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Global View

By Zainab Morbiwala

Aerial view of Surat, India. Photo: Today Group/Getty Images

India is undeniably a powerful force in the worldwide diamond market, with a proven ability to capitalize on its advantages and mobilize its resources. In an exclusive interview with Rapaport Magazine,
Rajiv Jain, chairman, and Sanjay Kothari, vice chairman, of the Gem and Jewellery Export Promotion Council (GJEPC) discuss the challenges and growing role of India in the diamond industry. GJEPC is the umbrella organization for promoting Indian gems and jewelry worldwide.

RAPAPORT MAGAZINE: What is India’s role — and its impact — in the global diamond industry?

RAJIV JAIN: India has a leadership position in cut and polished diamonds and the proof is in the numbers. Ninety percent of the global supply of diamonds by volume are cut and polished in India, 70 percent by value. That means 14 out of every 15 diamonds sold or placed in jewelry anywhere in the world are cut and polished in India. That is our strength and it developed only recently over the past 45 years. It was around 1960 that diamond cutting and polishing started in Gujarat, then moved to Mumbai and on from there.

In a way, India democratized diamonds because we are cutting from both the biggest and smallest pieces of diamond. Previously, diamonds were only for rich people because they were all solitaires and the larger diamonds were all cut in Belgium and other major diamond centers.

But when we started cutting in India, we worked with industrial diamonds that those centers were not able to cut and polish. An entrepreneur from Gujarat is said to have started cutting and polishing industrial diamonds and this is how the pool of skilled labor began in this country. Today, we have approximately 700,000 cutters in India, not counting another two million involved in other sectors of the industry and in support operations. Those two-million-plus people are our strength.

SANJAY KOTHARI: India has been involved with diamonds for thousands of years since the Mughal era and the era of the kings. The diamond has always been popular in India and all the big and famous diamonds were mined in India so the affinity of India for diamonds is well established.

We moved into the export arena and a more prominent role in the industry only after 1960. But government policies and import-export practices were not very smooth or very supportive of business at that time. It was in 1966 that the Gem and Jewellery Export Promotion Council (GJEPC) was founded and the government began to frame its policies for importing raw material and exporting polished diamonds. When the manufacturing of diamonds started around the same time, the whole diamond industry came into focus.

When the council was formed, diamond exports were approximately $28 million a year and today exports total $43 billion. So, during this journey of only 40 to 50 years, we have strengthened our global position to such an extent that India today is the world’s largest manufacturing center for diamonds even though we no longer have any significant mines. And our position
today is a feather in the cap of our forefathers and ancestors who, along with the Indian government, had a vision for the future of the diamond industry. Those early visionaries opened offices in Antwerp and Amsterdam and from there, people started importing the raw materials and they took their training in Israel or Belgium. 

Today, you can compare our 700,000 people in the diamond cutting and polishing industry to Israel, with a few thousand, and Belgium, with a few hundred. This is not to take anything away from those centers, but just to show our growth. Indian gem and jewelry exporters have approximately 2,500 offices worldwide. But it’s not just about buying rough and manufacturing. Our marketing expertise also has been growing and our marketing initiatives have been very effective.

RM: India is always seeking new rough supply to keep its manufacturing sector operating. You were recently turned down by Russia for additional rough and the Argyle mine is producing less. What are you doing to help assure a steady supply of rough?

RJ: Obtaining rough is a continuous effort — as I mentioned, there is a huge pool of gem cutters in this country — but the problem is not that we were turned down. Every country that produces raw material prefers to use that raw material to develop manufacturing and laboratories in their own country. That is happening everywhere.

India is getting a supply of diamonds from around the world and it is not that anybody has stopped supplying us. But there is a global scarcity of diamond supply and we have to work with that. We are trying to source as much rough as possible and we are going to any new centers where we can get direct sourcing.

SK: The rough market has changed dramatically since the days when De Beers controlled almost 85 percent of the rough production mining in the world; their share has decreased and now is about 30 percent to 35 percent. New mines are opening. The cartel has been broken. Russia is operating independently. And we have Zimbabwe.

I don’t believe any other country will match the manufacturing capacity of India in the near future so the rough suppliers will have to look at India. At the same time, we are searching out new sources where we can buy the raw material. Zimbabwe has opened up, Canada has opened up, a lot of other mines in India also are coming up so sustaining the rough is not going to be difficult. The supply and demand mismatch that we are seeing now will be taken care of over time.

RM: How is India dealing with the U.S. and European Union (EU) sanctions on Zimbabwe rough? How can we be sure that Zimbabwe diamonds are not going to the U.S. and EU in finished jewelry?

RJ: We want to emphasize that there is no industry sanction. All rough travels with its Kimberley Process (KP) certification. We believe in the KP system and GJEPC strictly follows it — our stand is that the KP paper should be there. When it was not there, we were not importing Zimbabwe rough. But now the supply has cleared the KP, it has started shipping and it is coming to India and going to other places as well. There is currently no KP sanction on Zimbabwe rough; rather, it is allowed. 

As far as the issue of illegal diamond trade goes, it can happen anywhere in the world. Some dealers might take rough out of one country and try to sell it in another country where it is illegal and that is a fact of life.

SK: The U.S. and EU have put their own sanctions on Zimbabwe diamonds and they are asking people to refrain from using Zimbabwe diamonds. It is like the situation with Iranian oil, which India is importing, but it is banned in the U.S., so products made from Iranian oil cannot be exported to the U.S. It is the same situation with diamonds. If I have a client in the U.S. and if I am supplying him, then I have to take care that I don’t use Zimbabwe diamonds — even though it is difficult in smaller sizes, where it is not always easy to identify the source. But still, people are trying to manage.

We also have organized an Indian cartel to buy rough. With the cartel, we can collectively buy quantity rough in good deals and we can look at collectively buying mines in the future. We are concentrating all our efforts to see that the number-one position of India is maintained as far as cutting and polishing is concerned.

RM: How has India’s role in the worldwide diamond industry changed in recent years?

RJ: India has moved beyond cutting and polishing and manufacturing. It is adding further value by designing its own jewelry, producing that jewelry and exporting it to the world. Previously, we were manufacturing jewelry based on international designs, but now India has developed its own design capabilities. India International Jewellery Week (IIJW) shows the world what design capabilities India has developed and how much innovation in jewelry designing is being done in India. So that is a change in the past 20 years to 30 years. India also has moved beyond diamonds and is working with colored gemstones.

The other change is that India has its own standing now. I remember a time when it was very difficult to attend and participate in the international shows but both the 2011 Basel show and the 2012 JCK Las Vegas show were designated as official India shows by the Ministry of Commerce and Industry. Our Minister of Commerce and Industry attended the Basel show and the Indian Ambassador to the U.S. Nirupama Rao appeared at the JCK show. So the presence and visibility of India are growing along with its strength. And through the efforts of the council and the government, people are beginning to realize that the diamonds they are buying from other centers are cut and polished in India — that is something they didn’t know before.

SK: India’s role in the industry has not changed significantly as far as manufacturing is concerned. But the marketing initiatives by the Indian industry have been outstanding. It is a difficult task for us to hold on to the number-one position. We see China coming up and it has started manufacturing too, and it can easily compete with India because it has similar advantages, including economical labor and a large workforce.

RM: What forces were at work in getting the Indian diamond industry to where it is today? What are the “secrets” to its success?

RJ: It is the entrepreneurship and the hard work of the entrepreneurs of India, particularly the whole belt from Gujarat to Maharashtra. The way they have worked their way up is admirable.

And not only within India, but outside India also, Indians who are in the diamond business have settled in Antwerp and other diamond centers. They have their own leadership. If you go to any international shows, every fourth booth will have an Indian face. Maybe they are not living in India, maybe they don’t even have Indian passports, but people know their origin is India.

The Indian government also has realized the potential of this industry and has implemented policies and provided support to help strengthen the industry. Without the help of the government, nothing could be achieved. So it is the entrepreneurship of the Indian people, their hard work, the policies of the government, the council and all the people who have served the council in the past — it is the combination of all these factors that have led to our success.

And we have to mention education and training. Previously, there were no institutions or schools for this industry. Each household was an institution or school in itself  — this exists even today, where the father teaches the tricks of the trade to his children. But now we have various institutions, including the Indian Institute of Gems and Jewellery (IIGJ) and the Indian Diamond Institute (IDI) to impart knowledge not only in cutting and polishing but also jewelry
making, designing, management, etc. There are so many courses already on offer and more to come.

With the help of the National Skill Development Council (NSDC), we have formed the Gem and Jewellery Skill Council of India (GJSCI) with the goal of reaching more institutions and expanding technology to develop the human resources for the industry. If we are to continue to grow, we need qualified manpower to support the growth.

SK: Marketing has played a key role in our development. Earlier marketing for diamonds in the 1960s, ’70s and ’80s was done by De Beers — we were getting a free ride on someone else’s money and that is how 40 years went by. But De Beers is no longer spending that money and why should they? Its share of the diamond market is no longer the 85 percent it once was; it’s closer to 35 percent. India recognizes how important marketing is to the worldwide diamond industry and to India’s own industry.

RM: Are there any roadblocks to continued success? In other words, what is standing in the way of further growth? What are you planning to do to remove or reduce these roadblocks?

RJ: First, we need more skilled people — not only skilled labor but also skilled managerial staff, technicians, marketing staff and people who can create and understand brands, which is an area that needs to be developed.

Second, if we really want to see India as a diamond hub for the world, we need people from around the world to come and establish offices here. For this, we need the help of the government and we have been talking to the government about implementing some sort of turnover tax. If we want people who have been supplying rough to us to set up offices here, then we have to give them the same kind of platform other centers, such as Belgium, Hong Kong and Dubai, are giving them.

Third, our infrastructure is a roadblock, but this is an area where we are seeing a lot of improvement. Again, this is an area where the government can help in establishing more bourses in the country. We also need good exhibition and convention centers because it can be very embarrassing when people from abroad attend the India International Jewellery Show (IIJS) and IIJW and see our facilities. Holding a jewelry exhibition in a factory sends the wrong message.

SK: I don’t see any major roadblocks to our continued success but marketing initiatives need to receive serious attention — especially when there is such competition from other luxury goods — so that consumers buy diamond jewelry. Excitement needs to be created around diamond jewelry, excitement either from the investment point of view or adornment point of view. Today this excitement has declined a bit, in part because of the price point of diamonds, but also
because of all the other luxury goods available.

RM: How important has Indian government support been to the success of the diamond industry? What kind of support has been most important?

RJ: There has been tremendous support for so many years and it has been critically important. There was a time when there were huge restrictions on our activities and various licensing issues. Many of those have been resolved.

But there still are export/import issues where we have to travel multiple times to Delhi to get clarification or an interpretation of a specific circular or notification. That is a waste of time. And the people sitting in the offices who manage this whole process should understand that these delays interfere with the growth of the whole industry and the country. We understand that very often, they are being cautious because they are worried that something incorrect or illegal could take place.

SK: One reason the government has been very helpful in eliminating roadblocks for our industry is because it realizes the potential of this industry. The formation of GJEPC in 1996, in fact, was specifically to breach the gap that existed between the industry and the government.

RM: Was there a turning point — an event or development — at which India made a breakthrough to become a more formidable global competitor than it had been previously? What was it and why was it important?

RJ: Our growth has been a gradual process and not just one event or development. The first milestone was perhaps when some Indian entrepreneur realized that an industrial diamond could be cut and polished and used in a piece of jewelry. That happened sometime in the 1960s. Another turning point came when the government understood the potential of this industry to grow and made changes to help us reach that potential by altering the license structure, abolishing duties on rough imports, etc. The third milestone was the council’s establishment of institutions for training.

SK: It has been a continuous effort. Our predecessors had the vision in going to Antwerp, getting people trained, etc.

RM: India and China are competing against each other as manufacturers. What advantage does India offer the diamond industry?

RJ: The pool of skilled labor that we have and the entrepreneurs we have — this is the strength we have in comparison to China. Language is also a major factor for us. In China, English isn’t spoken as frequently as it is here in India.

SK: As I said earlier, India has strong marketing abilities and the intricacies and the labor and expertise to cut and polish, particularly the lower-quality goods, which the machines cannot do because it requires the human eye and human hand. This we have developed over a period of 40 years. Eventually, China will be able to do this also, but it will take them almost a decade to catch up to us in the know-how and detailing of rough diamonds. 

RM: In what areas have Indian companies made the most significant gains in recent years? How have they achieved them and why?

RJ: They have succeeded because they are born entrepreneurs and because of the way they have marketed themselves and their brands and companies. Indian companies have offices around the world so it is all very organized and synchronized and a continuous process.

RM: Of all the marketing and promotional efforts launched by GJEPC, which have been most effective?

RJ: Exhibitions are the most effective, with the IIJS and IIJW our two most prominent events. There are also the trade delegations we take abroad and the India Shows we have done and the media publicity. The educational centers have also contributed to the growth of the industry.

SK: IIJS has been a major event for us. And also its transition from a business-to-consumer (B2C) format to business to business (B2B). IIJW has been important in portraying India as a designing destination. We take part in about 20 international shows a year and lead delegations to different parts of the world where it can be difficult to travel on your own — Latin America, Commonwealth of Independent States (CIS), Russia, the Middle East and Pakistan. And none of this is one-way traffic. We invite them to IIJS as well.

RM: How has the balance between India and the U.S. changed in recent years? What was the time frame?

RJ: We have increased our market share in the U.S. not only in diamonds but also in manufactured jewelry. We have a good marketing presence in the U.S. as well.

SK: At first, we were selling just loose diamonds but since 1991, we have been exporting finished jewelry. And we are now selling our own designs, since we have learned the design preferences of the Western world. The U.S. is still our biggest market.

RM: How do you see India’s role in the global diamond industry changing in the future?

RJ: India has all the ingredients to become a jewelry hub in the true sense — with everything coming to India — and I am eager to see this happen. One advantage we have is that the other centers that are cutting and polishing diamonds or making jewelry don’t have the domestic market we have.

SK: Whatever changes occur for this industry — maybe in the KP, Zimbabwe, whatever — I would just like to see us play an active part in those changes and hold on to our position.

RM: Short-term, what are your goals for the industry? Long-term?

RJ: Long-term, India should become a hub for gems and jewelry and short-term, we need to upgrade our technology and establish more training schools. 

SK: 2012 seems to be shaping up as a crisis year so our short-term goal is to see that 2008 is not repeated. We have to make an effort to assure that 2012 and 2013 pass smoothly. Our long-term goal is to see how we can increase our share in the world market and grow even further. The sky is the limit for us.

RM: Where would you like to see India’s diamond industry in 10 years? 20?

RJ: If everything goes well and we are able to achieve our short-term goals, then I am very optimistic the presence of India will be worldwide. Once you reach a certain high level, it takes more effort to stay at that level than it took to reach it in the first place. It is always more difficult to be on top because you are more visible and everyone is competing with you.

RM: What will it take to get there?

RJ: The collective efforts of all the members of the Indian diamond industry and the continued support of the Indian government.

Article from the Rapaport Magazine - August 2012. To subscribe click here.

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