Major Lay-Offs, Production Cutbacks Among Indian Diamond Manufacturers

(IDEX Online News) – The Indian diamond industry has been experiencing substantial job losses of late. By some estimates, thousands of workers have been laid off in the production centers of Surat, Bhavnagar and Ahmedabad in the state of Gujarat.

Nanubhai Vanani, Secretary of the Gujarat Hira Bourse, the diamond exchange and SEZ located in Surat, told IDEX Online, “It’s true there have been lay-offs, but one can’t really gauge the extent. These are mainly due to two factors – the economic slowdown in our export markets and the substantial devaluation of the rupee against the US dollar.”

Vanani noted that strangely, some factories were still head-hunting for skilled workers and were unable to get the right people.

One diamond manufacturer who specializes in small goods (-0.03 carat), however, said that the layoff were due to a combination of high rough prices and stiff buyer resistance to any correspondingly higher polished prices.

Speaking on condition of anonymity, he observed, “The production cutbacks and lay-offs have been particularly severe – up to 70 percent in some cases – in Bhavnagar and Ahmedabad.” The two centers specialize in the manufacture of small diamonds.

According to him, the problem was triggered by the sharp escalation in the prices of top end (VVS+) small diamonds, brought about by heavy buying by Swiss watch manufacturers last year. Prices in these categories shot up by 100 percent – even 200 percent in certain categories.

“People started paying substantially higher prices for rough seeing this huge escalation in prices,” said the manufacturer, “but they didn’t stop to think that this was only for the very top end goods. The lower clarities, which constitute more than 70 percent of the small goods category, have consequently fetched no margins or have actually generated losses. People held on for as long as they could, hoping polished prices would rise. They didn’t and so we’ve had financial failures among the smaller players and now the bigger operators have instituted production cutbacks.”