Battered by Covid, diamond industry set to sparkle in 2021

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Due to revived demand in the Western markets such as the US and parts of Europe, the gems and jewellery sector is all set for a shining start to 2021.

India’s total cut and polished diamond exports in November, 2020 saw exports rebounding to $1,665 million with 23 lakh carats – sharply up from $389 million with barely 5 lakh carats of quantity exported in May, 2020.

The November figures are closer to the pre-Covid levels of $1,864 million with 21 lakh carats reported in May, 2019.

Dinesh Navadia, West Regional Chairman, Gems and Jewellery Export Promotion Council (GJEPC), said that the revival was faster than expected. “It is evident from the reduced Diwali vacation, which was usually for a fortnight, was now reduced to just five days. That was the extent orders. The momentum is good as compared the beginning of 2020,” Navadia told BusinessLine.

Gold jewellery exports, however, suffered a setback with decline of close to 50 per cent on year at $523 million as against $1,084 million recorded in the same month last year. It was doing good with a gain of $284 million for the month over the same month the previous year. Ravi Dholakia, MD at Radheshyam Diamonds in Surat, said that the industry made one of the fastest recoveries during the global economic uncertainty and US-China trade war. Dholakia credits government’s interest moratorium for a much-needed breather for the businessmen in the time of tight liquidity situation. “The year 2020 has taught the businessmen, especially the diamond trade, to remain within the limits and not over-leverage unnecessarily,” he added.

 

Trade sources claimed that the China and Hong Kong markets supported the exports, while a continued trade in US has also fuelled the prospects for a faster recovery of the trade. US and Europe together account for nearly half of India’s polished diamond exports of about ₹1.32 lakh crore. Surat’s ₹1.8 lakh-crore diamond market is the world’s biggest diamond polishing hub employing over half a million people across 6000 polishing units and supplying 9 out of 10 polished diamonds to the world. With over 80 per cent dependence on exports, the diamond trade slipped into panic, which then spilled over the the funding institutions including the banks.

Liquidity challenges

Barely a month before the nation-wide lockdown in March, 2020, the diamond exports were down by $959 million for the month of February year-on-year and the industry was already operating at under-capacity.

However, the diamond trade managed its liquidity by restricting fresh imports of rough diamonds for two months and clearing the stock pipeline in the meanwhile. “This eased the liquidity challenges for the diamond unit owners and they could comfortably operate with the available stock of rough diamonds,” Dholakia said.



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