SURAT DIAMOND INDUSTRY

WHY IN NEWS ?

• Recently India’s diamond trade bodies asked members to halt the imports of rough stones for two months as cutting and polishing trade is facing an unprecedented crisis amid falling demand.

ABOUT INDIA’S DIAMOND CITY:

• Surat, a city in the Indian state of Gujarat, became known as the “Diamond City” due to its thriving diamond-cutting and polishing industry.
• The city has a long history of diamond cutting and polishing, dating back to the 16th century when it was a major trading center for diamonds and other precious stones.
• In the 19th century, the city’s diamond industry began to flourish, and today it is the largest center for diamond cutting and polishing in the world, accounting for over 90% of the world’s diamonds.
• The industry employs over 500,000 people and generates billions of dollars in revenue annually.
• Around 90% of the world’s diamonds that are mined are polished in Surat adding to about 80% of the Indian yearly diamond trade which is why there is no wonder as to why it is named as “The Diamond city”.
• It is home to over 6,000 units that cut and polish rough diamonds sourced from around the world.
• Over a million craftsmen and other workers are employed by the industry whose annual revenue is estimated at 1.6 trillion or more.
• The country cuts and polishes nine out of 10 of the world’s rough diamonds, providing employment to two million Indians.

• In 2022-23, India’s gem and jewellery exports totalled 1.76 trillion, with cut and polished diamonds accounting for 65% of that value.
• As the world embraces lab-grown diamonds, Gujarat’s second-largest city is moving fast to ensure that India plays a significant role here, as it did with natural diamonds.

RECENT TRENDS IN DIAMOND TRADE:

• Over 85-90% of the world’s roughs are processed in the Surat diamond industry.
• It employs close to 8 lakh people and is a major contributor to India’s gems and jewellery exports of about ₹3 lakh crore.
• For the period of April 2022-March 2023, the overall gross exports of cut and polished diamonds at Rs. 1.76 lakh crore declined 2.97% compared to the same period in the previous year, which was Rs. 1.82 lakh crore.

DIAMOND CITY IN CRISIS:

• As many as nine people involved with the city’s diamond industry have committed suicide in recent weeks.
• The fall in demand seems to be structural, with prices for natural diamonds (as opposed to lab- grown diamonds) collapsing by 59% in the past three years.
• They were among 20,000 workers who have lost their jobs as the diamond industry is in the middle of a crisis caused by multiple factors.
• Other workers have seen their earnings fall by as much as 30% as diamond units cut back on working hours, cut down the number of days to five a week and sent staff on unpaid leave this summer, which lasted as long as a month for some.
• In addition, the enviable bonuses that workers in the diamond units were used to getting every Diwali are a distant memory now.

FACTORS RESPONSIBLE FOR THE CRISIS:

• Economic slowdown in China after property bubble burst, has collapsed demand of diamond.
• US consumers are shunning luxury goods amid high inflation fuelled by an easy monetary policy during the pandemic.
• Mainly its due to fall in global demand.
• Consumers in the US and Europe facing higher interest costs are cutting back on spending.
• Though 2022- 23 exports, at `1.76 trillion, were only marginally lower than the previous year’s `1.82 trillion, global offtake has crashed by almost 30% in the last three months.

GEOPOLITICS ROLE IN CRISIS:

• The Indian diamond industry sourced almost 35% of its rough diamonds from Russia.
• After the Ukraine war, curbs have been imposed on diamonds mined, processed or produced in Russia.
• Alrosa, the world’s largest diamond mining company, has been sanctioned by the US, UK and Canada.
• Buyers from the US, the biggest market, now demand a declaration that the polished material is not from Russia.
• Indian players have been forced to cut back on Russian rough diamonds (which are cheaper).
• Global challenges affected the demand for diamonds in India’s key markets, including USA and China.
• But certain regions in Europe and South-East Asia fared well. India encountered difficulties due to inconsistent Russian rough diamond supply and challenges with beneficiation, as countries such as Namibia, Botswana, and Angola prefer to have their rough diamonds cut in their own countries