The economic downturn in the U.S. is impacting consumer demand for various goods and services and as in most slumps, luxury goods take the first hit. The U.S. has been the major destination for the Indian diamond and jewellery industry, which is now feeling the heat resulting in job cuts here.
Speaking to The Hindu, Vasant Mehta, Chairman, Gems & Jewellery Export Promotion Council (GJEPC), said that out of around 700 offices of Indian diamond companies in the U.S., around 20 have closed shops due to the slowdown.
The cutting and polishing industry, centred around Surat in Gujarat, employs around 7 lakh workers mainly on job-work or contracted basis. There have been job losses and a cutback in contracts and Mr. Mehta said, “Figures from the Surat Associations indicate that 25,000-35,000 workers have lost work. However, a clearer picture will emerge in December.”
Major market
Sailesh Sangani, Managing Director, Priority Jewels India, said normally, around Diwali, the job-work workers take 3-4 weeks off. “They are contracted workers who are primarily farmers and diamond cutting and polishing is their secondary employment in the slack agricultural season.”
The U.S. accounts directly or indirectly (via Dubai, Hong Kong and Israel) for 50 per cent of Indian diamond exports. Three years ago, it accounted for 60 per cent of direct diamond exports but this halved to 30 per cent last year and declined further to 28 per cent in 2008. In spite of lower volumes, values were not seriously hit due to a depreciating rupee and a 15 per cent rise in diamond prices last year.
The slackening U.S. market has led the council to aggressively develop other markets such as China, Far East Asia, Russia and the Middle East. “When China opens up, it will be a very attractive market. China has factories for cutting and polishing diamonds but rather than as competition, China will increasingly become a major market for us.”
Trends
Mr. Mehta said it was too early to indicate the trends of the current season. “We will get a better picture in December when several jewellery associations put out their research findings. It is very likely, however, that given the conditions, Indian exports could see a negative growth as sales have not been as good as last year. But then, jewellery sales during Diwali were not as bad as the pre-Diwali week.”
The announcement by Diamond Trading Corporation (DTC) regarding reduction in box-size for supply to India is a welcome step, according to Mr. Mehta. “It is announced every five weeks and the cut is normal given the vacation season for the workers here. Otherwise, the supply pipeline would be choked.”
GJEPC had earlier represented to the government regarding some credit-related relief for the players to control costs and two days ago, the government announced a cut in interest rates for export financing.
Mehul Choksi, Chairman, Gitanjali Jewels, said the industry situation was “quite critical and customers are unable to meet the commitments.” Exporters are taking some measures to combat the situation. Gitanjali is a significant exporter and is increasingly focussing on retail business to offset the impact of the slowdown. “Retail currently accounts for about 60 per cent of our revenues and we hope to take this up to 80 per cent in two years. We are also trying to cut the role of middleman and increasingly deal directly with customers.”