The Indian gem and jewellery industry, though known for its resilience, has for some years now struggling to stay afloat as it faced challenges galore…demand down, rough prices up, bank finance tight, high import taxes and what have you. The industry, which claimed that due to hike in the import duty several businesses have shifted out of India, was pacified by the country’s Commerce and Industry Minister Piyush Goyal at the Gold Summit in the end of November in New Delhi.
Addressing the industry members to follow legal practices in doing digital transactions to enhance the integrity of the sector, he said he wanted ‘commitment from you about the integrity quotient of the industry’. Piyush Goyal said: "I think it is important that we have a dialogue and I am also working to support the industry request on the duty structure of gold, other precious stones and diamonds, so that we can bring back a lot more business which is possibly gone out of the country and bring that back to India.”
Warning the industry members against indulging in any illicit transactions, Goyal said that “100 per cent honesty is important to convince other ministries to agree on the demands of the industry. And, the government will be able to support you with lower taxes, lower import duties and lower GST." Goyal also reminded the industry members about willful defaulters of bank loans, who have brought bad name, which the industry needs to reflect on and take the right path.
Being hit from all sides, the Indian industry, particularly the diamond sector, is taking all possible steps to regain its past glory by controlling and cutting down on production to ease polished goods inventory, as well as cutting down rough purchases to only what is required. The polished market, however, remained stagnant in recent months for many reasons. Overseas buyers, taking advantage of the Indian market condition, looked for reduced prices of polished goods. Domestic market buyers of polished stones too looked for lower prices, as well as reduced purchases due to low demand in the domestic jewellery markets.
Some solace came from mining companies in recent months. For the first time, De Beers allowed diamond houses to return a fifth or more of what they purchased, besides cutting prices of the roughs by 5% on average to support the diamond polishing, industry in India. But, the reason could be due to a slow market or even a decline in De Beers’ control over the supply of roughs, as it is sourced from multiple sources in recent times. But all aspects are not so easy to solve when it comes to the struggling Indian diamond industry, as lab-grown diamonds have entered the market in a big way. The sector seems to get stronger and bigger by the day and a section of the industry feels that LGDs can even revive the slowing industry.
According to sources, around 10 per cent of the once natural diamond factories in Surat are now cutting lab-grown diamonds, at a time when the natural diamond industry is suffering. This has negatively affected the natural diamond industry as pointed out by Amish R Shah, President of the ALTR Created Diamonds. He reportedly told Press Trust of India (PTI) that the mid-stream segment hasn't made money for the last decade and that the lab-grown diamonds have the potential to revive India's struggling diamond industry.
Amish Shah said: "When you look at the diamond industry, the mid-stream is all struggling continuously," adding that the lab-grown diamonds have helped re-infuse energy in the system. He claimed that exports are up 94 per cent in the lab-grown diamonds. “We were about 1-2 per cent of the whole industry, but 10 per cent of the industry is right now cutting created diamonds. It shows where this is moving,” Shah said. "When 99 per cent of the industry is struggling to support jobs, the 1 per cent has stepped in and this 1 per cent is profitable. This is an opportunity to revive our industry and we cannot forget that the consumer loves this,” he said.
Though lab-grown diamonds are making inroads into the consumer markets, not all consumers seem to be fascinated with the stones. While the older generation is still loyal to natural diamonds, the Indian millennials are easily convinced to spend a lot on lab-grown diamonds. Incidentally, high quality, lab-grown diamonds are now available at a fraction of the cost of their natural counterparts in India. So, demand for LGBs is very much on the rise and here to stay.
While the Indian industry has been recording dismal performance figures for a long time, especially in the diamond sector, a look at this October’s export-import figures (provisional data) released by The Gem & Jewellery Export Promotion Council (GJEPC) of India again shows 15.36 percent dip in exports of polished diamonds; and 19.61 percent down in rough diamond imports against Oct 2018. However, exports of polished lab-grown diamonds more than doubled during the month as against Oct 2018. As the LGD sector grows, this trend is bound to continue, threatening the natural diamond sector in the country.
Till date, it was said that many small & medium cutting units have begun cutting & polishing lad-grown roughs in Surat (India), but larger companies are also set to be entering the sector. The recent media reports of Dilip Mehta, Chairman of Rosy Blue Alliance, an Indian-Belgian company announcing his family's independent venture into lab-grown diamonds from Surat has strengthened the rumours that many larger Diamond Groups from India may eventually enter LGD sector … maybe as an independent business, and not connected to their natural diamond business. ‘If De Beers can do, so can I.’ … is the new trend?
Dilip Mehta reportedly told Times of India: “We will be manufacturing about 25,000 carats of lab-grown diamonds and will import rough diamonds manufactured in China via Hong Kong. Our target market will be India along with the US and Dubai. Gradually, we will be expanding our manufacturing capacity. Many diamond companies are already into lab-grown business, but they have not come out officially. In the next couple of year, you will see many companies in this lucrative field.”
To wrap up…though the Indian diamond industry has weathered many a storm before, the current situation is a totally different scenario. With more ‘demons’ to fight, is the diamond industry armed and ready?
Source: Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
Indian Diamond Industry, LGD, Rosy Blue, Dilip Mehta, Piyush Goyal, US, Dubai, De Beers, GST, GJEPC