Rapaport Magazine

India: Changing the Way the U.S. Does Business

India’s success poses challenges for the U.S. diamond industry in accessing rough, manufacturing costs and capacity, as well as cutting, polishing and design specialties.

By Karolyn Schuster

India has proven itself a formidable competitor in the global diamond industry. In a matter of mere decades, it has managed to multiply its trading volume, expand its manufacturing capacity, install cutting-edge technology, develop its skill set, add hundreds of thousands to its payroll and market itself creatively and aggressively. The result is that in terms of volume, the Indian diamond industry now sits above the world’s historic diamond centers, all of which have centuries of tradition, reputation and experience behind them.

As the world’s largest diamond-consuming market and a major trading center, the U.S. has felt India’s impact on every sector of its domestic diamond industry. U.S. companies have scrambled for rough as India has cornered the rough supply by bidding high. They have seen India move into cutting and polishing the larger, more expensive stones that have always been the U.S. specialty. Americans have been undercut on prices of polished goods by India’s ability to capitalize on its huge, low-cost labor force. And they have watched enviously as the Indian government has lavished support on its diamond industry and the country’s bankers have bankrolled it with capital.

“India has assumed a highly dominant role in all areas of the industry,” says Ronald J. Friedman, president of William Friedman Diamonds in New York City and president of the Diamond Manufacturers & Importers Association of America (DMIA). “They drive the business in terms of rough purchases, manufacturing and the supply of smaller stones under 3 carats. India basically controls
the industry. Go back 20 years and India was a force, but nothing like what it is now.

“The Indians are very capable,” continues Friedman. “They also have very strong support from their government in terms of export advantages, taxes on imports, conditions for bank loans and currency manipulation. That is not to negate their resourcefulness, their strength in technology and their desire and willingness to work hard, but it does give them an advantage over other diamond centers that don’t have the same level of support.”

“India has had a profound effect on jewelry manufacturing and jewelry distribution in the U.S. and elsewhere,” says Jeffrey Fischer, president, Fischer Diamonds, a New York City–based loose diamond manufacturer and wholesaler. “When their import duties were first lowered and then removed in the early 1980s, that removed a major impediment for India to bring goods into the U.S. at less cost and with less effort. Over time, they have made more and more inroads.”

The impact of India’s success in recent years has been felt in the U.S. in ways big and small. “Some very big houses supplying the market, a whole host of wholesale companies, some very strong, well-managed companies  — including Fabrikant, a huge outfit — have been driven out of business,” says Friedman. “Other U.S. companies dealing in small goods were competing with Fabrikant and with each other but they couldn’t compete with India. We still have smaller suppliers in the U.S. who are having a really horrific time.”


No assessment of India’s success is complete without mentioning the extensive support the Indian government provides to its diamond industry. There is financial support in the way of tax advantages and manufacturing incentives, as well as bureaucratic support in the areas of licenses and permits. “They have governmental support that we don’t have — maybe that support is a little cooler right now, but it’s still a lot of support,” says Fischer. “When you have partnerships between government and private industry — you have similar partnerships in Belgium and Israel — it creates a scenario and a budget for promoting the industry. That’s not the way business is done in a free-market economy like the U.S.”

Friedman agrees. “The focus of our government is on high-employment industries and diamonds is not one of them. The diamond business is a relatively small industry within the U.S. Israel and Belgium don’t have an automobile industry. They don’t have a steel industry. The relationship between the diamond industry and the federal government is different in the U.S.”


Ronnie VanderLinden, president of Diamex, wholesaler and manufacturer in New York City, says India’s major impact recently has been on the rough market. “With the world’s largest number of diamond cutting facilities, obviously, they have to access an enormous amount of rough. The manufacturing sector here has shrunk dramatically. These are difficult days for manufacturing here — or anywhere. We can’t do pointers in the U.S. from a cost point of view but in New York City, we still cut a number of large stones.” VanderLinden wants to rebuild manufacturing in New York City to accommodate the smaller stones. He admits that is a huge task but one, he says, he “is willing to tackle.”

There is no doubt that India’s expansive manufacturing has burdened it with an insatiable need for rough. “First they need rough to keep their manufacturing going,” says Fischer. “Second, they are concerned that if they don’t corner the market on raw material, someone else will. They are afraid that if they don’t buy it, it won’t be there when they need it. The Indian diamond industry organizations have an almost maniacal bent to corner the rough market.”

Fischer says there is no question that Indian manufacturers “have moved into product areas that overlap with what we cut in the U.S. or what they are cutting in Russia or Belgium — the larger, more expensive goods where the cost of labor is not as critical as the experience and skill of the cutter. Labor cost is still a factor with these stones but it does not weigh as heavily on the formula as the experience and skill of the cutter.

“In response to competition from India, U.S. jewelry manufacturing companies have tried to move upscale to specialize in niches, designs, sizes and stones more suited to the high end,” continues Fischer. “Just-in-time inventory and customer services become more important. Every time a foreign company says it will take six to eight weeks to fill your order or repair an item and someone else says they can do it in six to eight days, if not six to eight hours, that’s an advantage.”

Friedman notes that in specific cuts and large sizes, some of that manufacturing is better handled in Israel, Belgium and the U.S. “But each day is a challenge. Obviously, we try to encourage rough supply to New York. But the truth is we can’t do all that much to change the trend.”


Indian companies have increased their activity in and penetration of the U.S. market by establishing offices in the U.S. “They have partnered with U.S. companies and they have bought U.S. companies,” says VanderLinden. “From the U.S. point of view, some companies think it is better to join forces with the competition than to try to fight them. Indian companies are realizing the importance of an American retail presence with American employees. It’s not just a way of selling to the U.S. market by being present in that market, but also of learning about the market — what the preferences are, what marketing works best, the standards of customer service that are expected. Then they can take that knowledge back home and make it work for them.”


 “I can’t make predictions in this environment,” says VanderLinden. “It’s unnerving how fast things can change. One little hiccup and everything can come undone.”

Friedman believes that long-term, India’s dominance will continue. “Short-term, it has changed somewhat. The rupee has weakened recently and that has a very big impact. Consumption in India is considerably down, which affects the local industry and affects manufacturing. Export markets are not rosy right now.”

 “We are seeing some gyrations in the Indian economy; short-term, they are suffering some pain. Their first concern must be to stabilize their economy,” concludes Fischer. “The big picture is that India has a huge population that needs to live a decent lifestyle with basic services. For the world’s largest democracy to remain stable, the public’s demands will become increasingly important and there will need to be more attention paid to the division between haves and have-nots.”

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

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