The economic downturn in the world's jewellery markets has checked the growth of India's diamond export industry, cutting the workforce by as much as 25 per cent and forcing one of the country's most promising export sectors to seek government help.
India has a 55 per cent market share of the world's diamond cutting and polishing business. The industry imports more than half of its rough diamonds from Belgium and has strong links with De Beers, the global diamond group, Alrosa, the Russian diamond producer, and BHP Billiton, the resources group. The bulk of the diamonds, once cut, are then exported again to big markets such as the US, the United Arab Emirates and Hong Kong.
Vasant Mehta, the chairman of India's Gem and Jewellery Export Promotion Council, said on Wednesday the diamond cutting and polishing industry had lost as many as 200,000 jobs out of a total workforce of about 800,000 people over the past six months in a sector highly exposed to US and Gulf consumers.
The scale of the job losses suggests overall redundancies in the Indian economy in the face of the global financial crisis may be far greater than so far officially acknowledged. This year, the government said the economy had shed 500,000 jobs in key export industries but an economy-wide assessment has not been forthcoming.
"There are hundreds of small shops and entrepreneurs who have shut their shops because of recession in the west. This (diamonds) is a luxury item and they are usually last on the lists of consumers," Mr Mehta said.
Over the past 30 years India has built up an expertise in the low-cost cutting of smaller diamonds in Surat and Mumbai. According to Mr Mehta, the local industry dwarfs that of other cutting centres. The Belgian diamond centre of Antwerp has about 400 polishers, while Israel has up to about 4,000 polishers.
"We have asked the government to protect jobs. These are skilled workers in our industry. It's very sad if the poorest paid have to leave their jobs or close small factories. If skilled workers go out and stay out we may not see them coming back," Mr Mehta warned.
Exports of cut and polished diamonds fell 31 per cent to $5.2bn (Euro 4bn, Pound 3.6bn) in the six months to the end of March as the global recession began to be felt. The sector performed much worse than the overall gem and jewellery exports, which suffered a fall of 19 per cent to $9bn.
So worried had the diamond cutting and polishing industry become about the market that it halted the import of rough diamonds for a month last year to avoid flooding its production pipeline at a time when buyer interest was waning.
Imports of rough diamonds fell 60 per cent in the six months to the end of March to $1.9bn compared with the previous year.
Industry leaders are reluctant to provide forecasts for what looks like an uncertain year ahead. Mr Mehta said the industry was looking to grow its business in the domestic market and new markets such as China, but was also counting on demand returning ahead of Christmas in Europe and the US.
"We are looking at the bottoming out of the recessionary period," he said. "We are hopeful that things are going to improve in the second half of the year."
Copyright: The Financial Times Limited 2009