India’s Diamond Traders Have Their Work Cut out For Them

Posted by Reading Time: 3 minutes


July 14 – A little known fact states that India polishes about nine in every ten diamonds, mostly tiny stones less than a carat. None the less, the country's diamond traders have their eyes set on brighter tragets – the trade of rough diamonds.

"We're trying to make India the largest trading centre and manufacturing centre for diamonds," said Sanjay Kothari, the chairman of India's Gem & Jewellery Export Promotion Council (GJEPC) told Reuters. "Why should we go to Antwerp?"

A bullish confidence is common among Indian businessmen these days. Nonetheless, even if few see Antwerp being eclipsed any time soon, the ambition of Kothari and his colleagues is giving pause to at least some Antwerp traders.

But its dominance is under threat. Consultancy firm KPMG said in a 2006 report that India's share of diamond polishing by value would drop to 49 percent by 2015, from 57 per cent today, as the global diamond industry spreads into new corners of the globe.

China is investing heavily in polishing mid-sized stones. Angola, Namibia and Botswana are increasingly determined to process locally some of the stones chipped from their mines, which once would have been promptly whisked off to the London clearing house of De Beers, the dominant player in rough trade.

To keep their foothold, India intends to spread out along the chain between mines and ring fingers. Indians' success in cutting diamonds has given them advantages elsewhere: about 40 percent of the trade in Antwerp is controlled by Indians, according to the GJEPC's Kothari, while Indians make up about half of De Beers' elite customer list (much of the rest are Hasidic Jews).

The new Bharat Diamond Bourse — Bharat being the Hindi name for India — will house India's first international diamond trading hall, and is intended to bring the trade back to the land where diamonds are said to have been first mined a millennia ago.

An onsite electronic customs office will replace the present need for export forms requiring 35 signatures. There will be around 100 food outlets, none of which will serve meat or eggs, in keeping with the sensibilities of the Hindus and Jains from Gujarat state that have long dominated the trade. Musical fountains are planned for the garden.

The planned move comes at a tumultuous time in the diamond trade. For much of the 20th century, De Beers ran a cartel controlling the trade of the bulk of the world's rough diamonds from its mines in southern Africa.

In the last decade, De Beers has buckled under scrutiny by anti-trust regulators while its mining rivals have found diamond deposits in Russia, Australia and elsewhere, hobbling the giant's monopoly.

India thinks it can take advantage of this fragmentation, and its government has begun negotiating with mining countries, including Russia, to buy rough stones directly. This became all the more necessary after De Beers reduced the amount of rough diamonds it sells to India in January.

Last year, India reduced the 5 percent levies on the import of polished diamonds to zero to help the trade.

But doubters still feel India is moving too sluggishly. Dubai built its own bourse in a fraction of the time it has taken India, and has offered far more generous tax incentives.

Nor is it a particularly happy time for the Indian industry: polishers are increasingly disgruntled about being among the lowest-paid diamond workers in the world, and have organised sometimes violent demonstrations, while a bitter global economy has dampened jewellery sales in India's main markets.