India's diamond exports crashed by more than 44% in May as compared to a year ago period, sparking off panic in the diamond cutting and polishing industry. Though imports of rough diamonds also fell 20% in May, the country's rough diamond imports had jumped 20.3% the month before, in April.
The ``unexpected increase'' in April came under intense scrutiny from
government officials, especially since the polished diamond trade was
flat at that time. Diamantaires told the visiting regulatory officials
that demand for diamonds in India and China is set to far outpace
supply, which is limited to production at a small number of mines
"The demand for diamonds is set to boom. There is no doubt about
this. It will be driven primarily by the growth of the markets in China
and India,'' said Maneesh Dhukaje from Hare Krishna Exports, a diamond
In India alone, he noted, the market for diamonds is expected to grow
faster than that for gold over the next five years, with some estimates
pegging it at 1 trillion rupees. During the same time, India and China
are expected to represent half the global growth in demand for diamonds.
Meanwhile, at the Hong Kong Jewellery and Gem Fair that concluded
last week, some strain was evident in the business community, with most
Indian dealers speaking about the external factors that had influenced
the market. Traders also referred to the `silence' from the US market,
which remains the biggest market for diamond jewellery in the world.
However, demand for light-weight diamond jewellery by China and
India's rapidly expanding middle class consumers could counterbalance
the expected drop in demand from key markets, traders added.
Consulting firms also have predicted that prices of rough diamonds
are set to rise between 3% and 10% due to demand from emerging markets
like China, India, Hong Kong and UAE, given the gradual decrease in
global production of rough diamonds.
Traders said demand for diamonds is on the rise in India with the
affluent class wearing more of them as a style statement and the middle
class consumer shifting to the 16-18 carat gold diamond studded
jewellery style that is most preferred in the major metros.
Diamond jewellery with low carat gold also appears to have found
pride of place in smaller areas and districts of India, especially in
Tier-II and Tier-III cities.
"People in these smaller cities are going for 14 carat diamond
jewellery sets and even 12 carat sets to suit their shoe-string budgets
instead of the usual 18 carat diamond studded jewellery pieces,'' said
He added that the demand for diamond necklaces and bangles was especially on the rise in smaller cities.
The Indian diamond industry imports rough stones which are cut and
polished within the country before they are exported. This part of the
business took a major hit in May this year. According to data released
by the Gems and Jewellery Export Promotion Council, exports of cut and
polished diamonds fell from 51,22,000 carats in May 2011 to 25,74,000
carats in the corresponding period of this year.
In value terms, the fall in exports was from $2,240 million to $1,245
million in the same period. The decline in May was steeper than in
April this year, which saw exports decline 35% in terms of value as
compared to April 2011.
Diamond traders are blaming the fall in exports to the imposition of a
2% import duty on cut and polished diamonds on January 17 this year,
which most traders say has resulted in a dramatic reduction. India's
polished diamond exports for fiscal 2011-12 slipped by 17.3% immediately
thereafter, say traders.
"At the start of January this year it was a completely different
scene. Net polished diamond exports, which is the excess of exports over
imports, was recorded at $828.35 million in January 2012, which was a
considerable increase considering that the there was a deficit of $84.17
million in January 2011. Net rough diamond imports, which is imports
less exports, also rose by 3% to $940.82 million,'' said Shashi
Jariwala, diamond trader and exporter.
"Though margins are lower, cut and polished diamonds are imported for
the purpose of value addition,'' he added. India imported $1.58 billion
worth of roughs in April, up 8.4% as compared to March. The volume of
imports also increased, up 42.2% to 14.2 million carats. The average
value of imports totalled $111.41 per carat