The undisputed leader in India’s gem and jewellery export basket, cut and polished diamonds (CPD) accounted for nearly 65% of India’s total gross exports in fiscal year 2020-21 that ended 31st March, 2021.
After reaching historically low levels of exports starting in February 2020 following the disruption of global supply chains due to Covid-19, CPD exports came roaring back in the final quarter of FY 2020-21, resulting in a full-year decline of 12% to $16.4 billion compared with $18.66 billion registered during FY 2019-20.
The 12% annual decline is noteworthy considering that rough diamond imports had virtually ground to a halt during four of those 12 months.
From April to September 2020, CPD exports were down 47% to $5.5 billion, which indicates that nearly two-thirds of annual growth came during the second half of the year.
Vipul Shah, Vice Chairman, GJEPC, said, “If you examine data of the last few quarters, we have almost achieved pre-pandemic levels and things are starting to look better. While the American market had picked up around the end of last year, even Chinese demand is now good and we are quite optimistic for 2021.”
| Quarters | Cut & Polished Diamonds | |
| Gross Exports | % Growth /Decline (Y-o-Y) |
|
| FY 2021 US$ million | ||
| Q1 | 1801.71 | -65.38 |
| Q2 | 3699.87 | -27.26 |
| Q3 | 5186.35 | 18.51 |
| Q4 | 5713.38 | 42.90 |
| Apr 2020 to Mar 2021 | 16401.30 | -12.13 |
In April 2020, retail stores all around the world, barring China, closed their doors. As a result, GJEPC, being the apex body of the Indian diamond industry, engaged with all stakeholders and took a collective decision to call for a voluntary suspension of rough diamond purchases between April and July last year.
Sanjay Shah, Convener, Diamond Panel, GJEPC, noted, “That decision has worked in our favour. The essence of the industry did not devalue, and we were able to offload excess inventory to the tune of $1.5 billion. It wasn’t a total stoppage of rough, as few people had buyer commitments and had no choice but to import.
“Fortunately for us, the pent-up demand in the second half of 2020 from the USA and China, which consume 50% and 20% of diamonds produced in the world, respectively, resulted in healthy order bookings from retailers in those markets. From August 2020 to March 2021, the industry bounced back and recovered a major portion of the business lost from April to July 2020. Indian demand, too, started picking up from November 2020 onwards.”
India’s Top Countries For Cut & Polished Diamond Exports from April 2020 to January 2021 (US$ In Million)
| S.No. | Country | Apr 2019 – Jan 2020 (R) | Apr 2020 – Jan 2021 (F) | % Growth |
| 1 | USA | 5,905.65 | 4,737.96 | -19.77 |
| 2 | HONG KONG | 5,770.42 | 4,596.04 | -20.35 |
| 3 | BELGIUM | 1,186.30 | 747.72 | -36.97 |
| 4 | UAE | 904.07 | 672.05 | -25.66 |
| 5 | ISRAEL | 704.61 | 599.96 | -14.85 |
| 6 | THAILAND | 470.32 | 406.58 | -13.55 |
| 7 | JAPAN | 300.01 | 206.93 | -31.03 |
| 8 | AUSTRALIA | 109.22 | 102.32 | -6.32 |
| 9 | UK | 114.71 | 80.12 | -30.15 |
| 10 | BOTSWANA | 71.94 | 75.96 | 5.59 |
| 11 | CHINA | 57.06 | 58.24 | 2.07 |
| 12 | SWITZERLAND | 109.58 | 48.58 | -55.67 |
| 13 | KOREA | 44.28 | 34.88 | -21.23 |
| 14 | CANADA | 36.16 | 34.03 | -5.89 |
| 15 | GERMANY | 36.55 | 30.91 | -15.43 |
| 16 | OTHERS | 337.94 | 192.32 | -43.09 |
| Total | 16,158.82 | 12,624.60 | -21.87 |
Source: DGCI&S
Russell Mehta, Managing Director, Rosy Blue (India) Pvt. Ltd., agreed, “We should be happy that there was a strong recovery in the USA and China, and we were able to make up to some extent.”
The industry considers itself lucky that diamonds featured in the preferred buying priority list of consumers, and that their aspirational purchases were able to take place because of the stimulus payments doled out by the US government. “Our sector surprised everybody as gems and jewellery were a major part of the unprecedented boom in online sales,” Vipul Shah said.
Path To Recovery
Vipul Shah continued, “The industry’s responsible action to voluntarily suspend rough imports during the worldwide lockdown in 2020 has tremendously helped to improve our reputation among lenders. The Indian diamond industry has reduced its debt by around 35% from somewhat of a peak of $6 billion in 2018-19 to between $3 billion and $4 billion today. Easy availability of bank finance will be a key component of the recovery in cut and polished diamond exports. Additionally, the classification of gem and jewellery exports under Priority Sector Lending will assist our industry to attain higher growth levels.”
Industry experts are of the opinion that India’s CPD exports could also benefit enormously if diamond miners are allowed direct rough sales in the Special Notified Zones (SNZs). “We have requested the Government for a tax implication similar to Belgium (turnover tax not exceeding 0.16%), which, if incorporated, would enable rough diamonds to come here directly from mining countries and be auctioned in India itself. This will save time, flying hours, manpower, and bring down costs,” Vipul Shah said, adding that compared to last year, India should grow in double digits in 2021-22. “I expect 18-20% growth from this sector compared to 2020-21.”
Russell Mehta, too, is pragmatic about the recovery of CPD exports. “It will all depend on the pandemic and its impact on manufacturing in India and consumption in the USA and China. The second wave, which is in full force, is the biggest challenge that we all are facing today. It will create huge challenges on the supply chain. In my view, it will take two months to flatten the curve and get back to some sense of normalcy. Hence I see better exports than 20-21 but still less than 19-20 perhaps.”
Sanjay Shah added, “Going forward I would urge the trade to remain cautious as we have the same rough diamond inventory level in April 2021 that we had in April 2020. The $1.5 billion reduction of inventory from last year is now gone. If the trade keeps up this pace of acquiring rough diamonds and manufacturing, it is going to be challenging because many countries, including India, are experiencing a second Covid wave, and if the cases go out of hand, then manufacturing and export/import could be impacted.”
For future growth of CPD exports, the markets that hold potential in addition to the USA, are the Middle East, Russia, South America — mainly the oil-producing countries. The relatively untapped markets that hold promise are Cambodia, Vietnam, and the European Eastern Bloc. However, exploring new territories may not be a big priority this year as companies look to consolidate.