By P.S. Anantharaman, Surat, Nov 5 : The Rs.700-billion (USD 14 billion) diamond cutting and polishing industry here employing some 700,000 people is fast losing its glitter due to a sharp slump in demand following the global financial meltdown.
With the US market, which accounts for 40 percent of the diamond trade's exports, shrinking by more than 20 percent following the meltdown, the 5,000-odd diamond units in the western Indian state of Gujarat are facing an uncertain future.
This Diwali, the Indian festival of lights, proved to be rather dark for those involved in the diamond trade.
"The lack of demand has left us without any Diwali cheer," said C.P. Vanani, president of the Surat Diamond Association.
Many diamond cutting and polishing units in the state, struggling to tide over the crisis, have given their workers 40 days' leave for this year's Diwali instead of the usual 20-day festival vacation.
"We are not sure whether the industry will be able to restart operations even in December. The environment is pretty gloomy really," Vanani added.
He, however, said it was difficult to immediately quantify the fall in demand during the Dussehra-Diwali festival season this year, as most of the units are yet to restart operations after the annual vacation.
Chetan Sangvi, Gujarat region chairman of the Gems and Jewellery Export Promotion Council (GJEPC), estimated the gap between supply and demand of diamonds this year at 20 percent.
"This is not final as we still don't know about the overseas demand position in the Christmas and New Year season," he added.
Diamond factory owners are now saddled with unsold polished and rough diamonds. Many have asked their suppliers of rough diamonds to cut supplies, Vanani said.
"I have been in the diamond business for more than 25 years now and I have never seen such a downturn in the past," he said.
With both the major markets for the Indian diamond industry - the US and Europe - hit by the economic and financial downturn, industry leaders do not expect demand to pick up even during the Christmas season.
Vanani said the diamond associations in Ahmedabad, Bhavnagar and Amreli have written several letters to GJEPC urging it to take steps to address the crisis that the industry is facing.
The industry wants steps that would help them modernise by inducting new technologies so that they can cut costs and enhance productivity to maintain margins in this shrinking market scenario.
The associations have asked the council to persuade the commerce and industry ministry to launch an upgradation fund on the lines of the one for the textiles industry so that diamond units can get soft loans for modernisation with a built-in subsidy of 20 percent.
They also want import duty waiver for import of new technologies and modern machinery. Currently, diamond machinery imports attract 30 percent duty, Vanani said.
--- IANS
