The diamond industry in Surat, known as the world’s leading hub for diamond polishing, is grappling with significant challenges, including widespread layoffs and factory closures. The situation has arisen from a combination of factors, and the industry is now looking towards the upcoming holiday season to potentially revitalise demand, particularly from international markets such as the United States and China, according to a report by Moneycontrol.
Recently, the Global Trade Research Initiative (GTRI) revealed that thousands of workers have been affected, with about 800,000 individuals employed in the diamond sector within Surat. The gems and jewellery industry in India contributes approximately 10-12 per cent to the nation’s overall merchandise exports, with diamonds being the most substantial component. India processes nearly 90 per cent of the world’s diamonds, making Surat a key player in the global market.
A report by Crisil Ratings released last month further highlighted that the natural diamond polishing sector is projected to see a staggering decline in revenue, estimated at 25-27 per cent, dropping to a decade-low of $12 billion this financial year. This downturn is largely attributed to diminished demand in key markets, compounded by a growing preference for lab-grown diamonds. The sector has experienced declining revenues for three consecutive fiscal years, indicating a troubling trend.
Geopolitical tensions impact on diamond industry
The current crisis stems from a disruption in both supply and demand dynamics. The ongoing geopolitical tensions, particularly Western sanctions against Russian diamonds in light of the Russia-Ukraine conflict. This has severely limited the availability of rough diamonds, a primary source for Surat. This also coincides with reduced consumer demand from the major markets of the US and China, leading to a ripple effect throughout the industry.
Both the American and Chinese diamond markets are currently experiencing downturns, which have adversely impacted Surat. Despite these challenges, mining companies have recently managed to stabilise the supply of rough diamonds, curbing previous drastic price fluctuations, the report said.
Lab-grown diamonds vs natural diamonds
In addition to geopolitical tensions, lab-grown diamonds are making significant inroads into the consumer market. These synthetic alternatives offer lower prices and are not subject to the same production constraints as natural diamonds. As earlier reported by Business Standard, lab-grown diamonds have led fall in the prices of natural diamonds, eroding consumer interest and higher competition. The lab-grown diamond industry is also facing increasing competition from global firms.
Yet, the diamond industry in India appears to be cautiously optimistic with Diwali round the corner. The jewellery retail sector in India is also witnessing growth, with 3,000 new stores expected to open, which could help stabilise the local market, the report said.
The festive season in India and anticipated consumer demand during the Christmas period are seen as pivotal for the industry’s resurgence. The industry also expects to see an uptick in its international markets after the US elections are completed and around Chinese New Year, slated for the end of January 2025.