The global economic slowdown has led to a steep fall in demand for rough diamond, indicating that bad days await local cutting and polishing units as well as industry workers.

“There has been a significant change in the product mix with DTC sightholders seeking to purchase short production cycle, better quality rough in preference to traditional labour-intensive goods for the American market,” a De Beers Group spokesperson told Business Standard from London. About a fifth of India’s rough diamond supply comes from De Beers.

The change in rough diamond importers’ raw material preferences is likely to intensify job losses in domestic cutting and polishing industry, which has already retrenched over 1.5 lakh skilled and semi-skilled workers. Uncertainty over the recovery in the world economy in general and the US economy in particular has threatened the very survival of the cutting and polishing industry in India, the world’s largest diamond processing hub. The industry currently employs about 7-7.5 lakh cutting and polishing labourers across the country.

The development assumes significance as the Diamond Trading Corporation (DTC), the marketing arm of De Beers, has reduced supply of rough diamond to India to $80 million for January from $300 million in November.

The spokesperson said, “There has been a substantial slowdown in DTC sales to India following the Lehman bankruptcy as the industry attempts to realign its stock levels to the current polished demand.”

This has reflected in the stock performance of leading jewellery makers that have witnessed an average decline of over 55 per cent.

Lehman bankruptcy has triggered recession in the US to which India supplies about 75-80 per cent of finished jewellery. In the recently-ended Christmas and New Year season, Indian exporters have witnessed up to 20 per cent fall in their sales to the US.

The De Beers spokesperson cited four factors for DTC to have one of the smallest mine allocations to India in January: lower sales at retail as consumers cut discretionary spending across most sectors, liquidity crunch among clients, high levels of inventory in cutting centers and the voluntary boycott of rough imports in December.

“All our sightholders have global operations, which will include some sort of dealings with India. After a rigorous selection process, DTC selected sightholders for a 3-year contract in 2008. No changes are planned to the list of sightholders during the contract period,” the spokesperson added. India’s rough diamond imports recorded a 4.92 per cent decline in dollar term at $ 6,904.40 million between April and December 2008.

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