A sudden fall in demand since the new year began has the diamond processing industry worried, more so as it comes in the wake of a fall in demand abroad for all forms of jewellery. This week’s rise in import duty on diamonds and other precious metals has added to the concern.
After a 25-30 per cent growth in domestic demand in November-December, there has been a 15-40 per cent fall, especially in Tier-II and Tier-III cities’ although the wedding season is at a peak. “This is a big worry, not only for jewellery manufacturers but also for retailers, as most retail-centric companies have expanded footprint at high real estate lease cost. Yet, price-conscious consumers are currently staying away from big-ticket purchases,” said Bacchraj Bamalwa, chairman of the Gems & Jewellery Trader Federation.
He attributes the fall to a generally weak economic sentiment, intensified now by the increase in import duties across all precious metals and stones. “The hike (of two to four per cent) in import duty is expected to worsen matters,” he said.
To lure consumers, processors have cut polished diamond prices by five to seven per cent since January 1. Although the cut has not yet reflected on rough diamond prices, if the trend continues, miners would have to reduce prices proportionately, said Rajiv Jain, chairman, of the Gems & Jewellery Export Promotion Council. Processors’ margins are said to be around zero at present.
The Council’s data shows polished diamond exports from India declined 40 per cent in December to $1.5 billion. In November and October, these exports fell 27 per cent and nine per cent, to $1.18 billion and $1.9 billion, respectively. Overall, cut and polished diamond exports during the first nine months of the current financial year (April–December) fell 5.3 per cent in dollar terms to $17.9 billion as compared to $18.9 billion in the corresponding period of the previous year. In rupee terms, the decline was slightly lower at 3.2 per cent to Rs 83,714 crore as against Rs 86,448 crore earlier. The fall was notable in volume terms to 409,850 carats in the first nine months of this year as compared to 458,020 carats in the same period last year. The global economic slowdown is held to be the reason. Demand from Asian countries, on which Indian jewellers were banking, had also declined.
All this contradicts an optimistic report of just six months earlier from credit rating agency Crisil on the domestic industry’s growth. Mehul Choksi, managing director of Gitanjali Gems, one of India’s largest branded jewellery makers feels Indian consumers take some time to absorb price rises. Bamalwa says the industry is waiting for the coming Union budget for supportive measures.