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 The global downturn means diamonds aren't forever after all
Kishore Hali, 22, a diamond polisher at an industrial unit in Saurashtra, in India's western state of Gujarat, was the sole breadwinner of his eight-member family. When his unit shut its doors last month, the youth struggled with a $400-debt before jumping into a well to kill himself.
Nor is Hali alone. At least 70 diamond industry workers in Gujarat have committed suicide over the past few months as the state's storied diamond industry has sunk into depression. Nearly 60 percent of Gujarat's diamond industry has closed. Gujurat accounts for 72 percent of the world's processed diamonds and 80 percent of India's diamond exports. About 92 percent of the world's diamonds cut in 2003 were in Surat.
The Surat diamond industry alone is worth Rs8 billion — or was — and accounted for more than half of India's diamond exports, an industry that employs more than 700,000 workers across the country. Overall, about 2.5 million are associated indirectly with the diamond trade in India. But with the export market in a recession, layoffs and suicides have cast an ominous shadow over the state's 10,000-odd diamond units.
Analysts point out that it took India over four decades to consolidate its position as a world leader in processing diamonds. "Our biggest concern is the possibility of losing this pre-eminent position if the government does not implement these measures immediately," says Prakash Nane, a diamond trader.
"Surat is one of the biggest polishing industries of the world. The business is being carried out here for over five decades. But the US downturn has affected us badly as more than 60 percent of our exports used to go to the United States. Today, it is down to less than 30 percent," Nane said.
Diamond exporter Prem Bhaiji added that while Surat has witnessed several ups and downs in the last two decades, nothing has hit as hard as the current impasse. He states that a general shortage of rough diamonds, the global economic crisis, a recession in the domestic market and rising production costs due to inflationary pressures have coalesced to take the shine off the industry.
According to Gems and Jewellery Export Promotion Council (GJEPC) chairman Vasant Mehta, the US recession has caused a 60 percent plummet in demand from India. As a result, units have been forced to cut production by over 25 percent and recently announced a moratorium on the purchase of rough diamonds for processing and production.
Ironically, till barely six months ago, Gujarat's diamond industry was thriving as the largest exporter of processed diamonds to the US and accounted for almost eight of every 10 processed to be sold worldwide. Today, with thousands of units closing, laid off workers are struggling for sustenance or migrating to other cities in search of work.
"My family has been in the diamond business for 40 years but I've never seen such terrible times," says Bhaichand Patel of Surat Crafts, a diamond unit in Surat, which is working at half its earlier capacity, employing only 25 per cent of its former staff.
Chetan Sangvi, Gujarat region chairman of the Gems and Jewelry Export Promotion Council (GJEPC), estimates that due to the huge gap between supply and demand of diamonds this year, factory owners are saddled with gargantuan quantities of unsold polished and rough diamonds. These owners had earlier bought rough diamonds at peak prices due to high demand which is further adding to their losses. Tough competition from countries like Sri Lanka, China and Indonesia, hasn't really made things easy.
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