC and the Bharat Diamond Bourse collaborated with the Maharashtra Industrial Development Corporation (MIDC) to develop a Standard Operating Procedure (SOP), which was successful for the industry.
Major choices were made at this period by the trade associations and representatives of the industry. Colin Shah, the vice chairman at the time, said as follows: "This industry has come out stronger from every crisis. Finding the new normal will take longer this time around and may be 20% below the pre-Coronavirus level in terms of value. To stabilize diamond prices and reduce inventory, the industry decided to ban imports of raw diamonds for one month beginning on May 15, 2020.
The Indian corporate community acknowledged the pandemic's impact on the state of the world economy and that nothing will ever be the same again. Therefore, it was decided to make sure that the labor was brought back once the lockdown was released in order to return the industry to operating mode once more. According to reports in the media, the then-Economic Advisor, Ministry of Commerce and Industry, Government of India, was asked how the Indian industry can restore exports during the unsettling times. "The diamond/jewelry business will be unpredictable and it will take time before some resurgence in exports is visible," Ms. Rupa Dutta stated. As a result, she added, "the gem and jewelry sector will undoubtedly take longer to recover than other sectors."
Such a dire circumstance has not occurred recently for the Surat diamond producing industry. Surat Diamond Workers Union president Jaysukh Gajera was concerned that 70% of the workers who were leaving the city due to the epidemic and the lockdown might never return because they had been left without a job.
The 8000 or so diamond cutting and polishing units, which employ more than 5 million people, were closed in Surat from the end of March until the first week of June. However, since operations began in the second week of June, over 600 employees and their families have tested positive for the coronavirus, forcing a massive influx of workers to return to their homes. The workers who lived in rented homes were unable to make a living once the diamond polishing equipment were shut down. They have been without a job for about four months, and there was little reason to believe things would get better soon.
The makers, however, made every effort to keep the machines operating while taking the necessary safety measures to protect the staff from the COVID-19 virus because the cutting centre in Surat was unable to back off. India's cut and polished diamond exports fell by 25.72 percent in August 2020, totaling $ 1216.79 million, compared to $ 1638.22 million in August 2019. Compared to August 2019, when rough imports were $861.13 million, rough imports fell by 42.23 percent to $497.51 million in August 2020.
In August 2020, rough diamond exports came to $ 22.75 million, down from $ 120.15 million in August 2019. Imports of raw diamonds decreased in accordance with weak end-product demand as a result of production centres being shut down or operating at very low levels due to pandemic control measures.
As the epidemic stifles demand and disrupts supply chains, India, which polishes roughly 90% of the world's raw diamonds, will see a 25% decline in diamond shipments this year. According to sources in the industry, this will cause exports to reach their lowest level since records began in the 2009 fiscal year.
Shah stated in a media interview that "things were bad for a quarter in 2008 and business recovered after that." It has been two quarters already. While holidays like Diwali, Christmas, and Valentine's Day will boost demand during the next six months, he added, they won't be sufficient to increase exports for the entire year. In order to contain the coronavirus outbreak, India implemented one of the tightest lockdowns in the world in March.
This stopped all activity and set the economy on a trajectory for its first annual decline in more than 40 years. The nation is one of the virus hot spots in the world with more than 7 million infections. Imports of raw diamonds decreased in accordance with weak end-product demand as a result of production centers being shut down or operating at very low levels due to pandemic control measures.
In comparison to the same period last year, the nation's diamond exports fell 37% to $5.5 billion in the six months that ended in September. With social-distancing regulations in place, factories are now functioning at 70% to 80% of capacity in the diamond polishing hubs of Surat, Mumbai, and Kolkata, according to Shah. Even yet, he said, it's challenging to foresee worldwide supply chains because the virus's control regulations are constantly changing.
The largest diamond polishing hub in the world, Surat's diamond market employs over 500,000 people over 6,000 polishing units, yet it faced the toughest survival test during the lockdown. The cutting center has never seen its recent sales decline to their lowest level. Additionally, Surat has never seen a worker exodus returning to their hometowns on such a massive scale because to concerns about contracting the COVID-19 illness.
It is important to keep in mind that the processing industry was severely disrupted by the coronavirus outbreak. But it also affected consumer markets' purchasing power, including that of the US, Canada, Europe, China, Hong Kong, and Japan, among others. 14 out of the world's 15 raw diamonds are polished in Surat, with the majority of them being shipped back to foreign consumer markets.
The COVID-19 epidemic had spread to an alarming extent by July 2020 in India, and Surat, the country's largest center for diamond cutting, had also been severely affected. As a result, most of the city's diamond units—both large and small—were closed as a result of the widespread departure of diamond industry personnel.
According to reports, 0.6 million people were employed by more than 8000 diamond cutting and polishing plants in Surat, which were closed from the end of March to the first week of June.
In spite of stringent precautionary measures including the closure of several units owing to COVID-19 infections by the government authorities, output has been progressively increasing since business activities resumed in the second week of June.
In the meantime, the epidemic caused polished diamond demand to reach an all-time low. The Indian diamond sector is under increased strain as all major consuming regions, including the US, Hong Kong, the EU, and other regions, reported low demand. The GJEPC and other trade organizations recommended that Indian diamond firms voluntarily stop importing rough in order to reduce the stockpile and stabilize diamond prices. In India, more than 2,000 large and small businesses halted imports and persuaded ALROSA and De Beers to delay supplies in order to prevent a panic sale as demand fell due to COVID-19.
Early in August, the diamond market began to show some indications of recovery as demand in the US, China, and some regions of Europe steadily increased. As Covid-19 instances decreased in manufacturers, activity in the diamond cutting and polishing industry increased in Surat as well.
Nearly 5,000 small, medium, and large units of the 7,000 or more diamond manufacturing units quickly went into operation. The factories were operating at 70% of capacity in accordance with government regulations. Soon, orders for all kinds of polished goods began coming from the US, Hong Kong, and parts of Europe, according to diamond exporters.
According to media sources, Surat's diamond producers expressed optimism prior to Diwali in November. They claim that the sector's situation has transformed over the past two months as a result of strong demand and new orders from the US and Europe. "The atmosphere is positive, especially after almost three months of virtually little business during the lockdown. But as time goes on, our sales are increasing. China and Hong Kong initially provided some good business, but because of political unrest there, the US has now emerged as our reliable export market. We anticipate the momentum to last at least until the start of the New Year in 2021," they added.
However, the diamantaires encountered a shortage of personnel and rough diamonds during Diwali. The industry has reduced the diamond workers' customary 20-day Diwali holiday to 5 days. According to reports, after losing their profits due to the lockout, the employees were also willing to work and shorten their Diwali vacations in order to increase their income.
Travel constraints are cited as the cause of the shortage of rough. Manufacturing was suffering as a result of the excessive delays in obtaining rough diamonds. The acquisitions of raw diamonds were not proceeding at the necessary rate. There isn't any stock on hand. For rough diamonds, the polishers eat out of their hands. The cutters frequently repeated that the demand for polished diamonds "is likely to continue firm until Christmas," adding that this has caused a little increase in the price of rough diamonds.
Additionally, producers asserted that a significant portion of international investors are thought to have turned to diamonds for their haven qualities during the Covid-hit scenario, when other investment asset classes are volatile. Orders piled up at Surat units, but the diamond trade in Surat was soon sparkling again thanks to the efforts of the industry's participants and government support. Again, because workers did not desire holidays, diamantaires cut short the workers' Diwali vacations.
Due to consumer demand from markets outside of the country, the "no holidays" situation has persisted since then. In reality, the restored demand from the United States and Europe, which together account for about half of India's polished diamond exports, has brought the country's diamond trade closer to its pre-Covid lustre.
Sources claim that Mumbai and Surat's diamond exporters are beginning to show significant signs of growth. Additionally, the polishers have increasingly begun obtaining rough diamonds to fulfil new orders as the majority of the piled-up inventories of polished diamonds have been depleted. In September 2020, rough diamond imports totaled 163.71 lakh carats for $ 1347.30 million, compared to 152.24 lakh carats worth $ 1159.63 million in September of the previous year. The imports of rough diamonds have grown year over year for the first time since February.
All of the nation's cutting centers, including Surat, the top center for the production of diamonds worldwide, are operating normally once more. Although there are restrictions and regulations in place because of the pandemic, several top manufacturers have not recently reported any new COVID instances. According to Colin Shah, Chairman of the GJEPC, cut and polished diamonds account for a significant portion of India's $35 billion in annual gem and jewellery exports. Although the ongoing epidemic has negatively hampered exports in the first quarter, it is encouraging to see that exports have started from India.
The sector is recovering because there are orders coming in for specific sorts of polished items from the US, Hong Kong, and regions of Europe. The upcoming Western countries' holiday season will further increase demand for gems and jewelry.
According to Sanjay Shah, Convener, Diamond Panel Committee, GJEPC, with India's overall exports currently estimated at 50%, GJEPC is optimistic about Q3 and Q4 as orders have arrived from the US and demand from China too picked up from September onward, with an additional 10-15% boost in orders anticipated. About half of Surat's, over 7000 diamond manufacturing facilities are currently open for business. The factories are currently operating at 70% capacity as a result of the strict government regulations.
According to media sources, diamond cutting plants in Surat have been given more freedom to operate as of July 31 as long as they abide by a set of standards that include mandatory Covid-19 tests for dealers and personnel.
Due of the dramatic spike in Covid-19 instances that Surat has seen over the previous six months, restrictions were placed on how the units could operate. But Surat, the nation's center for the production of diamonds, has revived after a brief time of utter lockdown and worker exodus! In addition, GJEPC and MIDC have signed a memorandum of understanding (MoU) to develop India's largest jewellery park in Ghansoli, Navi Mumbai, on 25 acres of land, with a capacity for more than 5000 jewellery units in a range of sizes from 500 to 10,000 square feet. 2.09 billion dollars will be invested total.
Through the Gold Monetization Scheme, people, trusts, and mutual funds can deposit gold with banks and receive interest in return. Additionally, a notification dated September 28, 2020 from the Government of India's Directorate General of Foreign Trade (DGFT) authorized the amendment of technical errors, typographical errors, or errors that are obvious on the face of records in KP Certificates when done in accordance with Standards Operating Procedure (SOP) and verified by the Gem & Jewellery Export Promotion Council of India (GJEPC). Rough diamond imports that are still pending are likewise subject to the revised policy condition.
After Diwali, the industrial industry was humming with activity as over 200,000 foreign workers started working again. The manufacturers were apparently driven to fulfil the orders well in advance of Christmas and New Year's because they were reportedly flooding in from markets all over the world, including China and the important American and American markets. Despite the industry being on lockdown owing to the pandemic, performance has recently improved. India's cut and polished diamond exports fell 19.60% in September 2020, totaling $ 1564 mn compared to $ 1946 mn exported in September 2019.
However, compared to the $ 1159.63 million imported during September 2019, rough imports grew 16.18% to $ 1347.30 million during September 2020. The demand has recovered, and the trade is receiving solid orders from the US, China, Gulf countries, and some regions of Europe, according to Colin Shah, head of the Gem & Jewelry Export Promotion Council (GJEPC). There is also a strong demand in India. Hopefully, the worst is behind us. The employees are also coming back to start working. The biggest issue facing the Indian industry, however, is the lockdown in Belgium, the biggest diamond trading hub in the world, which is reportedly experiencing the world's worst coronavirus outbreak.