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The Show Must Go On

Editorial

Jul 14, 2011 2:09 PM   By Avi Krawitz
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RAPAPORT... The horrific explosions that shook Mumbai in the heart of the city’s diamond district this week were as shocking as they were tragic. Just as thousands of workers headed home from work on Wednesday, three bombs went off in the congested areas of Opera House, Zaveri Bazaar and Dadar, killing 18 people and wounding over 130. Mumbai’s already chaotic rush hour turned frantic.

Unfortunately, the city and its diamond trade are not strangers to terror. Just less than three years ago, Islamic gunmen killed 173 people in simultaneous attacks across South Mumbai, home to the diamond industry. While the scale and nature of the two attacks were quite different, the similarities are apparent. Both appear to have been strategically thought out and both hit the financial heart of the city, and, in fact, of the country.

It has long been the ploy of terrorists to maximize their gains by simultaneously killing people and disrupting business activity. In that sense, it appears they missed their target this time. The Bombay Stock Exchange (BSE) Sensex Index ended Thursday, following the blasts, up a slight 22 points. Investors appeared more encouraged by the lower than expected June inflation rate than they were concerned about the economic impact of the attacks. Indeed, the Indian economy remains as resilient as its people, and is still among the most exciting growth prospects around.

In a similar fashion, therefore, the country’s diamond industry is expected to soon resume its aggressive nature which has come to be the main driver for the global trade. Representatives from the Gem & Jewellery Export Promotion Council (GJEPC) were quick to assure the industry that its summer program of trade events will go ahead as planned.

It is vital that they do. The International India Jewellery Show (IIJS) has become a key event on the global diamond calendar, even if it is not the most glamorous. The International India Jewellery Week (IIJW), which launched last year, precedes IIJS and showcases India’s jewelry design and manufacturing sector and perhaps compensates for the glamour the IIJS event lacks.

For all intents and purposes, the growth of these events in the past few years is indicative of the fact that India has become the one-stop shop for the diamond industry. The country impacts all aspects of the global trade through its dominant manufacturing sector, trading activity, retail growth and burgeoning mining presence. In terms of its capacity to absorb diamonds into the system, Rapaport estimates that India will surpass the United States as the world’s primary consumer market for diamonds within three years.

Of course, the industry is not without its challenges and there are lingering concerns that by sheer numbers, Indian dealers may have undue influence on the amount of rough and polished that is filtered through the system. Indeed, many continue to indicate that some larger Indian rough dealers may be hoarding rough in anticipation of future price hikes, causing a shortage of polished goods available to consumer markets. In addition, Indian jewelry retailers themselves have indicated that local dealer demand may be overheating and does not reflect the end-consumer reality. The continuing scarcity of workers who did not return after the 2008 downturn has further aggravated factories’ capacity to keep up with demand. All these aspects may be a natural consequence as the country comes to terms with its far-ranging importance.

Still, India’s industry has come a long way since November 2008 and has emerged from the recession in a position of strength which is evident today. It is therefore difficult to believe that back then, while the rest of the world was contending with the global recession, Mumbai was forced to rebuild with the added shock of terror. India came out on top. This time, given the strength of the trade in the first half of 2011, it’s a safe bet it will do it again. 

While the explosions may have hit Mumbai’s rush hour, in terms of the trade, they occurred off-peak as the diamond industry enjoys its relative summer lull with U.S. wholesale customers taking their summer breaks and Far East dealers having filled their inventories for now.

But one can expect the turning point to come out of Mumbai again. As in the past, IIJS, which is scheduled to begin on August 4, is expected to serve as an important gauge for the local November Diwali season and an early indicator for dealer demand ahead of China’s October Golden Week wedding season and the Christmas buying season. If anything, the attacks on Mumbai’s diamond district will strengthen the industry’s resolve to carry on where it left off as the world’s leading diamond center. Indeed, for the global trade’s sake, in India, the show must go on.

The writer can be contacted at avi@diamonds.net.

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Copyright © 2011 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400. 

Disclaimer: This Rapaport Weekly Market Report is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.


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Tags: Avi Krawitz, Gem & Jewellery Export Promotion Council (GJEPC), Mumbai attacks, Polished Diamonds, Rough Diamonds
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