Outlook Positive for Indian Diamond Sector

After a decline in the first few months of the fiscal year, exports of cut and polished diamonds from India have begun to pick up in September. The industry is confident of matching, if not marginally improving, on its export performance during the last three months of the 2006.

According to Bakul Mehta, former chairman of the Gem & Jewellery Export Promotion Council (GJEPC) and now convener of the diamond panel committee, the shift can be attributed to the improved demand from the Western markets due to the approaching Christmas season. “With the demand from international markets improving,” he says, “the industry is positive about exports being healthy in the coming months, and by end of 2006, the export figures should be at about the same level as last year, or slightly better.”

Mehta believes that there has been a reduction in the goods held in the pipeline over the last few months and as inventory is being consumed, there is a fresh demand for new goods. “The rationalization of rough prices over the last few months, with reduction [in price] by both DTC and Rio Tinto, and the fact that the quantity of rough being supplied to their Sightholders is also a little lower, has further boosted the industry.”

Overall, Mehta notes, there is a correction taking place and with goods now more available at the right prices, the picture seems brighter even for small and medium polishing units.

The brighter prospects are borne out by a detailed analysis of the export figures released by the GJEPC recently. Actual exports of cut and polished diamonds from units in the DTA (domestic tariff area) and SEZ (special economic zones) were up from $915.14 million in September 2005 to $991.86 million during September 2006. In carat terms, exports rose from 2.94 million carats to 3.35 million carats.

Actual exports from the DTA and SEZ were up 3.46 percent during the first half of the Indian 2006-07 financial year (i.e. April 1 - September 30, 2006) to touch $4,716.77 million as compared to $4,558.82 million in the same period of the previous year. In carat terms, exports increased from 14.83 million carats to 15.53 million carats.

However, if overall diamond export figures still appear to be negative, this is on account of a 67.12 percent decline in exports from bonded warehouses compared to the corresponding period of last year to $561.7 million. Imports of cut and polished diamonds into bonded warehouses during the April-September period of $512.41 million have also shown a 68.9 percent decline.

Mehta explains that last year the bonded warehouse scheme was used by industry players to bring back big amounts of polished which were kept abroad for some years due to earlier restrictions. After a process of reassortment and reclassification, these goods were exported once again. The clearing of this inventory has meant that there is little inflow into the bonded warehouses this year, he clarifies.