India’s Diamond Legacy: The Rise, Challenges, and Uncertain Future
In the entire world, 14 out of every 15 diamonds used in jewelry are cut and polished in India. India has emerged as a global leader as a result of this. India shipped significant amounts of diamonds to other countries in 2021, totaling $26 billion. However, lately, things have slowed down. Gross diamond exports from India fell 10% in FY23 compared to FY22. Currently, the nation has $22 billion. Since cut and polished diamonds accounted for over 62% of all gem and jewelry exports last year, the industry is concerned. And guess who suffers the most harm as a result? Surat. A city in the Gujarat state.
The center of the Indian diamond industry is located in this city in Gujarat. It has a near monopoly in the diamond cutting and polishing industry and employs over 8 lakh workers. But at the moment, these processing units are only operating at 70% of their potential. Astonishingly, 20,000 workers have already been let go.
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What is the story of how India became this diamond-exporting mogul?
The truth is that India doesn’t have real accomplishments in the mining department. Indeed, almost 4,000 years ago, the first diamonds were found in the riverbeds of Golconda or modern-day Hyderabad. India was also historically associated with diamonds. But it appears that the country no longer owns the large mines necessary to compete with the rest of the globe.
In actuality, there is only one mechanized mine, located in the Madhya Pradesh town of Panna. Likewise, India’s other diamond reserves are situated in ecologically delicate regions where it can’t efficiently use mechanized mining.
However, given India’s history with diamonds, it was able to benefit in other ways. And by that, we mean the part where you cut and polish. India’s prosperity can now be attributed to one single factor: its low cost of labor. India can cut diamonds for 10% less than the US, which would otherwise cost $100 per carat. In addition to having inexpensive labor, they also have skilled workers who can handle even the smallest diamonds. Since cutting and polishing little diamonds takes a lot of labor, India has become the world’s exclusive supplier of cut and polished diamonds under 1 carat.
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And that’s how Surat became the center. The Mavjivanwala brothers, who chose to open a business in the early 1900s, are to thank for their efforts. While the trade gradually increased, a fundamental change occurred in the 1960s when Gujaratis chose to immigrate to a well-known diamond dealing center in Europe. We’re discussing the Belgian city of Antwerp.
Once there, these immigrants from India skilfully wriggled their way into the diamond trade. But they decided to use inexpensive family labor at home rather than hiring local workers. For polishing, they shipped the diamonds to Surat. That is how everything started.
Why the sudden lapse in the diamond industry?
To begin with, it appears that Americans and Chinese citizens are cutting back on expenses. They are limiting their diamond purchases. And the Indian diamond sector suffers when two of its main export markets falter. This is quite cyclical right now. Every few years, you’ll notice an increase and decline in demand. When things go better, the Indian diamond industry’s fortunes also pick up speed.
This time, though, there is also another factor, i.e., Russia. Russia is the source of at least 30% of the nation’s rough diamonds. India is heavily reliant on them. But when Russia decided to invade Ukraine, this complicated India’s preparations. Russian-made diamonds were not in demand any longer. Quite a few nations intended to impose sanctions to harm Russia’s economy.
Russia was shut off from the international dollar banking system. India has imported 40% less raw diamonds from Russia since April 2022. It appears that the Russians were also opposed to the rupee. And that put India’s diamond traders in a bind. Simply put, they were unable to find enough stones to meet their needs. The fact that the supply wasn’t fully cut off was the single saving grace. Since the world could not just do away with Russian diamonds, even if they did not want to be associated with them.
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As you can see, diamonds receive a certificate at the beginning of the supply chain that verifies their provenance. This is done to stop the ‘blood diamonds’ from getting into the system. But once the stones from different regions of the world arrive in locations like Surat to be treated, everything is combined. The diamond has a ‘mixed origin’ certification. This implies that it can be challenging to determine whether a polished diamond originated in Russia once it is prepared to be set into jewelry.
Conclusion
But the West is still making an effort. They are working to identify the source of Russian diamonds so they can stop this aspect of the trade as well. They are even attempting to persuade Belgium, which is home to Antwerp, the greatest diamond trading center in the world, to cooperate with them. And if it does come down to this, it might cause more problems for Surat’s diamond traders.
Only a small percentage of huge stones over one carat will be affected by these restrictions, it is hoped. Therefore, Surat’s diamond industry may still be saved thanks to our skill with smaller stones. We’ll just have to wait and see how everything plays out.
