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Rapaport Research Report: India in Focus
Insights
Feb 22, 2018 7:39 AM
By Avi Krawitz
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RAPAPORT... India holds a dominant position in the diamond industry, coming closer than any other market to spanning the entire pipeline. Besides its extensive rough and polished trade, it has made a name for itself in jewelry-making, diamond-cutting and retail. On the mining front, it still has some potential to develop its Bunder asset.
But diamond manufacturing is where India exerts its greatest influence on the global market. How India buys rough and sells its polished sets the tone for the rest of the industry.
The claim is that 11 out of 12 diamonds are manufactured in India. Whether that measure is accurate or not is irrelevant. The country accounts for a majority of global supply. It has thousands of diamond-cutting factories, and an estimated 4.5 million people work in its gem and jewelry sector.
Yet the local trade faces its own challenges, and 2017 was a topsy-turvy year for India’s diamond and jewelry industry. In the first half, it was still acclimating to the aftermath of the government’s 2016 demonetization program. Then the goods and services tax (GST) took effect in July, adding uncertainty as businesses adjusted to the new system.
Rapaport estimates that both the country's net diamond account and its diamond jewelry consumption fell in 2017. But despite the short-term teething pains, diamantaires were largely supportive of these regulatory measures. Efforts to bring better structure to the economy are vital to stimulating growth.
Of greater concern are the tight profit margins that diamond manufacturers face. As polished prices softened in 2017, rough prices increased, exerting additional pressure on diamond cutters. The result is that the trade in India — like everywhere else — continues to consolidate.
Still, India’s sheer size gives it an advantage over other centers. It has a further edge thanks to the government and banking support the local trade enjoys. It also counts among its customers the dynamic domestic jewelry market, which makes up an estimated 6% of global diamond jewelry demand. In contrast, overseas suppliers struggle to penetrate the Indian jewelry scene.
The February edition of the Rapaport Research Report explores the factors that affected the Indian diamond trade in 2017 and that will influence growth moving forward. A major fraud case in February involving prominent diamantaire-jewelers Nirav Modi and Mehul Choksi has already dampened sentiment.
Ultimately, though, 2018 is expected to be a better year for the local industry than 2017 was. As new regulations become entrenched and the global diamond market continues its apparent improvement, India can capitalize on last year's developments to solidify its position as the world’s leading diamond center.
This article is an extract from the February Rapaport Research Report that was published this week. The full report includes an in-depth look at the Indian market and presents extensive proprietary data from RapNet. It can be downloaded by subscribers at the following link: Rapaport Research Report
Image: Pexels
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Tags:
Avi Krawitz, Demonetization, diamonds, fraud, Gitanjali, India, Jewelry, Nirav Modi, RapNet
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