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By Avi Krawitz
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Posted: 03/11/10 09:00
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RAPAPORT... Just one year after a mass exodus of workers from Surat’s diamond sector, the city’s industry is again operating at full employment and growing its status as the world’s most important diamond manufacturing hub.
“Everyone who left the industry and wanted to return has come back,” Rohit Mehta, president of the Surat Diamond Association (SDA), said in a recent interview with Rapaport News. “Before the recession, we were 450,000 workers and while about 250,000 left [during the downturn], we’re back to around the same numbers today.”
Mehta estimated that approximately 4,600 manufacturing units were operating in Surat, both before the downturn and currently, approximately 90 percent of which are micro- and small-scale businesses. Given the disorganized nature of the sector, he stressed that it was difficult to collect definitive data on the industry.
 Vasant Mehta, chairman of the Gem & Jewellery Export Promotion Council (GJEPC), agreed that there is no unemployment in Surat’s diamond sector at the moment, as there has been a steady rise in manufacturing since March 2009.
“Right now, we’re manufacturing at about 80 percent of pre-recession levels,” he said. “We will reach 100 percent soon. It all depends on the consumer centers and our workforce will increase accordingly.”
Fastest Growing City
Surat has developed into the world’s largest diamond manufacturing hub over the past 50 years, with an estimated 90 percent of global polished diamond output — and 55 percent by value — manufactured there.
Situated in the southeastern Gujarat state, approximately 186 miles (300 kilometers) from Mumbai, Surat is India’s eighth-largest city and one of the country’s fastest-growing cities in terms of its population size and economic activity. A 2008 study by the research firm Indicus Analytics ranked Surat as having India’s fastest-growing economy after the city’s annualized gross domestic product (GDP) rose 11.5 percent a year in the previous seven years. Growth was stimulated by its two main industries: diamonds and textiles.
Surat’s growth is expected to continue, at least in the diamond sector, as most of the larger manufacturers in the city that spoke with Rapaport News indicated that they plan to increase capacity in the near future and with it, their employee count.
Coping With Crisis
The positive economic outlook is a far cry from this time in 2009, when the slump in global demand for diamonds forced Surat’s factories to close or downsize and a string of suicides related to those job losses ensued. India’s diamond industry collectively froze all rough diamond imports for a month in December 2008 as a means to manage the crisis and manufacturers were faced with the dilemma of how to respond to the newfound quiet.
Govind Dholakia, the founder of Shree Ramkrishna Export, recalled that management at his company had considered laying off up to 50 percent of its staff when the recession hit, but narrowed that estimate to 20 percent and eventually, to zero.
“We realized that 20 percent of our staff accounted for just 10 percent of total salaries and that the cuts wouldn’t make much of a difference in the long run,” he explained.
Instead, the company, which currently employs 5,000 people, gave its staff extended vacation time, which enabled it to save on other operating expenses, and managed to get through the downturn without issuing any layoffs. The decision paid off and Shree Ramkrishna is now in the process of building a new facility that will enable it to accommodate approximately 7,000 workers across all of its operations.
Industry Interchange
Others, however, were not as fortunate. An estimated one-third of factories had to dismiss workers due to the downturn. Many workers went to the textile industry, while those who own farms returned to agriculture.
Ashit Mehta, a director at Arjav Diamonds, which is part of the Blue Star Group, noted that many of the workers who left for the textile industry during the crisis are now returning to diamonds.
“Textiles had a fantastic run in the past two to three years and had an edge over diamonds,” he said. “But with what is happening now in the diamond industry, people are coming back.”
Arjav’s Surat factory currently employs 1,500 people and Mehta is hoping to fill its 3,500 capacity within the next year.
There was also an interchange of diamond workers with the agriculture sector throughout the crisis. Ashit Mehta explained that most Surat diamantaires also count farms as a source of income, so the interchange between the diamond and agriculture industries is natural.
“People go back to their farms every year,” he said.
With the diamond markets improving, diamantaires are confident they can effectively compete to attract workers to the industry. SDA’s Rohit Mehta noted that the average factory worker earns well above India’s minimum wage. He stressed that salaries in the industry are scale-based, based on work category and employee skill, and estimated that someone working on smaller melee and star stones earns between $165 and $175 (INR 7,500 and INR 8,000) a month, while someone working with larger diamonds may earn around $329 (INR 15,000).
Arjav’s Ashit Mehta stressed that as diamond prices rise, companies will be able to pay better.
Adding Value
Surat is not without its challenges. Most recognize the remoteness of the city and its relative inaccessibility from other centers as a hurdle. A three-hour train ride is required to travel from Mumbai. While Surat has an airport, only two flights a day arrive there — one from Delhi and another from Jaipur, according to the airport’s website. Rohit Mehta acknowledged that the airport needs work, but added that it was only a matter of time before it expands its services. A number of hotels are also being built in the city.
The city also sees the opportunity to diversify its product offering and is in the process of developing a special economic zone (SEZ) for jewelry manufacturing and diamond manufacturers are encouraged to add value to their businesses. Rohit Mehta reported that the infrastructure for the prospective jewelry park would be in place shortly and that it was slated to start operating in the next year and a half. He stressed that the challenge for the industry now was to brand Surat and “tell the world what is happening in the city.”
“People know that Surat is a major diamond manufacturing center, but they don’t realize exactly what is going on here,” he said.
Arjav’s Ashit Mehta went one step further, declaring, “Surat IS the diamond world.” If so, the industry certainly looks optimistic at the moment.
Picture 1: Dharmandan Diamonds' factory in Surat.
Picture 2: Workers at Shree Ramkrishna Export's factory in Surat.
LH
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