Diamond traders hope to recover losses

IMPACT OF THE DEPRECIATING RUPEE

With the rupee depreciating by almost 10 per cent so far this year, the Rs 85,000-crore domestic diamond processing industry is breathing easy.

Diamond industry players are hoping that they could recover losses incurred when the Indian currency appreciated below the 40 mark early this year. The rupee breached the 44- mark against the dollar in intra-day trade on Tuesday.

“We import rough diamonds, paying for all our deals in cash. The rupee depreciation helps us pay out lower on imports than what we earn through exports, benefitting the industry as a whole,” said Mehul Choksi, chairman and CEO, Gitanjali Group, the country’s largest integrated jewellery-maker.

The dipping rupee helps the industry in all merchandise and non-merchandise jewellery exports as it hedges its risk against raw materials well in advance, he added.

Sanjay Kothari, the chairman of the Gems and Jewellery Exports Promotion Council (GJEPC), is also of the view that domestic diamond exporters are likely to gain from the rupee depreciation as all quotations are done in the US currency.

But a section of the players who availed of dollar finance will be hit hard and it is a worry for us, Kothari added. This is a temporary rise and for the industry to benefit much, the rupee has to be steady, he added.

According to Vasant Mehta of the International Diamond Manufacturers Association , the industry does not have much to cheer about as 70 per cent of the jewellery cost is made up of imported components, including roughs, gold, silver, platinum and colour gemstones. So, the benefit will be calculated only on the remaining 30 per cent cost. “The advantages are not that big,” said Mehta, adding, “But we are out of losses anyway.”

India exported Rs 81,778 crore of cut and polished diamonds, gold jewellery and colour gemstones in 2007-08 compared with Rs 74,551 crore in the year-ago period.

Import of rough diamonds and gold bars were Rs 51,090 crore in FY08 compared with Rs 52,446 crore in FY07.