Despite recent news reports on the instability of the Indian
diamond industry that suggest it is in crisis, the industry appears to be going
through more of a confusion phase than a crisis phase. The majority of the
industry players reject the crisis theory and insist, in fact, that the
industry is showing signs of improvement. The biggest sign of positive movement
they cited was in terms of orders from the U.S., Europe and Southeast Asia
following the India International Jewellery Show (IIJS). At press time, all
expectations were centered on the Hong Kong show, with the hope for additional
business to be done there.
Sanjay Kothari, vice chairman, Gem and Jewellery Export
Promotion Council (GJEPC), said, “The next three months will be very crucial
for the industry and from what I am seeing, there is going to be an improvement
in demand. This can be attributed to the fact that retail in India is booming
and many new jewelry showrooms are opening across the country, which
automatically will create demand for diamond jewelry. The market sentiments are
good right now and the U.S. economy is showing some positive signs, too.”
Other recent news reports alleged that some Indian diamond
industry players have been using loan proceeds that were originally borrowed
for their diamond businesses to invest in real estate. This has created some
amount of unrest in the industry because it not only signals a lack of
confidence in the diamond industry by diamantaires themselves, but such illegal
misuse of loan proceeds also leads to a very negative image of the industry as
a whole.
The problem is that diamond loans are mostly borrowed as
export financing and therefore qualify for the London Interbank Offered Rate
(LIBOR) from the banks, which is approximately 5.5 percent to 6 percent cheaper
than loans extended by banks for real estate investments.
Coming down heavily on the practice, Pratish P. Mehta,
partner, DiaCentre, said, “This is a self-created crisis by a few industry
colleagues who are using bank financing to invest in real estate to enhance
their personal wealth when, in reality, this money was given to them for their
diamond business. Cheap loans by banks for this industry need to be streamlined
and strict reference checks need to be made to make sure no undue advantage is
taken by anyone.”
While he acknowledged the difficulties currently facing the
industry,
Amit Doshi, director, C. Dinesh & Co. Pvt. Ltd., emphasized that
“there is also enough opportunity in the market for people who deal in goods at
the right price and quality. We are doing good business and we have been
witnessing a year-on-year growth in our company, which is proof enough that
there is demand in the market. But, I repeat, it is only if you have the right
kind of goods at the right price and quality. The IIJS show proved to be good
for a majority of us. We are seeing a lot of inquiries from the show being
converted into business and we are looking forward to the
Hong Kong show.”
Sunil Kumar Gupta, senior manager of marketing and strategy
at
J.B. and Brothers Pvt. Ltd., rejects the idea that the industry is facing
any crisis at present. “The industry is stable. It gets a bit disheartening to
read newspapers talking about the industry being in crisis all the time. In
fact, personally speaking, we have been witnessing a remarkable improvement in
demand in the market and with the U.S. elections just round the corner, things
are looking better. We deal in solitaires and .30 carats to 10 carats in round
and fancy shapes in all colors and clarities and we haven’t seen a slowdown in
any of the categories.”
The most recent statistics published by GJEPC indicate the
volume of polished diamonds exported by the country has seen a dramatic drop
of
about 95 percent to land at 95 million carats in the April to August 2012
period. This compares to 200 million carats exported during the same period in
2011. Commenting, Rajiv Jain, chairman, GJEPC, admitted that the initial months
of the current fiscal year have not been good, which he attributed to the
government’s imposition of a 2 percent duty on imported cut and polished
diamonds — it was at 0 percent previously — which resulted in a 30 percent drop
in trading exports.
Article from the Rapaport Magazine - October 2012. To subscribe click here.