Indian Diamond Units Affected by Lack of Supply

A shortage of rough diamonds has resulted in a number of Indian diamond processing units closing down over the past couple of months. The problems in the processing units have been compounded by a lack of liquidity as many diamond traders have begun investing in real estate and the stock market.

Around 20 percent of over 10,000 processing units in Surat have closed in the past couple of months, resulting in the layoffs of about 15 percent of the total workforce of about 600,000, reports the Times of India.

In addition, nearly 20 percent of the 7,000 units in Bhavnagar, Amreli, Junagadh and Rajkot districts of Saurashtra have shut down, while another 30 percent are working below full capacity.

Apart from the shortage of roughs, Saurashtra units are hindered by unit owners' preference to invest in the stock market or real estate, Bhavnagar Diamond Association president Vithal Mendpara told the Times of India. Real estate investments proved problematic when prices in the region fell dramatically after a long period of increases. Some in the market say the high prices were artificial and represented short term demand rather then true value.

Jasdan Diamond Association secretary Bhikhabhai Rokad told the paper that, the high price of gold is affecting production at units in the Rajkot district.