Diamond exporters look to domestic market as rupee gains strength

With the festive season round the corner, strengthening of the rupee against the dollar has made diamond exporters look within the country for higher sales and better realisation. Diamond players have decided to focus more on the domestic market this festive season, fearing an uncertain currency movements during the peak season.

The rupee quoted marginally above Rs 53 against a dollar today. The Indian currency has recovered by about Rs 4 a dollar since June.

According to the industry, a weak rupee would make exports attractive, but at the same time, raw material imports of dollar-quoted gemstones would become costlier, leaving not much net gain for exporters.

 

“The weak rupee had caused an escalation of raw material costs for diamantaires. The rupee quoted above 55-56 against a dollar during the second quarter of the fiscal. The net gain between payments and receivables is marginal. So, it’s more attractive to sell in the domestic market,” said Dinesh Navadia, a diamond trader and president of the Surat Diamond Association.

Industry insiders maintained diamond exports had been on a decline since April. The data provided by the Gems and Jewellery Export Promotion Council (GJEPC) showed that exports of cut and polished diamonds stood at 13.44 million carats for April-August against 24.79 million carats during the corresponding period last year.

“Newer markets and consumer segments are emerging in the domestic market itself. We see domestic demand growing about 15-20 per cent during this fiscal over the same period last year. Jewellery demand is also upbeat. Therefore, exporters prefer the domestic market over international,” said Pravin Nanavati, a Surat-based diamond expert.

A declining trend of diamond exports can be gauged from the GJEPC data, which shows a decline of about 22 per cent from 66.64 million carats of cut and polished diamonds exported during 2010-11 to 51.86 million carats exported in 2011-12.

“International markets are dull. Key markets such as Europe and the US have shown some improvement, but that is insufficient to encourage exporters as the currency uncertainty is affecting their confidence,” said a diamond exporter from Surat. Industry players see diamond exports to drop 10-15 per cent this festive season.

It may be noted that in October 2011, the rupee quoted at Rs 49.16 a dollar, but it rose to touch Rs 57 a dollar by June this year. However, recently, the rupee showed improvement and recovered to Rs 52.70.

A strong rupee would make imports cheap, but at the same time, it is believed to limit the gains for the exporters as the dollar receivables would yield less in rupee terms.